1. Funding the CSU A Tale of Two Budgets Rodney Rideau, Director of the Budget, Chancellor’s Office Debbie Brothwell, Deputy Vice President – Finance, CSU East Bay

2. Slide 2 Overview How is the CSU Funded? Where Funding Is Used How the System Blew Up Where CSU Fits in the Universe Budget Cuts – Do You Know Your Share? Student Fees and Financial Aid CSU Budget Cycle CSU FUNDS

3. Slide 3 How CSU Is Funded CSU Receives Two Budget Allocations from the State –General Fund –Lottery Revenues CSU Uses One Source of Student Revenue (except when it doesn’t) to Address BOT Budget Priorities –Incremental Increase in Student Tuition Fees Campuses Use All Other Student Fees and Income –Application Fees, Nonresident Tuition, Miscellaneous Course fees, Student Excellence Fees, Health Services Fees, Academic Program Fees –CERF, Parking, Housing –Interest Earnings, Grants, Administrative Overhead

4. Slide 4 How Campuses Are Funded  Campuses receive three General Fund allocations  Operating budget (e.g., enrollment, mandatory costs, compensation)  State University Grants  Lottery  Campuses must raise projected budget plan fee revenue increase(s) or cut operating expenses, redirect operating budgets or do both  CO can use any operating revenue in the allocation process  CO can use CERF in the allocation process  Campuses must reimburse State for lost Tuition Fee Interest Earnings

5. Slide 5 System Perspective In 1992,Budget Redesign was born.  State ends the “needs-based,” formula-driven methodology used for annual changes in State General Fund appropriations to CSU  CSU adopts a “revenue-focused” budget framework to develop annual budget request for a reasonable expectation of General Fund growth  CSU establishes “gross budget” methodology to equitably distribute annual State General Fund change.  Budget Plan Recognizes Increase in Tuition Revenue but all Tuition Revenue remains at the campus

6. Slide 6 Campus Perspective In 1992, Budget Redesign begins new era of budgeting.  Campuses receive increased flexibility for budgeting expenditures. Campus responsibility for managing enrollments and fee revenue increases.  General Fund allocations vary by campus  All mandatory Tuition Revenue remains at the campus but increased revenue used in BOT systemwide budget plan.  Campus expenditure allocations based on past year budget performance, two years behind budget year costs

7. Slide 7 The Budget Process THE BUDGET PROCESS Where is Funding Used ?

8. Slide 8 2012-13 Support Budget CSU Request

9. Slide 9 2012-13 Budget Plan

10. Slide 10 CSU Budget Priorities

11. Slide 11 Campus Budget Allocations Campus allocations are designed to determine General Fund need.

12. Slide 12 2012-13 Campus Gov.’s Budget Allocations In recent years, the same process has been used to allocate General Fund cuts.

13. Slide 13 2011-12 CSU Operating Expenditures Source: CSU Final Budget Summaries Where Is Funding Used

14. Slide 14 Source: CSU Final budget Summaries Does not include Financial Aid or Lease Bond expenditures 2011-12 CSU Operating Expenditures Where Is Funding Used

15. Slide 15 How the System Blew Up

16. Slide 16 CSU State Support versus Higher Education Compact Funding Agreement $1.7 Billion Gap $ in Billions

17. Slide 17 Resident Students 2012-13 State Appropriations equal 1996-97 levels, but Resident Enrollment has increased by 90,000 Students $ in Billions How the System Blew Up

18. Slide 18 Declining State Support Forces More Reliance on Student Fees (in 2012 projected Constant Dollars)

19. Slide 19 Tuition Fee Increases Have NOT Made Up for General Fund Losses CSU Student Headcount and Funding Since 2007-08 2007-082008-092009-102010-112011-12 2011-12 versus 2007-08 Resident Student Headcount 447,301446,686422,277392,827398,059(49,242) Dollars in Thousands State General Fund $2,970,643$2,871,755$2,345,743$2,577,638$2,002,751($967,892) Tuition Fee Revenue (net of financial aid) $904,187$1,090,444$1,198,911$1,217,072$1,497,161$592,974 Tuition Fee Increases Have NOT Offset Total General Fund Losses How the System Blew Up

20. Slide 20 Sharing the cost of education in the CSU per $1

21. Slide 21 Where CSU Fits in the Universe

22. Slide 22 2012-13 California’s Revenues

23. Slide 23 2012-13 California’s Expenses

24. Slide 24 2012-13 Proposed Higher Education Spending

25. Slide 25 Where CSU Fits in California’s Universe  Higher Education 10% –Student Aid Commission 5% –University of California22% –Community Colleges54%  CSU 19% CSU is 19% of Higher Education spending and 2.4% of the State of California’s General Fund Expenditures

26. Slide 26 Do You Know Your Share?

27. Slide 27 Do You Know Your Share

28. Slide 28 Do You Know Your Share

29. Slide 29 CSU Share of California’s Fiscal Problem  If you hear the State of California has a $9 Billion problem: –Higher Ed 10% X $9B = $900 Million ($1 Billion, rounded) –CSU Approximately 20% X $1B = $200 Million  The allocation of the current problem is never prorated like this, but it does give you an idea of the potential impact to the CSU  2012-13 Potential Budget Reduction Trigger to the CSU is $200 Million

30. Slide 30 What is your campus share? If you hear the CSU has a $200 Million problem: –What is your campus share?

31. Slide 31 What is your campus share?

32. Slide 32 What is your campus share?  Sample CSU Campus Estimated Reductions: –3.2% = $9M –3.2% of $200M = $9M –4.7% of $200M = $13.2M –7.1% of $200M = $20M  CSU Maritime total budget is $22.6M

33. Slide 33 Student Fees and Financial Aid

34. Slide 34  Enunciated by the Board in 1993 document “Quality and Affordability.” Reaffirmed and elaborated upon by the Board in May 2010.  Primary responsibility for funding the educational mission and operations of the university, including supporting enrollments, rests with the State. CSU Trustees Fee Policy

35. Slide 35 California’s Master Plan for Higher Education  3. Reaffirmation of California's long-time commitment to the principle of tuition-free education to residents of the state. However, the 1960 Master Plan did establish the principle that students should pay fees for auxiliary costs like dormitories and recreational facilities. Because of budgetary reductions, fees have been increased and used for instruction at UC and CSU in recent years, but fee increases have been accompanied by substantial increases in student financial aid.

36. Slide 36 CSU Fees Remain Below Comparison Institutions Note: CPEC Comparison Institutions

37. Slide 37 Greater Efficiency? CSU Already Among the Most Efficient CSU Operating Costs Among Lowest in Nation

38. Slide 38 CSU Faculty is working harder…..

39. Slide 39 CSU Foregoes One-Third of all projected new Tuition Fee Revenue to Provide Grants to Students with Need. CSU revenue loss now exceeds $600 million. CSU State University Grant Awards Exceed $600,000,000

40. Slide 40 Budget Cycle

41. Slide 41 CSU Support Budget Cycle Jun Statement of Priorities Trustees Approve Budget Legislative Analyst Analysis Legislative Hearings & May Revise Budget Calendar JanFeb AugSep Exec Council Review Governor's Budget Issued Nov Preliminary Campus Allocations Apr Budget Signed Jun May Budget Advisory Com. Review

42. Slide 42

43. Slide 43 CSU FUNDS

44. Slide 44 Main Operating Fund  General Fund/Student Fee Revenue – CSU Operating Fund –The primary purpose of the CSU Operating Fund is to record revenues and expenditures for state- supported instruction.  Used to record state tax revenue and student fees. The state tax revenue portion, which is annually allocated by the California Legislature to the CSU, is the main source of funds for the University operating budget. A secondary source of funds is student fees such as the CSU State University Fee, Non-Resident Tuition, Application Fee, Health Services fee, and other fees.

45. Slide 45 Capital Outlay  Funding Source –There are two sources of funds for CSU capital outlay programs  state tax revenues appropriated by the state legislature  the proceeds from the sale of bonds. –funding is allocated to the University as either  Minor Capital Outlay (projects of $400,000 or less)  Major Capital Outlay (projects greater than $400,000). –The funding must be used for the construction projects specified.

46. Slide 46 Enterprise Budgets  Other CSU Funds – Campus specific budget process –Housing –Parking –Continuing Education –Instructionally Related Activities –Lottery –Miscellaneous Trust

47. Slide 47 Lottery Education Fund  Funding source –Cash generated from the sale of California State Lottery tickets, a portion of which is allocated to CSU campuses  Departments are allocated Lottery Funds by an annual budget allocation

48. Slide 48 Lottery Guidelines

49. Slide 49 Continuing Education Revenue Fund (CERF)  Funding Source –These sources are generated by student fees for enrollment in Continuing Education courses. –Funds must be used for self-supporting instruction in the Continuing Education program.

50. Slide 50 IRA (Instructionally Related Activities)  Use of Funds –Funding source are fees collected for the mandatory IRA Fee and or revenue generated by the IRA program itself –IRA funds are to be used solely for the support of instructionally related activities as defined in Section 89230 of the Education Code and by CSU System-wide policy. As a general rule, expenditure of IRA funds follows the same principles and guidelines as required of CSU Operating Fund monies.Section 89230 of the Education Code Exception: Different Guidelines under Hospitality Policy –If capital equipment is purchased whose use will not be restricted to IRA programs/activities, IRA funds may be employed only in proportion to the anticipated IRA use. –Expenditure for awards that are the culmination of a group(s) or individual(s) efforts through competition or as a normal part of program activities will be allowed. Awards will normally be in the form of trophies, plaques, ribbons, and other similar items, the value of which is primarily intangible and limited to the recipient(s). –Departments are allocated IRA Funds by an annual cash transfer

51. Slide 51 Housing  Funding Source –Revenues are generated from license fees paid by dormitory residents and must be used exclusively for the self-supporting housing program

52. Slide 52 Parking  Funding Source –Parking revenue is generated from the sale of parking permits and fines paid for citations issued.  Parking permit revenue must be used to maintain parking lots and parking staff  Citation income must be used for administration of citations and alternate transportation.

53. Slide 53 Campus Union  Funding Source –Revenues are generated from the mandatory University Union fee. –Exclusively for the self-supporting Campus University Union facilities and related programs.

54. Slide 54