Various CSU Proposals - The 2021-22 Budget: Legislative ...
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The 2021-22 Budget:
Various CSU Proposals
MARCH 2021
In this post, we cover four California State Initiative (CTI) based at CSU Monterey Bay. In
University (CSU) proposals. In the first section, the third section, we analyze proposed trailer bill
we analyze the Governor’s proposal to provide language that would allow CSU to transfer funds
enrollment growth funding for CSU Stanislaus’s among certain accounts. In the fourth section, we
off-campus center at Stockton. In the second analyze the proposal to postpone the potential
section, we analyze the Governor’s proposal to suspension of state-funded summer financial aid at
provide one-time funding for the Computing Talent the universities.
Stockton Center
In this section, we focus on CSU Stanislaus’s to assess demand for a potential new campus in
off-campus center at Stockton. We first provide one of five specified areas: San Joaquin County
background, then discuss the Governor’s (including Stockton), Chula Vista, Concord, Palm
proposal to fund enrollment growth at the center, Desert, and San Mateo County. The Chancellor’s
analyze that proposal, and make an associated Office contracted with a team of independent
recommendation. consultants on the study, which was released in
July 2020. The study concluded that projected
Background enrollment demand did not justify a new campus in
CSU Stanislaus Maintains Off-Campus Center any of the five areas, as the existing CSU campuses
in Stockton. The Stockton center is located about have sufficient capacity under their master plans
45 miles away from the main campus at Stanislaus. to accommodate projected growth. However, the
It offers upper-division undergraduate coursework existing campuses would need additional funding
in selected fields (including business, criminal to reach their planned capacity. The study does
justice, psychology, and liberal studies), as well as not directly evaluate which existing campuses or
a small number of graduate programs. It enrolled centers to prioritize for facility or enrollment growth
291 state-supported full-time equivalent (FTE) funds.
students in 2019-20, making it among the smaller
Proposal
of CSU’s eight off-campus centers. (The center also
enrolls a smaller number of self-supported students Governor Proposes $1 Million Ongoing for
in extension courses.) The Stockton center’s Enrollment Growth at Stockton Center. The
current facilities have capacity for 1,069 FTE Governor’s proposal would fund an additional
students. Like other centers, the Stockton center’s 115 FTE students at the Stockton center. The
operations are funded through the main campus’s provisional language does not specify when
budget allocation. the center is to meet the target. The $1 million
State Recently Funded New Campus augmentation is based on the traditional marginal
Study With Focus on Five Areas, Including cost formula, of which the state General Fund
San Joaquin County. The 2019-20 Budget Act component is $8,586 per FTE student in 2021-22.
provided $4 million to the CSU Chancellor’s Office The administration indicates this proposal is
2 0 21-2 2 L AO B u d g e t S e r i e s 1intended to address growing demand for an these types of criteria, it is not clear that San
educated workforce in the San Joaquin region. It Joaquin County would be the highest priority for
further indicates that the proposal aligns with the growth funds. Based on the new campus study,
Governor’s overarching goals related to equity San Joaquin County scores relatively high on some
and access in higher education. Specifically, criteria, including the ability to serve first-generation
the Governor’s proposal is intended to expand students. However, it scores relatively low on other
educational access in an area that has many criteria, including regional enrollment demand and
low-income and underrepresented residents and is regional workforce demand.
not within close proximity to the main campus of a Center Would Have Limited Opportunity to
public university. In contrast to the administration’s Meet Growth Target in 2021-22. The Stockton
focus in previous years on developing a new center’s strategic plan (which was last updated
campus in Stockton, this proposal is intended to in 2019) includes a goal to increase the center’s
utilize existing facility capacity at the Stockton enrollment by 25 percent annually over a five-year
center. Aside from this targeted proposal, the period, subject to available funding. The plan
Governor’s budget does not fund systemwide suggests this goal could be achieved through
enrollment growth at CSU, nor does it set a comprehensive marketing, as well as strengthening
systemwide enrollment target for CSU. relationships with educational partners and
other local stakeholders. An increase of 115 FTE
Assessment students represents roughly 40 percent growth. We
Proposal Departs From State’s Typical think there would be limited opportunity to meet
Approach of Funding Enrollment Growth. this target in 2021-22, the year the funds would
Typically, the state provides enrollment growth be provided. First, the center would likely need to
funding to CSU systemwide. The Chancellor’s implement substantial changes to its recruitment
Office, in turn, allocates these funds across the and admissions strategy to achieve such rapid
23 campuses based on multiple factors, including growth. Second, by the time the state budget is
recent enrollment trends and potential for growth. finalized in June, admissions and potentially course
Campus leaders have discretion over how to divide scheduling decisions will have already been made
their allocations between their main campus and for fall 2021.
any off-campus centers.
Recommendation
State Has Not Established Prioritization
Criteria for Targeted Growth Funding. If the Recommend More Systematic Approach to
Legislature desired to adopt a different enrollment Funding Enrollment Growth. Given the above
growth approach that allocated funds directly considerations, we recommend rejecting the
to campuses or off-campus centers, it would Governor’s proposal to fund enrollment growth at
want to have a systematic way of identifying the Stockton center in 2021-22. If the Legislature
which locations to prioritize for funding. Having wishes to move toward funding enrollment on
transparent, rational allocation criteria would help a more targeted basis, it could work with the
ensure that growth decisions were not arbitrary. In administration and CSU to identify a set of factors
deciding how to allocate state funds for enrollment to use in prioritizing campuses and centers for
growth, the Legislature could consider various growth in future years. In the meantime, we
factors, including regional enrollment demand, recommend the Legislature set a systemwide
workforce demand, and certain demographic enrollment target for CSU in 2022-23, as we
factors. These are the same types of factors that discuss in The 2021-22 Budget: Analyst’s of the
the July 2020 new campus study examined. Using Major University Proposals.
2 0 21-2 2 L AO B u d g e t S e r i e s 2Computing Talent Initiative
In this section, we focus on a computer Proposal
science initiative based at CSU Monterey Bay.
Governor Proposes $10 Million One Time for
We first provide background, then discuss
CTI. This initiative would build upon the existing
the Governor’s proposal to fund the initiative,
computer science program and activities based at
analyze that proposal, and make an associated
CSU Monterey Bay and Hartnell College. The goal
recommendation.
of the initiative would be to strengthen the state’s
Background technology workforce pipeline, with an emphasis
on increasing diversity within the industry. The
Monterey Bay Has Local Partnership in
administration indicates the initiative was selected
Computer Science. In 2013, CSU Monterey Bay
for funding because of its alignment with the
and Hartnell College (a local community college)
Governor’s focus on equity.
created an accelerated, three-year bachelor’s
Funds Would Support CTI Activities Across a
degree program in computer science. Students
Five-Year Period. Budget bill language does not
in the program complete about half of their
specify how the proposed $10 million is to be spent
coursework at each institution. The program’s
or across what time period the funds are available.
cohort-based model is intended to create a learning
However, CSU has provided us with a preliminary
community, with students involved in workshops,
five-year expenditure plan developed by the CTI
study sessions, and industry mentorships. In 2015,
program team, as detailed below.
the two institutions jointly received a $5 million
one-time state award through the Innovation in • Demonstration Sites ($2 Million to
Higher Education initiative for having created the $3 Million). A portion of the funds would
program. CSU Monterey Bay has also launched be used to bring components of the
a similar four-year, cohort-based program for cohort-based bachelor’s degree program in
students entering as freshmen. To date, these computer science to additional demonstration
programs have enrolled more than 400 students sites. The program team intends to select at
across 15 cohorts. About three-quarters of these least five sites from various geographic areas
students have been underrepresented minorities, of the state, with priority for sites that involve
and about one-third have been female. The a community college partner and serve a high
programs report a four-year graduation rate of concentration of low-income, first-generation,
69 percent, much higher than CSU’s systemwide and underrepresented students.
four-year graduation rate of 31 percent for • Statewide Activities, Including Online
freshmen. Hub ($2 Million to $3 Million). Another
Certain Program Components Have Been portion of the funds would support statewide
Expanded to Other Locations. In 2018, the activities. These activities would include the
program team at CSU Monterey Bay and Hartnell development and operations of an online
College replicated their cohort-based bachelor’s hub for computer science students, faculty,
degree program at CSU Dominguez Hills and and industry representatives. The hub would
El Camino College, with support from a National provide resources and enable collaboration on
Science Foundation grant awarded to the four activities such as mentorship, internship and
institutions. More recently, the program team has job placement, and curriculum development.
also started to make certain workshops originally The activities also would include data
developed for the on-campus, cohort-based collection on higher education computer
program available online to computer science science programs, with the goal of informing
students at community colleges and universities decisions about how to address challenges in
statewide. the state’s technology workforce pipeline.
2 0 21-2 2 L AO B u d g e t S e r i e s 3• Financial Aid (Remaining Funds). The Compared with specific one-time initiatives,
remaining funds would support student these broader strategies are likely to have a
scholarships and stipends. larger and more long-lasting impact, allowing for
more systemic progress toward the state’s equity
Based on information the administration provided
objectives.
to us from the program team, CTI is expected to
Proposal Could Create Ongoing Cost
enroll a total of 500 to 2,000 students at the new
Pressures. Based on CTI’s preliminary expenditure
demonstration sites over the five-year period, and
plan, most of the proposed $10 million would
reach potentially tens of thousands of students
support costs that are ongoing in nature, including
through the online hub. The program team intends
program operations and student aid. Although the
to explore several potential funding sources to
intent is to seek funding from private industry and
cover the ongoing costs of the initiative, including
other sources, it remains to be seen whether such
private funds from the technology industry and core
sources would provide sufficient funding to sustain
operations funds at demonstration sites.
CTI activities beyond the initial five-year period.
Assessment This creates a potential risk that the program may
require future General Fund support if it is to have
Important to Weigh Proposal Against State’s an ongoing impact.
Other One-Time Priorities. In considering
Proposal Does Not Contain Provisions for
the Governor’s smaller one-time proposals for
Legislative Oversight. Although CTI includes
2021-22, the Legislature likely will want to weigh
a data collection component intended to help
the benefits of funding these various initiatives
measure progress toward its objectives, the
against the benefits of using the funds for a few
proposed budget bill language does not contain
strategic purposes. In The 2021-22 Budget:
a requirement to report any of this data to the
California’s Fiscal Outlook, released last November,
Legislature. Having a reporting requirement is key
we recommended using one-time funds for two
to helping the Legislature understand whether the
key purposes: restoring budget resilience and
initiative is having its intended impact. Program
mitigating the adverse effects of the pandemic.
reporting could also help inform the Legislature’s
The Governor’s CTI proposal is not tightly linked to
decisions about whether to fund similar initiatives in
either of these purposes. While the pandemic has
the future.
highlighted attention on the technology industry,
a bachelor’s degree program does not provide Recommendation
immediate employment benefits, in contrast to the
short-term workforce training programs typically Consider Redirecting Funds Toward
used to respond economic downturns. Other One-Time Priorities. Given the above
considerations, the Legislature may wish to reject
Proposal Would Likely Have Minor Impact
the Governor’s CTI proposal and redirect the
on State’s Equity Goals. Although the Governor’s
associated funds toward other one-time priorities,
CTI proposal would expand the reach of the
including restoring budget resilience and mitigating
existing program at CSU Monterey Bay and Hartnell
the effects of the pandemic. If the Legislature
College, the scale of the proposed initiative remains
wishes instead to pursue this proposal, it could
small relative to the state’s higher education
request that the administration and CTI program
system. In addition to targeted proposals such
team provide a financial sustainability plan this
as this one, the Governor’s budget contains
spring that provides further detail, including
broader strategies to increase equity, including an
potential ongoing funding sources and amounts
expectation that all three public higher education
beyond the initial five-year funding period. A
segments reduce student equity gaps as a
financial sustainability plan could inform the
condition of receiving base increases in 2021-22.
Legislature’s decision as to whether providing initial
(We cover this expectation in The 2021-22 Budget:
state funding could have long-lasting effects. Were
Analysis of the Major University Proposals.)
the Legislature to provide funding for this initiative,
2 0 21-2 2 L AO B u d g e t S e r i e s 4we encourage it to modify the Governor’s proposal how the funds were being spent; the types of
to improve oversight. Specifically, the Legislature programming and student support provided;
could include a requirement that the program the number of students participating; and their
submit annual reports during the initial five-year retention, graduation, and job placement rates, as
period that contain key information, including this data becomes available.
Use of Restricted Funds
In this section, we focus on a trailer bill proposal internally under normal circumstances, as accounts
that would allow CSU to transfer funds among typically have sufficient revenues to cover their
certain accounts. We first provide background expenses.
on current restrictions on how CSU may use its CSU’s Noncore Programs Have Experienced
funds, then discuss the Governor’s proposal to Significant Revenue Losses Over Past Year.
provide greater flexibility during the pandemic, Due to the pandemic, noncore programs such
analyze that proposal, and make an associated as housing and parking are operating at reduced
recommendation. capacity, resulting in significant revenue losses.
Based on a fall 2020 campus survey, CSU
Background estimates that its revenue losses total $689 million
CSU Maintains Separate Accounts for from March through December 2020. CSU is
Certain Programs. Campuses have a core addressing a portion of these revenue losses
operating account that supports their academic using federal funds for institutional relief, which
programs. Campuses maintain separate accounts total $854 million to date. (These federal relief
for their noncore programs (also known as funds also can be used to cover extraordinary
“enterprise programs”), including housing, parking, costs associated with the pandemic, such as
continuing education, student body centers, higher technology costs resulting from more online
and health facilities. These noncore programs instruction. We cover federal relief in our recent
are self-supporting, with user fees set to cover post.) Despite operating at reduced capacity,
associated costs. Consistent with this financing noncore programs still have some continued
principle, under current law, noncore revenues expenses, such as employee compensation and
generally must remain within the associated service contracts.
program. For example, parking fee revenues
support parking expenses, and housing fee Proposal
revenues support housing expenses. (State law Governor Proposes to Remove Restrictions
makes an exception for debt service on university on CSU’s Accounts. The proposed trailer bill
bonds, explicitly authorizing CSU to pledge language would allow CSU to transfer funds
revenues across its accounts.) across accounts, or use funds in any account
State Law Authorizes Internal Borrowing for any purpose, regardless of existing statutory
Across CSU Accounts. State law explicitly restrictions. This flexibility is intended to mitigate
authorizes CSU to borrow funds from one of its the effects of the pandemic, remaining operative
accounts for another account. For example, the through June 30, 2023. The flexibility generally
housing program at a given campus could borrow applies to core and noncore funds. However,
from the continuing education program. However, the proposed language explicitly excludes tuition
the loan must be repaid with interest by the time revenue (the main source of balances in the
funds are needed for expenditure within the original core operating account) and lottery revenue. In
account. The need for repayment creates a future contrast to current law, funds transferred under
cost pressure for the program that borrows the the proposed language would not need to be
funds. CSU indicates programs do not borrow repaid. The proposed language would require
2 0 21-2 2 L AO B u d g e t S e r i e s 5any transferred funds to first be used to mitigate possibly provide an even larger third round of
impacts to programs that predominately support institutional relief in the coming months. Second,
underrepresented students, expand online campuses could draw on their noncore reserves,
education, or provide for continued employment. which totaled $1.1 billion at the end of the 2019-20
(The administration suggests that supporting fiscal year. Although a portion of these reserves
noncore programs such as housing and parking have been committed for planned activities, these
could meet the first of these criteria.) funds could be repurposed until the associated
CSU Might Use Flexibility to Cover Operating programs regain their fiscal footing. (We provide
Costs in Noncore Programs. The CSU further detail on university reserves in our recent
Chancellor’s Office indicates that, if campuses were post.) Third, if a campus is unable to cover costs
to use the proposed flexibility, they would most in a given program using federal relief funds
likely transfer funds to noncore programs that have and campus reserves, it could use the internal
experienced significant revenue losses during the borrowing option authorized under current law.
pandemic. The funds would be used to cover these Given that CSU has announced plans to return to
programs’ operating costs, potentially including largely in-person instruction in fall 2021, we expect
employee compensation. noncore program revenues to begin recovering
in 2021-22 (though the amount of time it takes
Assessment these programs to return to full capacity remains
uncertain).
Strong Rationale Needed to Remove Current
Restrictions. Under current law, the restrictions on More Information Needed on Added Benefits
the use of CSU’s noncore funds reflect that these of Proposed Flexibility. The main difference
programs are supported by user fees. That is, the between the internal borrowing option authorized
students (and sometimes staff and faculty) who use under current law and the Governor’s proposed
the programs pay for them. For example, a student flexibility is that the latter would not require that
enrolled in a continuing education course pays a transferred funds be repaid. This potentially
fee for that course, a student who commutes to benefits some future program users, but it does
campus by car pays a parking fee, and a student so potentially at the expense of other program
who is housed in a dormitory pays a housing fee. users. For example, if the housing program were
By extension, the students who do not use these to borrow from continuing education under current
programs are not charged for them. In all these law, future students using CSU housing could
cases, transferring fee revenue among accounts potentially see their housing fees increase during
runs contrary to the users’ expectations at the time the repayment period. In contrast, were the funds
their fees were paid. Transferring funds without transferred without repayment, future students
repayment also could have a negative impact on using CSU housing could potentially see smaller
the account from which the funds are taken, as increases in their housing fees, but the continuing
those funds could otherwise have been used for education program would have fewer funds than
future activities such as program development. otherwise—funds, for example, that might have
been used for research on better understanding
Noncore Programs Have Existing Options to
student demand for certain continuing education
Cover Operating Costs. Although the pandemic
courses. The CSU Chancellor’s Office indicates that
presents extraordinary circumstances for CSU’s
the amount and duration of such fee increases are
noncore programs, campuses have several existing
not known at this time. To date, CSU campuses
options to continue covering program costs.
have not needed to borrow internally, and CSU
First, campuses could use federal relief funds. As
does not know how much campuses would use the
noted above, the first two rounds of institutional
proposed flexibility to transfer (rather than borrow)
relief funds have totaled $854 million—an amount
funds. Without this information, it is difficult for the
exceeding CSU’s estimated $689 million in revenue
Legislature to assess the impacts of the proposal.
losses through December 2020. Depending on
current negotiations, the federal government could
2 0 21-2 2 L AO B u d g e t S e r i e s 6Recommendation If the administration and CSU cannot provide this
information in the spring, the Legislature may wish
Withhold Action Pending Receipt of
to reject the proposal in light of those drawbacks.
Additional Information. Given the considerations
(The administration proposes similar trailer bill
above, we recommend the Legislature direct the
language for the University of California [UC] and
administration and CSU to provide additional
California Community Colleges, but neither of these
information estimating how much campuses would
segments has expressed particular interest to us in
likely use the proposed flexibility, as well as the
this flexibility. Were the Legislature to consider the
associated amount of future fee increases that
language for these other segments, we recommend
would likely be avoided as a result. This information
it direct the administration and those segments to
would allow the Legislature to weigh the benefits
provide comparable information as that requested
of the proposal against the drawbacks of using
of CSU.)
funds for purposes other than originally intended.
Summer Financial Aid
In this section, we focus on financial aid for the suspension items, for 2021-22. It postpones
summer term at CSU and UC. (We include UC in the suspension calculation for all items by one
this section, as the Governor’s proposal in this area year—to the May Revision for 2022-23. At that
applies similarly to both segments.) We first provide point, unless estimated General Fund revenues
background on the state’s recent funding for exceed expenditures in 2022-23 and 2023-24 by
summer financial aid at CSU and UC, then discuss at least the total cost of the suspension items, then
the Governor’s proposal to postpone the potential these items are to be automatically suspended on
suspension of this funding, and make associated December 31, 2022.
recommendations. Recommend Eliminating Suspension
State Provided Funding for New Summer Language. In The 2021-22 Budget: The Governor’s
Financial Aid Grants, Subject to Suspension. Suspension Proposal, we raise several concerns
The 2019-20 Budget Act and 2020-21 Budget Act regarding the Governor’s broader approach to
each provided $6 million to CSU and $4 million suspensions across the state budget. Although
to UC for new summer financial aid grants. Under the suspension items are treated as temporary
the associated budget bill language, CSU and UC spending, they tend to support programs that are
could provide summer-term grants to students ongoing in nature. Treating them as temporary
eligible for state financial aid. In both budget acts, therefore understates the true ongoing cost of the
this funding (and more than a dozen other items state’s policy commitments. Moreover, the potential
across the state budget) is subject to potential suspensions create uncertainty for program
suspension on December 31, 2021. Specifically, providers and recipients, making planning and
when submitting the May Revision later this implementation more difficult. For these reasons,
year, the Department of Finance is to compare we recommend the Legislature eliminate the
estimated General Fund revenues to expenditures suspension language. As an alternative to using the
in 2021-22 and 2022-23. Unless revenues exceed Governor’s proposed suspension calculation, the
expenditures in both years by at least the total cost Legislature could instead decide whether to fund
of all suspension items, then all these items are to the suspension items based on the merits of each
be automatically suspended. item.
Governor Proposes to Postpone Suspension Recommend Reevaluating Summer Financial
Calculation by One Year. The Governor’s Aid Funding. Whereas many of the other
budget proposes to continue funding summer suspension items in the state budget are tied
financial aid at CSU and UC, as well as the other to longstanding programs with well-developed
2 0 21-2 2 L AO B u d g e t S e r i e s 7underlying policies, the summer financial aid prioritization. We recommend the Legislature
funds at CSU and UC were provided for the first fundamentally reevaluate whether to continue this
time only two years ago and had limited policy funding, taking into consideration its merits, other
development. Summer financial aid grants at CSU financial aid programs, and the state’s projected
and UC could potentially support several laudable operating deficit. If the Legislature chooses to fund
policy objectives, including increasing aid for summer financial aid grants at CSU and UC on an
students with financial need, reducing students’ ongoing basis, we recommend it adopt statute to
time to degree, and improving utilization of campus define clear policy objectives for the new program,
facilities during the summer. However, current law establish program rules that align with those
does not identify any of these objectives for the objectives, and identify ways to measure progress
summer financial aid funds. Moreover, no statutory toward those objectives over time.
rules guide grant size, coverage, or student
LAO Publications
This report was prepared by Lisa Qing, and reviewed by Jennifer Pacella and Anthony Simbol. The Legislative
Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature.
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