DECEMBER 19, 2002


The State of California is facing an approximate $30 billion budget deficit through at least 2003-04. After the Legislative Analyst's Office issued a report in November estimating a $21.1 billion budget deficit, with on-going budget shortfalls occurring between now and 2008, the Governor's Department of Finance (DOF) released numbers yesterday revealing a $34.8 billion deficit - 45 percent of the state general fund. Governor Gray Davis also announced that current DOF Director Tim Gage will be resigning his position next month to be replaced by former State Senator Steve Peace, and past chair of numerous legislative budget conference committees. Peace also spearheaded CFA's 2002-03 budget language to delay CMS/PeopleSoft funding pending the completion of a comprehensive state audit.

To help alleviate the state's fiscal crisis, Governor Gray Davis recently announced $10.2 billion in mid-year budget reductions, including a $59.6 million mid-year cut to the CSU's budget (by comparison, proposed cuts for the University of California and community colleges total $74 million and $135 million respectively). The newly announced reduction to the CSU budget is in addition to cuts approved earlier this year and other unfunded cost increases. In total, according to Vice-Chancellor Richard West, the CSU is facing a $125.4 million budget shortfall in 2002/03: The CSU administration's budget reduction plan was presented to the Systemwide Budget Advisory Committee (SBAC) on Friday, December 13. Chancellor's Office staff also held a special meeting with representatives from the CSU's labor unions. While we remain cautious, CFA found the tone and substance of both meetings encouraging. Chancellor's office staff indicated that the budget shortfall would be met by reducing administrative expenses and travel budgets, cutting maintenance and academic support expenditures and leaving open positions vacant. Campuses will be instructed to maintain funding for instructional and student service programs. The message from the administration was clear: the 2002/03 budget reductions will not be met through layoffs. Chancellor's office staff also indicated that delayed implementation of the Common Management System (CMS/PeopleSoft) could be a partial solution to the CSU's budget problems.

In response to the budget deficit, the CSU administration is proposing a mix of student fee increases and budget reductions. The Board of Trustees met on Monday, December 16 and approved a mid-year resident fee increase of 10 percent for undergraduates and 15 percent for graduate students. The fee increase is anticipated to generate a total of $30 million, $10 million of which will be used for institutional financial aid programs (State University Grants). The remaining $20 million will be used to offset the budget shortfall. Additionally, Chancellor's Office staff indicated that the state would increase the size of Cal Grant financial aid awards to cover the amount of the fee increase. Several hundred students traveled by bus to the Chancellor's Office in Long Beach to voice their opposition to the mid-year fee hike.

In anticipation of a severe budget shortfall, and possible budget cuts, CFA has been working to structure a budget that limits cuts, prioritizes instruction and protects student access. As part of our campaign, CFA presented a 2003-04 budget plan to the CSUBOT - that garnered the support of the other major CSU unions - as an alternative to the administration's budget proposal. In the past, such attempts would have been met with little discussion or debate. However, this year CFA's alternative plan not only generated debate among the Trustees, but came to a vote after a motion was made by Trustee Rick Icaza, and seconded by Trustee ex officio Lt. Governor Cruz Bustamante. Assembly Speaker Herb Wesson also wrote a letter to the CSU Board of Trustees supporting CFA's budget. Although the motion only gained three votes (including the faculty Trustee Harold Goldwhite) it marked another example of CFA's growing political power.

A state deficit that last year was predicted to top out at $10 billion, has already tripled, and could grow even higher by the end of this year. Governor Davis convened a special session of the legislature last week to approve his proposed $10 billion in 2002-03 mid-year cuts. However, the legislature won't decide on Davis's recommendations until late in January, after the Governor releases his 2003-04 budget proposal on January 10. In the meantime, CFA will continue its work with the Governor's Office and participate in legislative hearings being held at the Capitol and throughout the state (San Jose State faculty-librarian Judy Reynolds testified at yesterday's education budget hearing in San Jose).

How big is the state's deficit? It equals at least a third of total state spending, and is greater than the entire budget of 48 other states (only New York's state budget is greater than California's deficit). If California gave lay-off notices to every state employee, shut down all the CSU campuses and closed all the state's prisons, a multi-billion shortfall would still exist in the state's coffers.

Governor Davis has indicated he wants to balance the state budget by the end of 2003-04. Even though such a feat will require both budget cuts and tax increases, such a "balanced" approach involving both budget cuts and new revenues is a notion adamantly opposed by the Republican leadership who this November gained two more seats in the Assembly and one more seat in the Senate, further aggravating the two-thirds voter requirement to pass a budget and tax increases. Even if discussed tax increases are enacted - "tax the rich," half-cent sales tax, and increasing the vehicle license fee - only about a third of the projected deficit ($11 million) would be eliminated.

We will keep you updated as budget negotiations continue.

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