February 28, 2003



As part of our work in implementing CFA's 2003-04 legislative priorities,
CFA introduced three pieces of legislation last Friday.  The bills,
described below, may be accessed by signing onto the legislative website at

AB 1185, authored by Assemblymember Cindy Montanez of Mission Hills, is in
an effort to rein in runaway growth in the CSU's administrative costs.  The
bill would require the Chancellor's office and each campus to provide
annual reports that provide a detailed analysis of the administrative costs
incurred in the previous fiscal year. Such costs would include salaries,
benefits, conferences, travel, housing and car allowances, contract
obligations, consultants, computing support, information technology, leases
and supplies.

AB 978, authored by Assemblymember Gloria Negrete Mcleod, the Chair of the
Assembly Committee on Public Employees, Retirement and Social Security,
would give CSU employee groups the ability to hold an election to vote on
whether they want to be covered for disability benefits under the State
Disability Insurance program (SDI), thus becoming eligible for paid family
leave. CSU employees are currently covered under the Non-Industrial
Disability Insurance program (NDI), which provides considerably fewer
benefits than those available through SDI. However, while NDI is entirely
employer-financed, SDI coverage is paid for solely through employee

AB 1465, also authored by Assemblymember Negrete Mcleod, would require the
CSU to include in its annual independent audit specific and detailed
information regarding its continuing education programs.

CFA will also be sponsoring a resolution that will direct the CSU to
provide a detailed report regarding the operations, financial management,
and governance of CSU campus parking programs. The resolution is a response
to growing concern that students, faculty, and staff are not adequately
consulted on parking related issues, including fee levels, construction and
alternative transportation decisions.


The non-partisan Legislative Analyst's Office (LAO) released its analysis
of the Governor's Budget on Wednesday, February 19th.  The LAO's response,
which is issued on an annual basis, concludes that the Governor's budget
proposal, if adopted in full, would eliminate the state's projected
multi-billion dollar budget shortfall.  However, the LAO warns that failure
to adopt certain elements of the governor's proposal, or alternative
proposals of similar magnitude, could result in a significant ongoing
structural budget deficit.  This cautionary note is especially ominous
given the highly charged political climate surrounding the Governor's
proposed tax increases.

The LAO makes several significant recommendations and alternative proposals
related to higher education and the CSU.

Enrollment Growth Funding

The Governor proposes increasing CSU funding by approximately $150 million
in 2003/04 to fund anticipated enrollment growth.  The Governor would
provide the CSU with $105 million to fund new enrollment growth of 5
percent in 2003/04 (approximately 16,000 additional FTES).  In addition,
the Governor proposes $45 million to backfill for over-enrollments in the
current fiscal year.

The LAO analysis concludes that the Governor over-funds enrollment growth.
According to the LAO, there is no justification for providing $45 million
for over-enrollments.  Essentially, the LAO argues that the CSU has already
accommodated the over-enrollments within their current budgets and
therefore should not receive additional funding for these students,
especially in light of the budget shortfall.  The LAO also feels that
demographic data and enrollment projections fail to support the level of
enrollment growth funded in the Governor's proposal.  The alternative
proposal developed by the LAO provides $84.7 million for enrollment growth
(4 percent), a $66.2 million reduction from the level supported in the
Governor's 2003/04 proposal.

The LAO's enrollment proposal could have an extremely negative impact on
the CSU.  Elimination of the Governor's proposed $45 million augmentation
for over-enrollment is of particular concern.  If adopted, this proposal
would increase the CSU net budget shortfall in 2003/04 from $260.7 to
$305.7 million.

Reducing funding for new enrollments is also very dangerous.  The
application process for the 2003/04 is already well underway and the CSU
has established a system-wide enrollment growth target of 5 percent.
Failure to fully fund enrollment growth will result in significant
disruptions at the campus level.

Student Fees

The Governor's budget proposal assumes the CSU Board of Trustees will
generate approximately $212.7 million in additional revenue by increasing
undergraduate fees by 25 percent and graduate fees by 20 percent.  Under
the Governor's plan, the CSU would continue its practice of devoting
one-third of student fee revenue to its institutional financial aid program
(the State University Grant).  Thus, the CSU would collect a total of
approximately $141.8 million in new, undesignated fee revenue that could be
used to offset budget reductions.

The LAO alternative proposes a smaller increase in student fees.
Specifically, the LAO would increase undergraduate fees by 15 percent and
graduate fees by 20 percent.  The fee increase proposed by the LAO would
provide the CSU with approximately the same amount of undesignated revenue
to offset budget reductions because of a proposed change in the way student
fee revenue is allocated (see the Financial Aid section below).

The LAO also proposes adoption of a long-term student fee policy similar to
the one recently developed by the California Postsecondary Education
Commission (CPEC).

Financial Aid

As mentioned above, Board of Trustees policy requires the CSU to devote one
third of student fee revenue to the State University Grant financial aid
program.  The Governor's budget would allow the CSU to continue this

The LAO encourages the Legislature to take a more active role in providing
guidance in the area of institutional aid policy development.  The LAO
recommends the Legislature take the first step in establishing this new
role by reducing the overall increase in CSU's institutional aid program in
2003/04.  Rather than devoting one third of new student fee revenues to
institutional aid, the LAO recommends the Legislature increase aid by a
much smaller amount.

By reducing the proportion of new student fee revenues devoted to
institutional aid, the LAO is able to recommend a lower fee increase (see
above) and still allow the CSU enough new, undesignated student fee revenue
to offset $142 million in proposed budget reductions.  This is the same net
offset as under the Governor's proposal.

The LAO further recommends that the Legislature begin working with the
higher education segments to develop legislation that governs institutional
aid programs and student fee redistribution.


In the coming days, CFA will be preparing a response to the LAO's analysis
of the Governor's budget.  The response will focus on the LAO's proposed
reduction in enrollment growth funding and the proposal's potential impact
on the CSU.

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