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Governmental Relations Office Report Contents:
CFA LEGISLATIVE PACKAGE 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 www.leginfo.ca.gov. AB 1185, authored by Assemblymember Cindy Montañez 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 contributions. 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. LEGISLATIVE ANALYST'S OFFICE BUDGET ANALYSIS 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 policy. 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. Conclusion 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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