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California State University, Long BeachCalifornia State University, Long Beach
CALIFORNIA STATE UNIVERSITY, LONG BEACH
TO:Donald J. Para, Interim President
FROM: David Dowell, Interim Provost and Senior Vice President for Academic Affairs
Mary Stephens, Vice President for Administration and Finance
Co-chairs, 2014-15 Resource Planning Process (RPP) Task Force
DATE: June 18, 2014
SUBJECT:

2014-15 RPP Task Force Budget Recommendations

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This memo transmits the budget recommendations of the 2014-15 Resource Planning Process (RPP) Task Force. The final state budget and CSU funding will not be known until later this summer, but the RPP Task Force believes it is important to communicate budgetary plans to the campus based on what we currently know.

In the past decade, CSULB has faced challenging budget circumstances resulting in substantial reductions to the resources of our operating divisions. During this time, the campus prioritized our academic purpose, graduating students with highly-valued degrees, focusing on academic quality and continuing to support the schedule of classes and student progress to degree. The campus can be proud that graduation rates and numbers reached all-time record highs, despite budget challenges of recent years.

Fortunately, for the second straight year, the CSU will be receiving an increase in the system’s budget. While this budget is fairly good news for the system and our campus, it will take several years of consistent state reinvestment to fully recover from prior budget cuts. Nevertheless, the increased funding will allow us to move forward in a positive direction. We will be able to better serve students and meet the educational needs of more Californians, thereby positively affecting the workforce and the state’s economy.

Executive Summary

The Governor’s May Revise Budget contained no changes for the CSU budget from his January proposal. The following summarizes our understanding of the budget situation:

  • The governor’s 2014-15 budget proposal invests new, discretionary General Fund resources in higher education, consistent with the four-year budget plan he set for the system last year.
  • The governor’s budget proposal includes $142.2 million in additional funding. While this funding increase is welcome, it still falls short of the $237 million requested by the Board of Trustees.
  • The chancellor has allocated $53.3 million of the proposed $142.2 million from the governor’s budget proposal to the campuses. A total of $39.6 million has been allocated for enrollment growth and $13.7 million for mandatory cost increases (healthcare and energy).
  • The chancellor is holding the balance of $88.9 million until further notice. This amount would supposedly be for compensation increases, student success and completion initiatives, and the financing of maintenance and infrastructure. The original Board of Trustees request amount for these three priorities was $156.6 million.
  • CSULB’s estimated share of the discretionary funds allocated by the chancellor is $4.1 million. In addition, we estimate that campus revenues will increase by about $15 million due to enrollment growth and a sizable increase in non-resident enrollment. After allocating enrollment increase instructional cost funding and setting aside a contingency reserve of $2 million, we estimate that we will have approximately $10.9 million of discretionary funds available. This $10.9 million has been tentatively allocated to the operating divisions on a pro rata basis to fund operational requirements.

Campus budget planning by RPP has been completed based on this estimate of $10.9 million, the best estimate that was available during the spring.

Background

The proposed funding increase for higher education signifies the importance of a college education for California residents as well as the impact it has on the state’s economy and workforce. The increase in funding will move the CSU forward in a positive direction as the system looks to recover from the substantial decrease in state funding experienced during the state’s economic downturn. The governor’s budget proposal once again emphasizes the importance of timely degree completion in all of the state’s higher education segments.

Current Budget Outlook

Governor Brown recently released his May Revise budget for the coming year. The May Revise now projects that state revenues will exceed the January Governor’s Budget estimate by an additional $2.4 billion. Given this positive revenue forecast, the governor has announced his priority is retiring some of the state’s outstanding debt and establishing a new “rainy day fund.” Additionally, large portions of the additional surplus will be applied to the following:

  • Increased Medi-Cal caseloads
  • Proposition 98 related spending increases
  • Shoring up of state employee retirement systems
  • New expenditures to combat the drought

Therefore, despite the improved revenue forecast, the May Revise budget does not increase the January budget proposal for the CSU.

The May Revise also maintains the governor’s commitment to a multi-year stable funding plan for higher education. Under this plan, the CSU would receive up to a 20-percent increase in General Fund appropriations over the four-year period (2013-14 through 2016-17). In exchange, the CSU is expected to freeze resident tuition for that same period to ensure affordability for students and their families. Additionally, the CSU is expected to achieve the following priorities: decrease the time it takes students to complete a degree; increase the number of students who complete programs; and improve the transfer of students from community colleges. The multi-year funding plan increases funding and strengthens accountability to encourage the CSU to become more affordable and to maintain quality and access over the long term.

Subsequent to the May Revise, budget committees in both state legislative houses recommended amendments that would increase the CSU budget by $95 or $100 million. After many legislative deliberations and negotiations, these recommended augmentations were not included in the final budget approved by the governor. While the approved CSU budget is short of the Board of Trustees’ request, we are grateful for the addition of new funds and the ongoing support of the governor and legislature.

Preliminary Campus Budget Outlook and Planning (Spring Term Planning)

While we do not know the final budget for CSULB, we have projected, based on most likely assumptions, the availability of some discretionary funding this coming year. We also know the CSU tentatively has set aside funding for specific purposes such as compensation increases, student success and completion, and financing maintenance and infrastructure. The distribution of any compensation increase pool will be subject to the collective bargaining process. Funding for student access and success initiatives will be allocated to campuses based partly on a competitive process. And any potential funding for maintenance and infrastructure needs is likely to be allocated to campuses on a competitive, priority-based methodology. Funding allocations for these specific purposes will be made at a later date by the Chancellor’s Office with the funds earmarked for these purposes. Beyond these set-asides, CSULB’s expected discretionary funding is primarily due to an increase in our enrollment and the associated increase in fee revenue. The estimated amount of $10.9 million in campus discretionary funds was the basis for RPP budget planning this spring.

While we are grateful to have a fairly sizable amount of discretionary funds available for 2014-15, it is important to point out that a large portion is attributable to an atypical increase in revenue. This atypical revenue is due to conservative revenue planning in 2013-14, the first year of major-specific admissions criteria and the unknown enrollment patterns that would result. Because of this uncertainty, we purposely projected conservative revenue growth in 2013-14 base budget planning. Fortunately, enrollments continue to be very strong and we now have the opportunity to “make-up” for past conservative base budget planning.

It is important to point out that because our budgeted revenue planning has now “caught up,” we cannot plan on this level of campus discretionary funds going forward (under more typical conditions). Also, with this more aggressive revenue budgeting, we will likely not have as much available surpluses to add to our campus reserve as in prior years.

Results of Divisional Budget Planning

The projected $10.9 million in campus discretionary funds were allocated to the operating divisions on a pro rata basis. The divisions were asked to develop expenditure plans for their share of discretionary funds. Divisions were asked to tie expenditure plans to the Campus Strategic Priorities and Goals. Below is a summary at an aggregate level:

  • The divisions have embraced the top campus priority “Student Success” making students our highest priority. Some examples include: implementation of e-advising technologies; expand use of instructional methods based on innovative technology; support suicide prevention awareness and other mental health issues.
  • The majority of discretionary funding will go towards essential employee hiring to address critical operational needs. Consecutive years of budget reductions forced all operating divisions to reduce staffing levels. Increased funding in 2014-15 allows the campus to reinvest in mission critical priorities including an increase in tenure track hiring and RSCA (research, scholarly, and creative activities) funding to strengthen academic programs.
  • Other divisional priority areas include: maintaining classrooms to facilitate active learning; increased monitoring of timely progress of graduate students; enhancing employee training opportunities; supporting innovative technology; completing a major comprehensive campaign; strengthening programs that reduce achievement gap; and supporting RSCA adequately.

Divisional plans are very preliminary and are based on our best estimate of available campus discretionary resources. Both the amount of campus discretionary funds and details for the use of these funds by divisions may change by the time we have a final budget later this summer. Plans may also change depending on how much and for what purpose CSULB receives funding designated for student access and success.

Recommendations of the Resource Planning Task Force

  • RPP recommends that the $10.9 million in discretionary funds be allocated to all campus operating divisions pro rata as prescribed in planning.
  • The $2 million of campus discretionary funds reserved as a contingency should be allocated as determined by the vice presidents and the president once the 2014-15 budget is finalized. Since this $2 million is considered permanent base funding, any one-time uses of these funds would be available for allocation the following year.

A summary of divisional budget plans are contained in the Campus Budget Plans section of this report.

Enrollment

For 2014-15, the campus funded enrollment target has been established at 27,848 resident FTES, an increase of 650 FTES or 2.4 percent over our 2013-14 target. At this time, the campus enrollment plans for 2014-15 are based on our resident FTES to come in approximately 1.0 percent over target for 2014-15. This increased enrollment contributes positively to our net budget.

Due to our new approach to admissions based on major-specific criteria for all academic programs, there continues to be some uncertainty about our enrollment performance. However, because of effective enrollment management, indicators are that we will be close to projections.

Concluding Thoughts

Anticipated budget increases do not fully offset severe reductions we experienced in recent years. Compensation remains particularly problematic with many years with little or no pay increases for faculty and staff. Increases in the Student Excellence Fee will bring much needed improvements in some areas, especially technology.

We expect technology to continue to drive changes in pedagogy and service delivery. New initiatives, such as instructional technology, must be pursued despite limited resources. It is important that the campus be as well organized as possible to effectively adapt to technological changes in both services and instruction.

Some form of performance-based funding is likely in our future. The campus has long been focused on the core performance metrics: student retention and graduation. Always the right thing to do, student success is increasingly in the campus’s best interest. Growth is an immediate challenge. The state has a well-articulated need to increase baccalaureate completion numbers (not just rates) which may lead to CSU campuses being asked to continue to grow. Yet, CSULB is near physical capacity. The campus may have to adapt to accommodate more students, while continuing to improve quality, using any or all of several strategies such as reduced time to degree (which could dramatically increase capacity), online and blended technology instruction (which can improve efficiency of facility usage), and other creative strategies.

The Task Force would like to acknowledge the continued hard work and resolve shown by the entire university community. CSULB remains a vital, premiere institution of higher education. This would not be possible without the energy, creativity, dedication and positive attitude of our faculty, staff and students.

Copy to:
  • Associated Students Officers
    All CSULB Employees

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