2016-17 RPP Task Force Budget Recommendations


Image: csulb_seal_3.png


TO: Jane Conoley, President

FROM: Brian Jersky, Provost and Senior Vice President for Academic Affairs
Scott Apel, Vice President for Administration and Finance
Co-chairs, 2016-17 Resource Planning Process (RPP) Task Force

DATE: July 14, 2016

SUBJECT: 2016-17 RPP Task Force Budget Recommendations

This memo transmits the budget recommendations of the 2016-17 Resource Planning Process (RPP) Task Force. The 2016-17 state budget was recently enacted. While CSU final campus allocations will not be known until late this summer, the RPP Task Force believes it is important to communicate budgetary plans to the campus based on what we currently know.

Consistent with the governor’s long-term plan, the CSU will receive an increase in the system’s budget. The governor’s budget once again emphasizes the importance of timely degree completion in all of the state’s higher education segments. With the increased funding, CSULB 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 following summarizes our understanding of the current budget situation:

  • The governor’s 2016-17 budget invests new General Fund resources in higher education, consistent with the four-year budget plan he set for the system in 2013-14.
  • The governor’s budget includes $154 million in additional funding for the CSU. While this funding increase is welcome, it still falls short of the $241 million requested by the Board of Trustees.
  • The Chancellor’s Office has allocated $91.7 million of the $154 million from the governor’s budget to the campuses. A total of $20.7 million has been allocated for enrollment growth, $36 million for mandatory cost increases (healthcare and new space), and $35 million for 2 percent compensation increases for all employees except faculty.
  • The Chancellor’s Office is holding the balance of $62.3 million until further notice. This amount is comprised of $34.5 million for faculty compensation increases, $12.5 million for further enrollment increases, $7.0 million for retirement rate adjustments, and $8.3 million for systemwide initiatives to be announced.
  • CSULB’s estimated share of the funds allocated by the chancellor is approximately $6.6 million. In addition, we estimate that campus revenues will increase by about $2.9 million primarily due to resident enrollment growth and an increase in non-resident enrollment.
  • CSULB is projected to have about $4.1 million in discretionary funds available, after setting aside funds for non-discretionary uses such as compensation increases for non-faculty and health benefit cost increases.
  • RPP recommends supporting the increased campus instructional costs for the allocated enrollment increase by allocating $1.7 million for instruction.
  • RPP also recommends allocating $1.5 million to permanently increase the university-wide set-aside for costs associated with the Doctor of Physical Therapy program (from $512K to $2.0M), and allocating $200,000 to support the information technology function. After the above allocations, $700,000 of discretionary funds remains available. The campus has been told by the Chancellor’s Office that each campus is expected to fund some portion of the currently unfunded faculty compensation increases recently agreed to by the CFA, other bargaining units, and the Trustees. Therefore, RPP recommends setting aside $700,000 for this purpose as the estimated long-term permanent cost to the campus is much greater.
  • The contract settlement with the CFA may prompt some faculty to postpone retiring. Based on announced retirements to date, it appears that some portion of the salary savings that the Division of Academic Affairs had been projecting may not be available, creating a cash flow problem for the division.

Campus budget planning by RPP was based primarily on the Governor’s January Budget for a $140 million CSU funding increase. While the May Revise and the final state budget include some incremental funding for the CSU, it is almost all one-time funds and allocation decisions for this additional funding will likely not occur until later this summer. Therefore, RPP budget planning concluded at the end of the spring semester based on the best estimate that was available.

Current Budget Outlook

The May Revise budget projected that state revenues will be $1.9 billion lower than the January Governor’s Budget estimate. This shortfall will primarily be mitigated by reduced contributions to debt payments and the Rainy Day Fund. Fortunately, there was no negative funding change to the CSU from the January Budget. In fact, the May Revise contained some additional funding for the CSU. The sum of $25 million in one-time funding was designated to improve the four-year freshman graduation rates and two-year transfer graduation rates, particularly for low-income students. Also included in the May Revise was $1.1 million in permanent funding to support the CSU Student Success Network, an initiative to explore new ways to improve outcomes for students and scaling effective practices more broadly throughout the CSU. The 2016-17 CSU budget also includes several other one-time funding allocations. Thirty-five million is allocated to help the CSU address its deferred maintenance backlog and $35 million for graduation rate improvements.

The final state budget also included a further $12.5 million in base budget support to the CSU to grow funded enrollment by another 0.4 percent. Campus specific allocations of the aforementioned one-time funds or the additional funds for enrollment growth have yet to be announced by the Chancellor’s Office.

While the proposed 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. It is anticipated that a final CSU budget will not be available until sometime in July.

Update on Compensation Increases

The California Faculty Association (CFA) and the CSU reached a multi-year agreement in April 2016. Under the agreement, faculty employees will receive a 5 percent general salary increase (GSI) on June 30, 2016, a 2 percent GSI on July 1, 2016, and a 3.5 percent GSI on July 1, 2017. The agreement also includes a 2.65 percent service salary increase (SSI) for all eligible faculty employees in fiscal year 2017-18. This agreement was ratified by CFA members in early May 2016 and approved by the CSU Board of Trustees in late May.

At this time, the CSU projects that funding for a 4 percent general salary increase for faculty employees will be available in 2016-17 (2 percent from 2015-16 and 2 percent for 2016-17 based on current CSU budget projections). However, based on the agreement and the implementation timeframe, the cost to implement the salary increases will be 7 percent in 2016-17, resulting in a funding shortfall of 3 percent. While we have not yet received clear direction, we have been told that the CSU will utilize one-time systemwide funds in 2016-17 to cover 2 percent of the 3 percent shortfall. Campuses are expected to cover the additional 1 percent shortfall from campus resources. In 2017-18 the 2 percent increase covered temporarily in 2016-17 with one-time funds must be replaced with permanent funds. Moreover, the system will need additional funds to support the 3.5 percent GSI to be awarded July 1, 2017. Finally, the 2.65 percent SSI must also be permanently funded beginning 2017-18.

Many of the other bargaining unit contracts contain “me-too” clauses based on the CFA agreement. Staff bargaining units including the CSUEU, APC, SETC, and the Physicians unit recently agreed to the terms of their “me-too” clause. These unions have agreed to a 7 percent GSI, but the timing is quite different from the CFA. These employees already received a 2 percent GSI effective July 1, 2015. A 3 percent GSI will be effective July 1, 2016 and another 2 percent will be effective June 30, 2017. At this writing, only the UAW unit remains outstanding. Unknown at this time is what rate of increase non-faculty employees may be awarded effective July 1, 2017.

Based on the preliminary information we’ve been provided, we have developed projections of the costs to implement the above compensation increases and the funding the campus is expected to contribute towards these costs. As mentioned earlier, due to the multi-year nature of the compensation increases, not all required funding has been identified. For planning purposes, we have assumed the campus will receive its share of the 2 percent compensation increase pool currently contained in the 2016-17 budget plan. We have also assumed the CFA agreement is implemented for all faculty employees and the agreed-to plan is implemented for the other employee groups with “me-too” clauses. Using these assumptions, the estimate of compensation costs for 2016-17 in excess of our 2 percent funding pool is $5,400,187. The one-time funding for 2016-17 committed by the CSU equating to a 2 percent increase for faculty is approximately $2,650,000, leaving a funding shortfall of about $2,750,187 for 2016-17. The discretionary funds balance of $700,000 described in the Executive Summary section above is needed to help cover this shortfall. Fortunately, during the 2015-16 RPP budget planning process, we set aside $1,100,000 of permanent funds pending compensation negotiations. After applying these campus base funds of $1,800,000, the 2016-17 compensation funding shortfall of just under $1 million will require one-time campus funds. In summary, the campus will contribute $1.8 million in base funds and almost $1 million in one-time funds to the campus compensation pool for 2016-17. For 2017-18, the campus will likely need to find $1 million in base funds to replace the one-time funds utilized in 2016-17.

Each year salary savings associated with anticipated retirements are projected as part of the Division of Academic Affairs budget planning for the subsequent year. The recent contract settlement means that some faculty contemplating retirement may defer retirement for at least a year in order to add the 7% increase to their retirement benefits. The Division of Academic Affairs had been projecting salary savings but in this situation, some portion may not be available. This may create a cash flow problem for the division in 2016-17. This situation may balance out in a subsequent year if there is an increase in retirements but it will likely mean belt tightening for the academic division in 2016-17.

Clearly, the CSU must be successful in garnering additional state support in 2017-18 to help permanently fund these much deserved compensation adjustments. For 2016-17, final budget allocations to campuses for 2016-17 must be made. Based on budget allocations from the Chancellor’s Office, final campus budget plans will be made later this summer or early fall 2016.

Divisional Budget Planning

While the CSU is projecting to receive incremental funding in 2016-17, all of the funding is earmarked for specific purposes such as compensation increases, enrollment increases, and mandatory cost increases. There are no truly discretionary funds available to divisions. As such, the operating divisions were told very early in the spring to expect a status quo budget for 2016-17. No budget reductions or funding augmentations should be anticipated. Therefore, divisions were not asked to develop specific expenditure plans for 2016-17 nor were budget hearings conducted as in prior budget cycles.

Recommendations of the Resource Planning Task Force

  • RPP recommends that the limited discretionary funds be allocated as prescribed in planning for enrollment increase instructional cost funding, permanent adjustment to university-wide funding of costs associated with the Doctor of Physical Therapy program, and additional support of the information technology function. RPP recommends that $700,000 of remaining discretionary funds be added to the campus compensation pool.
  • RPP recommends that the $1,100,000 set aside in the 2015-16 budget process be added to the campus compensation pool.


For 2016-17, the campus funded enrollment target has been established at 28,692 resident FTES, an increase of 265 FTES or 0.9 percent over our 2015-16 target. At this time, the campus enrollment plans for 2016-17 are based on our resident FTES to come in approximately 0.5 percent over target for 2016-17. This increased enrollment contributes positively to our net budget as it generates additional fee revenue.

Concluding Thoughts

The CSU continues to face a set of key issues. Understandably, this year compensation has been the focus of a great deal of attention. Graduation rates and time to degree have attracted the attention of the governor. Deferred maintenance and capital funding are continuing important issues. Of note, however, is that some analysts are concerned with a risk of economic downturn in 2017-18, which may affect the system’s ability to garner new funding for these very important priorities.

Graduation rates and time to degree continue to be high priorities of the governor and legislature. The campus has long been focused on the core performance metrics: student retention and graduation. Student success is increasingly in the campus’s best interest.

The campus may face key choices with regard to enrollment growth. Enrollment growth is the primary funding mechanism through which the campus can capture additional state dollars that are important to the University. However, the campus is near its master plan enrollment limit. The campus may have to adapt to accommodate more students, while continuing to improve quality, using both traditional and 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.


  • Associated Students Officers
    All CSULB Employees