2019-20 RPP Task Force Budget Recommendations


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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, 2019-20 Resource Planning Process (RPP) Task Force

DATE: June 10, 2019

SUBJECT: 2019-20 RPP Task Force Budget Recommendations

This memo transmits the budget recommendations of the 2019-20 Resource Planning Process (RPP) Task Force. While CSU final campus allocations will not be known until later this summer, the RPP Task Force believes it is important to communicate budgetary plans to the campus based on the proposed state budget and projections of how that might affect the CSULB budget for 2019-20.

Citing the need for higher education to remain engines of economic mobility, the new governor is making significant investments in all three of the state’s higher education segments and in student financial aid.  The Administration has committed to promote affordability, access, and efficiency in higher education.  For the CSU, additional state funding is being provided in recognition of the critical importance the system plays in preparing the workforce of California.

Executive Summary

The following summarizes our understanding of the current budget situation:

  • The governor’s 2019-20 budget invests new General Fund resources in higher education.
  • The governor’s budget includes $300 million in additional base operational funding for the CSU. This funding supports $45 million for the Graduation Initiative 2025, $148 million for employee compensation increases, $94 million for enrollment, and $45 million for mandatory cost increases. These cost increases total $332 million, with the balance of $32 million in required funding coming from additional revenue generated by enrollment growth of two percent.
  • The governor’s 2019-20 budget also provides $247 million in one-time funds for deferred maintenance and on-campus child care.
  • The Chancellor’s Office has not yet provided final budget allocations to the campuses for the $300 million base funding increase or the $247 million in one-time funds. Campus budget allocations are anticipated to occur in late July 2019.
  • Due to marked improvements in graduation rates, higher average unit loads, and declining international student enrollment at CSULB, actual headcount figures continue to be below projections based on the former funding model, resulting in a 2019-20 campus revenue shortfall projection of just under $3 million.
  • Based on preliminary campus budget allocations provided after the Governor’s January Budget Proposal, CSULB will receive approximately $23 million in additional state funding. However, about $18 million of this amount is earmarked for specific purposes such as the graduation initiative, compensation increases, and mandatory cost increases. That leaves $5 million in campus discretionary funding, so after adjusting for the revenue shortfall, the net available discretionary funding is about $2.1 million.
  • Because of the relatively small amount of available discretionary funding, RPP recommends the $2.1 million be allocated to all operating divisions on a pro rata basis.
  • If the overall campus base budget for 2019-20 changes significantly over the summer, RPP will reconvene in the fall.

RPP Budget Planning

Campus budget planning by RPP began in April based primarily on the Governor’s January Budget for a $300 million permanent CSU funding increase. The May Revise contained no significant change to the CSU budget and the $300 million permanent increase remained a good planning figure. Based on the $300 million increase and CSULB’s preliminary campus budget allocations, RPP budget planning concluded at the end of the spring semester with hopes that the CSU would receive additional funding in the final state budget.

Current Budget Outlook for CSU

The May Revise budget projected that state revenues will be $3 billion higher than the January Governor’s Budget estimate. However, most of the increased revenues are constitutionally obligated to reserves, debt repayment, and K-12 schools. Most of the remaining flexibility is dedicated to building the Rainy Day Fund and paying down the state’s unfunded liabilities. The governor cites growing uncertainty related to the global political and economic climate, federal policies, rising costs, and the length of the current economic expansion as reasons for continued budgetary prudence.

The May Revise contained some small changes to the CSU budget. The only notable change was an additional $6.5 million in base funding to support homeless and housing insecure students. There was also an additional $750,000 in base funding to increase support for Project Rebound and $740,000 in one-time funding to support a youth program at CSU Sacramento. Since these are very specific earmarked funds and campus allocations are unknown at this time, they are not being addressed in this memorandum.

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

Status of 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 2.5 percent general salary increase (GSI) on July 1, 2019. Staff bargaining unit R06 (SETC) will receive a 3.75 percent general salary increase on July 1, 2019. Most remaining bargaining units (CSUEU, APC, UAW, and the Physicians unit), Confidential, and MPP employees will receive a 3 percent GSI effective July 1, 2019. At this writing, salary increases for Police (SUPA) employees have not been determined.

Enrollment and Revenue

For 2017-18 and again in 2018-19, the campus achieved and slightly exceeded its funded FTES enrollment target. With marked improvements in graduation rates and historically high average unit loads, actual headcount figures declined while FTES increased. Also, the non-resident headcount has decreased by 6 percent since 2017-18 due to multiple challenges in attracting international student applicants. Both of these effects combined have resulted in a shortfall in resident and non-resident tuition fee revenues. For 2017-18 and 2018-19, this revenue shortfall was mitigated with one-time funds..

Several strategies are being considered to counter these challenges. In order to minimize the tuition revenue shortfall for 2019-20, a record number of new students will be admitted to CSULB in Fall 2019. While the plan is to be very close to the FTES target, headcount is still expected to be slightly under projections, resulting in continuing revenue shortfalls. For 2019-20, the resident enrollment target is 29,542 FTES, two percent higher than 2018-19. Current projections are to achieve 29,999 FTES, or about 1.5 percent above target. However, due to the lower headcount and the continued decline in international students, the projected revenue shortfall for 2019-20 is just under $3 million.

Fully adjusting to these new dynamics has taken a few enrollment cycles. t has been a phenomenon not experienced in the past, but one that is also occurring on many other CSU campuses. Fortunately for CSULB, it is believed that a permanent revenue adjustment of $3 million in 2019-20 will properly reset the revenue budget going forward.

Graduation Initiative 2025

The proposed state budget includes $45 million in base budget for the Graduation Initiative 2025 throughout the CSU. The exact CSU budget allocation methodology to campuses has yet to be determined. If it is similar to last year, each campus may use these funds in support of their individual graduation initiative plan, including system-wide priorities of increased tenure-track faculty hiring, offering additional high-demand course sections to increase average unit load for undergraduate students, and providing additional academic and student support services that support reduced time to degree. For CSULB, this will enable the divisions of Academic Affairs and Student Affairs to plan strategically and implement strategies to meet these system-wide priorities. For Academic Affairs, the priority is to secure funding for new tenured/tenure track positions. In addition, Academic Affairs will expand and continue the efforts that began in 2016-17 in support of the 4-year Graduation Initiatives by Colleges, Highly Valued Degree Initiative 2025 Taskforces, Faculty-led Research on Timely Graduation, and Data Informed Decision Making. We also plan to offer additional courses to reduce bottlenecks in 4-year plans. For Student Affairs, the funding will enhance student support services related to GI 2025 priorities.

CSULB Budget Outlook

CSULB is projected to receive incremental funding in 2019-20. Unfortunately, the majority of funding is earmarked for compensation increases, the Graduation Initiative 2025, and mandatory cost increases. The projected enrollment funding provides some discretionary funds, but some of it is needed to mitigate the revenue shortfall for 2019-20. Although we must await final campus budget allocations by the Chancellor’s Office, the best projection at this point is that the campus will have $2.1 million in true discretionary funding available for 2019-20.

Based on the January Governor’s Budget proposal, the operating divisions were told very early in the spring to expect very little if any discretionary funding for 2019-20. As such, divisions were not asked to develop specific budget plans for 2019-20 nor were budget hearings conducted as in prior budget cycles.

Recommendations of the Resource Planning Task Force

  • RPP recommends that base funds of $3 million be utilized to permanently reset the revenue budget for 2019-20 and beyond.
  • RPP recommends that the projected discretionary funding available in 2019-20 of $2.1 million be allocated to the operating divisions on a pro rata basis.
  • Should the overall campus base budget change significantly over the summer, RPP will reconvene to address the change.

Concluding Thoughts

The CSU continues to face a set of key issues. Graduation rates and time to degree continue to be discussed system wide and in Sacramento. Deferred maintenance and capital funding are continuing important issues. Of note, however, is that some analysts are concerned with the possible effects of major changes in federal policy, especially changes to federal health care programs. Also of concern is a risk of economic downturn which may affect the system’s ability to garner new funding for these very important priorities.

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 revenues 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. These accommodations should be carefully discussed by financial and strategic planners along with the Academic Senate, as well as within any new campus master plan.

It is important to note that the 2019-20 campus budget outlook is very positive, although it may not feel so. For the first time in several years, the base budget is fully balanced and longstanding budget issues such as underfunded compensation increases, unfunded employee benefit costs, and revenue shortfalls have all been addressed. This is a notable accomplishment given all the other competing priorities and needs on campus. 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