Wednesday, May 20, 2009

Budget Update from Pat Gantt

Here is this morning's message from CSUEU President Pat Gantt:

TO: CSUEU Board of Directors and Assigned staff

Budget Update 5/19/09

It has been a while since I updated you on the state and CSU budgets. I have been waiting either for some of the pieces to fall in place or for a new ball to be put in the air. That's turned into quite a long wait!

The messages on the May 19 special election were confusing, but the bottom line was that Prop. 1A's spending cap provision would have done nothing for the CSU in the short run and would have done harm to all of us in the long run. Its defeat was a victory for all who are concerned about the future of the CSU.

Now we wait to see what the legislature and governor do next. We need to closely watch some numbers identified in the Trustees' budgets and the new May revise. I am working with a variety of sources to get a handle on the use of federal stimulus funds and what the May Revise really means.

Following are some reports from the last week dealing with the CSU and state budget:

Trustees Meeting

The California State budget is notorious for its twists and turns. Last week, it appears that there may have been some new twists. The Chancellor's Office presented an updated budget outlook to the Trustees on Tuesday that was grim and doubtful, but with some hope of protection thanks to federal stimulus funds. Here is an excerpt from the May CSU Trustees Finance Committee Report:

May Revision As noted above, the May Revision will have a strong nexus to the May 19 election and the State's revenue projections. Consequently, the CSU support budget will be vulnerable to additional reductions. However, the federal ARRA includes “maintenance-of-effort” (MOE) requirements for states (like California) that draw upon the Education Restoration Fund. The ARRA specifies that states accepting the funds must “maintain State support for public institutions of higher education (not including support for capital projects or for research and development or tuition and fees paid by students) at least at the level of such support” in 2005-06, unless a waiver is granted. The Department of Finance has calculated the MOE requirement for the CSU to be $2.596 billion. The current State General Fund appropriation for 2009-10 of $2.654 billion exceeds the MOE by $58 million. Assuming the State is not granted a waiver, the CSU support budget should be reduced no more than $58 million.

Conclusion Considering the General Fund reductions, the absence of the funds related to the Compact for Higher Education, the ten percent student fee increase and the funds to be received from the federal stimulus package, the total two-year impact on the CSU support budget is a negative $587 million. In the context of the continuing economic uncertainties and the impact the May 19 ballot propositions will have on the General Fund, the CSU may be forced to plan for additional budget reductions.

Chancellor's Report

Excerpts from the Chancellor's Report to the CSU Board of Trustees
May 13, 2009 Compiled by Teven Laxer

  • I have been in public service for 45 years. I have never seen what I am seeing now. I anticipate continuing bad news. I don't see any improvements for 18 to 24 months.
  • We can have more revenue (through a fee increase) or less staff and faculty
  • Events that are coming will come very fast. By the first week in June, we will have a PLAN.
  • CSU held its advocacy day last week in Sacramento. Some legislators are talking about a cut to the CSU budget of 18 to 20 percent.
  • Can we manage it? Our payroll is $296 million per month.
  • Where you start with the Governor is generally where you wind up.
  • We will work through the weekend (May 29-31) and come up with a plan which will be presented to the Presidents at a June 1 meeting at our office. We will talk about what the May Revise means to the CSU.
  • The Speaker told me that she intends to have a (new) budget for FY 2009 between June 15 and July 1.
  • There will be a meeting with the campus presidents on June 1 in the Chancellor's office.
  • After June 1, we intend to send out a list of allocations to all of the presidents.
  • Our goals will be as follows:
    • Students first
    • Save all of the jobs we possibly can
    • We're going to talk about some different initiatives that we haven't done before
  • We expect 90,000 students will graduate this spring.

The full Chancellor's report should be posted shortly on the Chancellor's reports page on the CSU website

Thursday, May 14

Thursday of last week came with a new surprise: the Governor released his May Revise early. In fact, he released two May revises, both aimed to push voters in favor of the Governor's ballot measures. The same day, CSU Chancellor Reed released a statement on the impacts to the CSU of the CSU May Revise, noting that cuts to the CSU may range up to $410 million. A cut of that level would represent a cut of 10 percent in one budget year.

On May 15, the L.A. Times published an article laying out what the Governor has presented as Plans A and B. The revealing headline? California's Bleak Budget Options.

The Governor has also proposed previously an early release of prisoners. He threatened to release up to 38,000 prisoners–either low-level offenders or those nearing parole–if the ballot measures fail. Under the California Constitution, the Governor can commute the sentences of prisoners without approval of the Legislature. This plan set off immediate negative reviews from some conservative legislators.

There is also a plan in the May Revise to sell some state property, including San Quentin State Prison, situated on very valuable land in posh Marin County. If you want to dive into the details, here is the Full text of May Revise.

As California has increased spending on prisons, it has decreased spending on higher education. Here are some facts on prison spending:

  • The corrections budget has gone from 4.3 percent of the state's general fund in 1985-86 to 11.2 percent today. It has steadily displaced spending on higher education.
  • Incarceration of each inmate costs an average of $43,500 per year.
  • The state has built 22 new prisons since 1984 (compared with 12 prisons between 1852 and 1984). There are now 33 state prisons.
  • Voters passed the three strikes initiative; governors and legislators have added hundreds of sentence enhancements throughout the penal code. As a result, the state now imprisons a much greater proportion of the state's population than in past decades – 453 per 100,000 residents in 2007, compared with 102 per 100,000 in 1980.
  • Spending per CSU student from the General Fund has fallen from $11,075 in 1998-99 to $8,338 in 2009-10.

Monday, May 18

On the eve of the May 19 special election, Gov. Schwarzenegger left California for Washington to participate in federal announcements about automobile energy regulations. All well and good, but it sends a message that he has a less than full commitment to California's pressing budget problems and their resolution.

In closing, it will be a busy couple of months as California tries to solve this deep budget crisis. I will keep you posted on the developments as information and analysis becomes available.

In Union,
Pat Gantt


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