Analysis of the 2008-09 Budget Bill: Education

Introduction: Higher Education

Total Higher Education Budget Proposal

As Figure 1 shows, the 2008‑09 budget proposal provides a total of $33.4 billion from all sources for higher education support costs. (This total could change depending on decisions by UC and CSU on fee levels, as discussed in more detail below.) This amount is $401 million, or 1.2 percent, less than the Governor's revised current–year proposal. The total includes funding for UC, CSU, CCC, Hastings College of the Law, CSAC, and the California Postsecondary Education Commission. Funded activities include instruction, research, and related functions, as well as other activities, such as providing medical care at UC hospitals and managing three major U.S. Department of Energy laboratories. (Capital outlay expenditures are discussed at the end of this section.)

Major Funding Sources

General Fund. The 2008‑09 budget proposal provides $11 billion from the General Fund for higher education. This amount is $261 million, or 2.3 percent, less than proposed current–year funding. The budget also projects that local property taxes will contribute $2.2 billion for CCC in 2008‑09, which reflects an increase of $145 million, or 7 percent, from the revised current–year estimate.

Student Fees. Student fee revenue at all the public higher education segments (including Hastings College of the Law) would support at least $4.2 billion of proposed expenditures. As discussed in more detail below, actual fee revenue will depend on decisions still to be made by UC and CSU.

Other Funds. The budget also includes about $16.1 billion in other funds, which reflects a decline of about $616 million, or 3.7 percent. Almost all ($15.2 billion) of these other funds constitute nonstate revenue—including federal funding and private contributions. The remainder is made up of various state revenues, including lottery and tobacco funds. In addition to the amounts reflected in Figure 1, local community colleges are projected to receive an additional $1.8 billion from locally budgeted resources. (These funds are identified in the “California Community Colleges” section of this chapter.)

Major Funding Changes by Segment

Major funding changes are shown in Figure 2. For UC, the Governor proposes General Fund appropriations of $3.2 billion, which is $99 million, or 3 percent, less than the revised current–year estimate. Of this reduction, $31 million would come from UC’s administrative support budget, while the remainder would be unallocated. The Governor's proposal also includes at least $125 million in new student fee revenue, from a fee increase of at least 7.4 percent. When all fund sources are considered, UC’s budget increases by 3.5 percent.

For CSU, the budget includes $2.9 billion in General Fund support, which is $98 million, or 3.3 percent, less than the current–year estimate. Of this reduction, $2.4 million would come from CSU’s administrative support budget, while the remainder would be unallocated. The Governor's proposal also includes an augmentation of at least $110 million in new student fee revenue, from a fee increase of at least 10 percent. When all fund sources are considered, CSU’s budget remains essentially unchanged.

For CCC, the Governor's budget includes $4 billion in General Fund support, which is $112 million, or 2.7 percent, less than the revised current–year amount. Local property tax revenue (the second largest source of CCC funding) would increase by 7 percent, to $2.2 billion. Fee revenue would provide an additional $284 million, reflecting an increase of 1 percent (due to budgeted enrollment growth).  

Enrollment

As shown in Figure 3, the administration proposes budgeted enrollment growth of 2.5 percent at UC and CSU, and 1 percent at CCC. However, the Governor's budget acknowledges that UC and CSU may decide to enroll less than the proposed level of students as a way to accommodate part of proposed General Fund reductions. We discuss enrollment trends in more detail later in this chapter.

Student Fee

As shown in Figure 4, student fees would be increased at all segments except for CCC. For UC and CSU, the figure reflects increases of 7.4 percent and 10 percent, respectively. These amounts reflect fee increases envisioned by the segments when they developed their budget plans in the fall. However, the Governor's budget does not formally propose any specific fee level, acknowledging that the segments may increase their fees above their initially envisioned levels in order to backfill some or all of the proposed unallocated General Fund reductions.

Financial Aid

Funding for the Cal Grant entitlement programs would be augmented to accommodate projected enrollment growth and fee increases in excess of the levels noted above. However, the Governor proposes to fund no new grants in the Cal Grant competitive programs in the budget year and beyond, for estimated General Fund savings of $57 million in 2008‑09. Students receiving a grant in the current year would still be eligible for renewal awards. As these students graduated over the next several years, the competitive programs would be phased out.

The proposed budget also authorizes 7,200 new awards in the Assumption Program of Loans for Education (APLE), as well as 100 new warrants each for the State Nursing APLE and the Nurses in State Facilities APLE.

Capital Outlay

As shown in Figure 5, the Governor's budget proposal includes about $1.6 billion in new capital outlay funding for 2008‑09. In addition to this funding, the budget provides $418 million in carryover and reappropriated funding that was originally appropriated in prior years. For CSU, the budget also includes $50 million in bond funding for special repairs that is counted as part of CSU’s support budget.

All of the proposed funding would come from general obligation bonds. Under the Governor's proposal, $457 million would come from bonds authorized by Proposition 1D and $1.1 billion would come from a proposed bond that would be placed before voters in November 2008.