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EVC/CFO Benjamin F. Quillian

Subject: Important Message from EVC/CFO Benjamin F. Quillian

Colleagues:

You may recall that the budget package enacted in February by the Legislature and the Governor included a requirement for the State Treasurer and the Director of the Department of Finance to make a determination, on or before April 1st, as to whether the state would receive at least $10 billion of federal funds by June 30, 2010 that would be available to offset state General Fund expenditures. A determination that this $10 billion would be reached would trigger two budget actions: (1) the State Controller would restore $948 million cut from specific programs (including $50 million from the CSU) and (2) the rate increase on personal income taxes would drop from 0.25 percent to 0.125 percent. Together, these actions would reduce the state’s General Fund balance by about $2.8 billion for the 2009-10 fiscal year.

The State Treasurer and the Finance Director today announced their joint determination that the $10 billion threshold will not be reached. This determination means that the CSU will experience the $50 million “contingent” reduction in its 2009-10 budget that was discussed in the Preliminary Budget Allocation Memo sent to you on March 5th. Attachment F of that memo allocates this $50 million reduction to the campuses and the Chancellor’s Office.

It is understandable to feel some disappointment in this development. On the other hand, the decision resolves one element of uncertainty in what we face for 2009-10. It should also be understood that, had the Treasurer and Finance Director reached the opposite conclusion, the state’s General Fund condition would have worsened by $2.8 billion. This, combined with the Legislative Analyst’s recent report of an $8 billion revenue shortfall would have meant a need for the Legislature and Governor to find at least $10.8 billion of new revenues or spending reductions. Under such circumstances, a restoration of our $50 million probably would have been very short-lived.

For your reference, here is a link to the March 5th Budget Allocation Memo: http://www.calstate.edu/budget/2009-2010/

Also, for those interested, here is a link to the Department of Finance’s webpage on the $10 billion trigger: http://www.treasurer.ca.gov/10B_BudgetTrigger/