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News from Chancellor Reed

Budget Update

July 30, 2009

I want to update you on how the California State University is managing during one of the most challenging times in its history. Please see my video message available here:
On the CSU’s website:

http://www.calstate.edu/executive/multimedia/2009/07292009chancellor-message-to-employees.shtml

On the CSU’s YouTube page: http://www.youtube.com/csuco



Chancellor Reed video on CSU budget plan

Thursday, July 16, 2009

Chancellor Charles B. Reed today discussed the CSU’s plan to cope with severe budget cuts during a press teleconference. Chancellor Reed’s remarks describe the magnitude of budget cuts and CSU’s plan of action to address the cuts including employee furloughs, student fees, financial aid and enrollment cuts.

View the video at the the CSU Public Affairs Web site:
http://www.calstate.edu/PA/ or

on YouTube:
http://www.youtube.com/watch?v=alvNsaPvcbA



The California State University Employee Update

Thursday, May 21, 2009

CSU Faces $410 Million Cut as Propositions Fail
With voters rejecting five propositions aimed at reforming California's budget, the CSU will face a $410 million cut to its 2009-10 budget that will impact its ability to serve students and maintain its operations. Propositions 1A-1E were created to provide new revenues to help balance the state's General Fund budget over the next several years. Their defeat by voters in the May 19 special election means the state will now face a revenue shortfall of $21.3 billion, a gap which Gov. Schwarzenegger has proposed closing through a variety of cuts and other actions.

"A $410 million reduction will severely impact our ability to provide student access to our universities, maintain our workforce, preserve services, and protect the quality of our institutions," said CSU Chancellor Charles B. Reed. "These are all hard decisions and there are no good options," said Reed. "I will be meeting with the campus presidents to address these fiscal issues and to develop a plan of action in consultation with our Board of Trustees." The CSU has implemented several cost-savings measures including a salary freeze for vice presidents and above, a hiring freeze, and travel and purchasing restrictions. In addition, the CSU took steps to limit the number of new students admitted in fall 2009 based on the state's inability to fund enrollment growth and the CSU's operational needs. The CSU's budget is approximately $4.2 billion, with $2.7 billion from state General Funds and $1.5 billion in student fee revenue. The proposed $410 million reduction represents a 15 percent cut in General Fund support.

Chancellor Reed to Lobby Washington for Increases in Student Aid CSU Chancellor Charles B. Reed will be in Washington D.C. this week promoting ideas to increase student aid and improve college access and completion, particularly in underserved communities. Reed will testify at the House Committee on Education & Labor's May 21 hearing on "Increasing Student Aid Through Loan Reform." The hearing will examine the Obama Administration's proposals to restructure federal student loan programs and use projected savings to increase funding for Pell grants and other aid programs. Reed will review CSU campus experience with existing student loan programs and present several proposals to increase need-based aid. CSU is the largest recipient of Pell Grant awards in the country. A webcast of the hearing will be available live and archived through the committee's web site.



Budget Update

To: All CSU Employees
May 15, 2009

Today I want to update you on the California State University's budget and an important election that will determine further reductions to our budget. The CSU's budget is almost $600 million below its basic "workload" needs for the 2008-09 and 2009-10 fiscal years, due in large part to the state's deteriorating economy. In April alone, the state's General Fund revenues were down $1.89 billion, 16 percent below what the February budget projected. It is projected that the state will face a $15.4 billion shortfall by the July 1 start of the new fiscal year, which could grow as high as $21.3 billion.

The CSU has implemented several cost-savings measures to protect our students, faculty and staff, and to preserve the quality of our universities. This week, the CSU Board of Trustees took another action to mitigate our budget shortfall. The Trustees voted to increase student fees for the 2009-10 academic year. The student fee increase was included as part of the 2009-10 budget adopted by the legislature and the governor. It is always a difficult choice to raise fees and it is a decision that the Trustees and I contemplated very carefully, understanding that there are consequences to our students. But we are in a dire budget situation that requires us to look at all the options we have to operate our universities. Information about fees and financial aid is available on our Budget Central website: http://blogs.calstate.edu/budgetcentral/.

The outcome of the May 19 Special Election will determine the magnitude of further reductions to our budget. Nearly $6 billion in revenue in the 2009-10 state budget depends on the passage of Propositions 1A through 1E. The CSU Board of Trustees has endorsed 1A through 1E because of the direct impact they will have on the CSU. Most of the measures provide new revenues to help balance the state's General Fund budget over the next several years. This directly impacts the CSU as two-thirds of its budget comes from the state General Fund. If the measures are not approved by voters, the state will face a revenue shortfall of $21.3 billion. This will result in a $410 million reduction to the CSU's budget according to the governor's May 14 revision of the state budget. These deep cuts will require us to consider drastic actions such as further enrollment reductions, layoffs, additional student fee increases and the potential closure of campuses. Even if the ballot measures pass, the CSU will likely face a $292 million budget reduction for the 2009-10 fiscal year. (More information on the special election is on the state's elections website.)

As we manage this unprecedented financial crisis, we have been working hard to make our voices heard in Sacramento to minimize impacts to the CSU. Our message to legislators has been clear: Continued reductions to the CSU's budget will erode our ability to educate and graduate the students that are critical to the state's economic success.

I want to encourage you to continue to work together to tell our elected officials, as well as our local business, community and civic leaders, that the CSU is the economic powerhouse that makes California's economy work, and that higher education is a long-term investment that benefits everyone.

Thank you for working hard every day during difficult times to bring excellence to our university system through outstanding teaching, research and the management of our campuses. I will continue to keep you updated on our budget.



The California State University Employee Update

Wednesday, January 21, 2009

The State's Cash Situation and IOU's
The state controller has projected that there will be insufficient cash available to meet all expenditures in the 2008-09 budget because the Legislature and the Governor have been unable to reach a solution on the budget deficit. Hence the state controller's office will be forced to pursue payment deferrals or issue registered warrants—also known as "IOUs" – as early as February 1. Under the State Constitution, however, the state has an obligation to meet its payment to public schools and public higher education systems. Therefore, CSU employees will continue to be paid. Read the list of priority payments here

Funding Cal Grants
Due to the state's impending cash flow crisis, the state controller and the California Student Aid Commission have informed higher education institutions of possible delays in the payment of Cal Grant A and B awards for the spring 2009 term. In response, the CSU has announced that it will defer State University Fee payments for the spring 2009 term for CSU students who experience delays receiving Cal Grants from the California Student Aid Commission. To ensure that CSU's financially-neediest students who rely on Cal Grant A and B awards to cover their State University Fee will be able to enroll for the spring 2009 semester, CSU campuses will delay student payment of the State University Fee until the California Student Aid Commission is able to disburse Cal Grant funds to campuses.

In addition, Cal Grant B recipients receive a stipend from the state. However, due to the state's growing cash flow problem, CSU is not in a position to automatically cover these cash stipends to students until the California Student Aid Commission actually distributes the funds. While these students will receive their federal Pell Grant awards and other financial aid, some students may still face financial hardship for the spring 2009 semester. In these cases, campuses will try to provide short-term emergency loans to needy students on a case-by-case basis, provided students have exhausted alternative funding.

Furloughs
Several state agencies have reported that they will begin implementing the Governor's December executive order for furloughs two days a month on February 1. The Governor's furlough plan applies only to state Civil Service Employees under the State Employer-Employee Relations Act (The Dills Act) and does not apply to CSU employees. However, the governor's executive order requests that the CSU, the University of California, the California Community Colleges and other state entities implement similar measures to achieve budget and cash savings for the current and next fiscal year. The CSU is not planning furloughs at this time and has implemented several cost savings measures including: limiting student enrollment for fall 2009; freezing the salaries of vice presidents, vice chancellors, presidents and the chancellor; restricting travel; canceling equipment and supply purchases; and filling only essential positions.

Long-term Prognosis
It is difficult to say when and how the legislature and the governor will resolve the budget crisis. The CSU has been planning how to maintain operations under several different scenarios. CSU's leaders have committed to do everything they can to protect students, faculty and staff and to preserve the quality of the universities. However, the longer the state delays reaching a budget compromise, the more at risk the CSU will become to deeper budget cuts that will significantly impact programs, services, payroll and personnel. Employees will receive ongoing updates as news develops.



Cost Saving Measures and Budget Update

January 9, 2009

Today I want to update you on several things that pertain to the state's fiscal challenges and the ways in which the CSU is responding.

The governor released a summary of his 2009-10 budget proposal on December 31, 2008. This early notification, made in advance of the formal budget that is being released today, underscores the urgent nature of the state's economic downturn and the necessity of immediate action by the governor and the legislature to shore up the state's finances to maintain statewide operations. The state faces a staggering budget shortfall between now and the end of 2009-10 of almost $42 billion unless the governor and the legislature take rapid corrective action.

For the past several months, the CSU has been taking actions to reduce costs while doing everything we can to protect our students, faculty and staff and to preserve the quality of our universities. These actions have included steps to limit the number of new students admitted in fall 2009 based on the state's inability to fully fund enrollment growth and CSU's operational needs. Today I am announcing additional mandatory measures for the Chancellor's Office and all campuses including: travel restrictions for employees; the cancellation of all non-critical equipment and supply purchases; and a hiring freeze on all positions except those essential to the operation of the university.

In addition, we are implementing a salary freeze for all vice president level positions and above including presidents' and vice chancellors' salaries and my salary, effective immediately through the 2009-10 budget year.

We have also been forced to suspend and shut down state-funded design and construction projects on all of our campuses in response to the state's freezing of $600 million in general-obligation and lease revenue bonds used to finance these projects. Unfortunately, hundreds of projects will be affected including libraries, performing arts centers, classrooms, administration buildings, seismic upgrades, laboratories and more.

Across all state programs, the proposed 2009-10 budget identifies a $14.8 billion revenue shortfall in 2008-09 that will grow to $41.6 billion by the end of 2009-10 if proposed solutions are not adopted by the legislature. The budget proposal reflects $14.3 billion in revenue adjustments, $17.4 billion in spending cuts, and $10 billion in warrants and borrowing to achieve a balanced budget over the next 18 months that leaves a $2 billion reserve.

For the CSU, the governor's budget would make permanent $66.3 million in budget reductions proposed for 2008-09. It restores the $31.3 million budget reduction CSU received in 2008-09 (treating it as a one-time budget action). Compact funding of $217.3 million for operating costs and 2.5 percent enrollment growth were not funded. The budget provides $3.6 million in new state funds for 340 full-time equivalent nursing students. These proposals are subject to approval by the legislature. Finally, the budget assumes that the CSU Board of Trustees will increase student fee rates by 10 percent, which is projected to achieve $130 million in revenues, with one-third set aside for student financial aid. However, mandatory costs, enrollment funding and financial aid costs required for 2009-10 total $84.4 million, $15.8 million more than available revenue.

Our focus in the coming months will continue to be maintaining jobs and preserving access and quality for students. I encourage our students, faculty, staff, alumni, and labor unions to work together to tell our elected officials as well as our local business, community and civic leaders, that the CSU is the economic powerhouse that provides the highly skilled professionals to the industries that make California successful, and that higher education is a long-term investment that benefits everyone. I want to thank all of you who work hard every day to bring excellence to our university system through outstanding teaching, research and the management of our campuses. I wish you the best for a productive year.



CSU Systemwide Impaction

November 18, 2008

This week the California State University will make an unprecedented decision regarding student's admission to the CSU's 23 campuses. The CSU's Board of Trustees and senior leaders will discuss whether or not to declare a systemwide impaction, a move that will require the CSU to restrict access to some students.

Why is such a move necessary? For several years, the CSU has provided access to more students while funding and resources from the state have remained static, and in some years, actually declined. In fact, the CSU this year is serving 10,000 students for whom the state provides no funding. This imbalance cannot continue. Admitting students without the resources necessary to provide the courses and services they need to successfully manage and complete their education is not fair to students, or to the faculty and staff members who support them. In the end, all stakeholders (students, faculty and staff, taxpayers and employers) lose when quality is compromised.

The CSU is facing significant funding reductions to its current budget which is already $215 million below our operational needs. Gov. Schwarzenegger proposes reducing the CSU's current year budget by $97.6 million which includes an earlier requested $31.3 million one-time reduction. These cuts come as the state tries to close an estimated $11.2 billion deficit.

At the same time, applications for fall 2009 are up almost 20 percent from last year with a 36 percent increase in applications from community college transfer students. Student demand is increasing while state funding is declining. This has created a significant challenge, the magnitude of which the CSU has not faced before.

When access and quality are threatened, we must take action. The CSU is committed to serving students and to serving them well. This is demonstrated in the outstanding work all of you do everyday to support our students. But without adequate funding and with continued reductions to our budget, we can no longer provide the courses and services students need to assure their success, unless we manage enrollment to funded levels.

This will not be an easy decision. But it is one that is necessary if we are to preserve the CSU's mission and its goal of providing access to an excellent education. We must continue to publicly advocate for higher education. All members of the CSU family--students, parents, faculty and staff, labor unions, alumni, donors and supporters--need to remind our legislators, our business and community leaders, our neighbors and friends, that for every $1 the state invests in the CSU, the CSU returns $4.41. The CSU provides the majority of the workforce in California and helps sustain more than 200,000 jobs in the state each year. Investing in the CSU is a winning proposition for every resident of California.

If you would like to read about the specific details of systemwide impaction, see the Board of Trustees Agenda item at http://www.calstate.edu/bot/agendas/Nov08/EdPol.pdf (scroll to the third page). As the Trustees meeting takes place this week, I encourage you to check www.calstate.edu for the latest developments and to subscribe to our newsletter CSU Leader at www.calstate.edu/CSULeader.

Thank you for the work you do everyday in support of the California State University.



CSU Budget Update

October 23, 2008

As we've all heard, economies around the globe are facing significant challenges. California is experiencing very difficult economic times with seven straight months of job losses, and unemployment now at the third-highest level among the 50 states. This has all had an impact on the 2008-09 budget signed by the Governor on September 23. Revenues flowing to the Treasury to fund this year's budget are already more than $1 billion below those forecast in May, and it is estimated that the total shortfall will be between $3 billion and $4.6 billion.

California's 2008-09 budget provided $2.97 billion of state General Funds to the CSU. That is essentially the same amount we received the previous year, and $215 million less than what we need to meet enrollment growth and fund other operational expenses. The only significant source of additional revenue for the CSU is $73 million from the student fee increase that will be used to cover mandatory cost increases such as energy and employee health benefits.

However, we have been informed by the state Department of Finance that state agencies and departments receiving General Funds need to cut a total of an additional $390 million from the current budget. For the CSU, this amounts to $31.3 million of the money we receive from state funds. We anticipate that we will be able to manage this reduction without disrupting campus operations or impacting instruction, student services or public safety. Campuses will be encouraged to take measures such as curtailing travel, deferring purchases and delaying filling vacant positions.

The state's worsening budget situation also brings the possibility of additional mid-year reductions in the 2008-09 budget, which would require action by the legislature in a special session. Governor Schwarzenegger plans to call such a session with the current legislature for later in November before new legislators take office in December.

For a university system such as ours, no budget cut is easy. But, whenever the CSU is faced with budget reductions, we strive to manage those cuts with minimal disruption to campus operations, the quality instruction of students, the maintenance of our high quality programs, and the safety of students, faculty and staff. As a precaution, campus presidents will review the impact of possible additional cuts and report back to me. I want to stress that this is a precautionary move. The Governor and the legislature have not made decisions on any additional cuts beyond the $31.3 million.

Now, more than ever, we need to continue to advocate to the legislature and Governor about the impact of such cuts, and stress the importance of funding higher education. The CSU plays a critical role in the state's economy by providing more than 90,000 graduates each year into the workforce. We are a vital part of the long-term solution to righting the state's economy.

I know these are challenging times, and we all feel a sense of anxiety over the continuing bad economic news. But, together, we need to keep telling our friends, our community and our legislators about CSU's contribution to California, and the importance of higher education to the future of our state. As the budget picture evolves, I will continue to keep the CSU family updated on the developments. If you don't already subscribe to the newsletter CSU Leader, I'd encourage you to sign up for the most up-to-date information. For information on how to subscribe, please see http://www.calstate.edu/CSULeader.

Thank you for the hard work that you do every day for the California State University.

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