The 2021-22 Budget: Analysis of the Major University Proposals

The 2021-22 Budget: Analysis of the Major University Proposals Summary In this report, we first examine how the pandemic has affected the California State University (CSU) and the University of California (UC), then analyze the Governor’s major university budget proposals. Below, we share some of the key takeaways from the report. Adverse Fiscal Impacts of Pandemic Have Led Universities to Adjust Budgets. Due to the pandemic, CSU and UC have experienced substantial revenue declines in their noncore programs, a reduction in state General Fund support, and some higher than normal costs. Although the universities have received federal relief funds and taken actions to contain their spending, they report having operating deficits in 2020-21. Base Increases Could Be Considered but Final Levels Set in May. The Governor’s budget proposes to provide CSU and UC each 3 percent base General Fund increases in 2021-22, along with certain other targeted ongoing augmentations. In total, CSU would receive an additional $202 million in ongoing General Fund support and UC would receive $136 million. These increases would partly, but not entirely, restore the universities to their pre-pandemic levels. CSU and UC would each remain more than $100 million below their 2019-20 levels. Given all of the factors affecting the universities, we think providing them base increases merits consideration. The Legislature, however, may wish to wait until May when updated revenue information will be available before finalizing its decisions in this area. Base Expectations Could Be Revisited and Refined. As a condition of receiving the 3 percent base General Fund increases, the Governor would require CSU and UC to (1) develop a plan for eliminating student equity gaps by 2025, (2) adopt policies to sustain online education at a level that is at least 10 percentage points higher than 2018-19 levels, and (3) create a dual admissions pathway with the community colleges. Though we believe the Governor has identified areas of common concern with the Legislature, we recommend making certain improvements to each of these proposals. We generally think the Legislature could strengthen oversight of the universities’ performance in these areas while avoiding the drawbacks of the Governor’s proposals (such as the arbitrary benchmark relating to online education). Student Support Proposals Could Be Better Coordinated. The Governor has five proposals in the area of student support—signifying one of his main university budget priorities. The proposals total $90 million ($45 million ongoing and $45 million one time). They provide funding for students’ basic needs (including food and housing), mental health, access to technology, and emergency grants. Although the Governor has a laudable focus on issues that have been exacerbated by the pandemic, he continues the state’s piecemeal approach to addressing those issues—even adding new programs to a hodgepodge of existing ones. We recommend the Legislature clarify the objectives of each student support program before approving additional ongoing funding. Longer term, we encourage the Legislature to take a more holistic approach in coordinating traditional student financial aid programs, basic needs programs, and other public assistance programs. GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 2021 analysis full gutter 2021-22 BUDGET INTRODUCTION This report analyzes the Governor’s major sections focused on base support, enrollment, budget proposals for CSU and UC. We begin the student support, faculty professional development, report with a review of what is known to date about and deferred maintenance. We plan to cover a few the impacts of the pandemic on the universities’ remaining proposals—for example, ones relating to budgets. We then describe the Governor’s overall UC medical education—in subsequent analyses. budget plans for the universities. Next, we analyze We provide tables detailing each segment’s budget the Governor’s specific university proposals, with on our EdBudget website. IMPACT OF PANDEMIC Campuses Have Operated Remotely Since protective equipment. As with campuses, some Start of Pandemic. In response to the public students are facing extraordinary challenges, health crisis, all 23 CSU campuses and 10 UC including reduced household income, higher campuses (as well as all California Community technology costs, and disruptions in housing Colleges) shifted primarily to remote operations arrangements. beginning in March 2020. Campuses continue Federal Government Has Provided Some to offer the vast majority of their instruction Fiscal Relief. One source of assistance for online, with the exception of a small number of the universities and students has been federal courses that involve laboratory or other required relief funding. The federal government provided hands-on work. In addition, campuses are higher education institutions with relief funding providing most of their student services (such as shortly after the onset of the pandemic (in academic advising, financial aid administration, spring 2020) and is set to provide a second and mental health services) online. Institutions round of relief funding in winter 2021. (See our tend to be operating their noncore programs posts, Overview of Federal Higher Education (including their housing, dining, and parking Relief and Second Round of Federal Higher programs) at substantially reduced capacity. Education Relief Funding, for more detail.) As Pandemic Is Having Adverse Fiscal Impact on Universities and Students. As Figure 1 Figure 1 shows, the total estimated fiscal impact from March through December 2020 is $1.1 billion Universities Are Reporting Substantial at CSU and $1.9 billion at UC (excluding its Revenue Declines Due to Pandemic medical centers and medical schools). The most Cumulative Adverse Fiscal Impact significant fiscal impact for campuses at both From March Through December 2020 segments has been revenue declines, which have CSU UC resulted from operating at reduced capacity. Funding Reductions Revenue declines have been particularly acute Noncore funds $689 $1,384 for the segments’ self-supporting noncore State General Fund 299 302 programs (including their housing programs). Tuition revenue 24 38 Campuses also have experienced declines in Subtotals ($1,012) ($1,724) core funding (state General Fund and student Extraordinary Costs $70 $150 tuition revenue). Additionally, campuses have Totals $1,082 $1,874a incurred some extraordinary costs, including a UC also reports funding reductions of $1.1 billion and extraordinary costs of $361 million from its medical centers and medical schools. higher technology costs and costs for coronavirus disease 2019 (COVID-19) testing and 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET Figure 2 shows, federal relief funding across with the rest available for campus operations. the two rounds totals $1.4 billion for CSU Campus relief funds can be used for an array of campuses and $658 million for UC campuses. expenses, including health and safety measures, Both rounds designate a portion of federal technology, professional development, and funding for emergency student financial aid, backfilling revenue declines in noncore programs. Figure 2 Second Round Provides More Federal Relief Funding Than First Round (In Millions) CSU UC CARES Act Student aid $263 $130 Campus relief 263 130 Supplemental reliefa 38 7 Subtotals ($564) ($267b) CRRSAA Student aid $263 $130 Campus relief 591 261 Subtotalsc ($854) ($391) Totals $1,418 $658 a Can be used for either student aid or campus relief. b Excludes $861 million in CARES Act relief funds for UC medical centers. c As of this writing, CRRSAA supplemental relief for campuses and relief for UC medical centers not yet been announced. CARES Act = Coronavirus Aid, Relief, and Economic Security Act (enacted in late March 2020) and CRRSAA = Coronavirus Response and Relief Supplemental Appropriations Act (enacted in late December 2020). OVERVIEW OF GOVERNOR’S BUDGET Governor’s Budget Partly Restores General (4.5 percent) over the level in 2020-21, with larger Fund Support for Universities. As Figure 3 growth at CSU than at UC. Ongoing funding, shows, the Governor’s budget proposes a total of however, would remain below pre-pandemic $7.8 billion in ongoing funding for the universities. General Fund levels, with 2021-22 funding below This level of support is an increase of $338 million the 2019-20 level by $232 million (2.9 percent). In Figure 3 Governor’s Proposed General Fund Support Reflects Partial Restoration Ongoing General Fund Support (In Millions) Change From 2020-21 Change From 2019-20 2019-20 2020-21 2021-22 Actual Revised Proposed Amount Percent Amount Percent CSU $4,352 $4,042 $4,243 $202 5.0% -$109 -2.5% UC 3,724 3,465 3,601 136 3.9 -123 -3.3 Totals $8,076 $7,507 $7,845 $338 4.5% -$232 -2.9% www.lao.ca.gov 3 analysis full gutter 2021-22 BUDGET addition to ongoing support, the Governor’s budget adjustments for retirement benefit costs. The bulk includes $450 million one-time General Fund for the of the proposed one-time funding would support universities ($225 million for each segment). deferred maintenance projects. Several of the Governor’s 2021-22 Proposals Revolve remaining proposals focus on providing additional Around a Few Areas. As Figure 4 shows, the support for students and faculty. largest ongoing proposals provide 3 percent general-purpose base increases and, for CSU only, Figure 4 Governor Has Similar Budget Priorities for CSU and UC 2021‑22 (In Millions) Proposals CSU UC Ongoing Proposals Base increase (3 percent) $112 $104 Retirement benefitsa 57 — Student mental health and technology 15 15 Student Basic Needs Initiative 15 — Programs in Medical Education (PRIME) — 13 Other 3 4 Subtotals ($202) ($136) One-Time Initiatives Deferred maintenance $175 $175 Emergency student financial aid 30 15 California Institutes for Science and Innovation — 20 Faculty professional development 10 5 Other 10 10 Subtotals ($225) ($225) Totals $427 $361 a Consists of adjustments for retiree health ($55 million) and pension contributions ($2 million). BASE SUPPORT In this section, we first provide background Background on how CSU and UC responded to core funding State Enacted Base Reductions to the reductions in 2020-21. We then describe the Universities in 2020-21. Following several years Governor’s proposal to increase university base of the state providing CSU and UC with General support in 2021-22. The Governor links his Fund base augmentations, the 2020-21 Budget proposed increase in CSU and UC base support to Act reduced state funding for the universities. three expectations relating to student equity gaps, These reductions were part of a broader state online education, and dual admissions. We analyze budget package intended to address a substantial each of these expectations in turn. We end with a projected shortfall in General Fund revenues. As discussion about tuition. Figure 5 on the next page shows, the reductions in ongoing General Fund support at CSU and UC were 6.9 percent and 8.1 percent, respectively, 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET from 2019-20 levels. CSU’s reduction, however, groups. Campuses also have seen savings as a was slightly larger in terms of total core funding, as result of reduced employee travel and utility costs. General Fund support comprises a larger portion Nonetheless, both segments report that these of core funding at CSU than at UC. Whereas strategies have been insufficient to fully address CSU’s reduction in terms of total core funding was their core funding reductions, and campuses have 3.9 percent, it was 3.3 percent at UC. had to draw down funds from their reserves. As of Universities Did Not Increase Tuition to this writing, the CSU Chancellor’s Office reports Offset State Reductions. Neither CSU nor UC that campuses plan to draw down a total of roughly increased student tuition to help offset the declines $200 million from their core operating reserves in in 2020-21 state funding. As Figure 6 shows, 2020-21 (about half of its estimated uncommitted resident undergraduate tuition has remained about core reserves at the end of 2019-20). The UC flat over the past ten years, only increasing once Office of the President reports that UC campuses since 2011-12. Though the universities kept tuition plan to draw down as much as $174 million (about charges flat in 2020-21, they experienced a drop 65 percent of its estimated uncommitted core in overall tuition revenue largely resulting from reserves at the end of 2018-19, the most recent declines in nonresident enrollment. CSU estimates a $24 million Figure 5 reduction in tuition revenue from State Reduced Base Support for the 2019-20 to 2020-21, whereas UC Universities in 2020-21 estimates a $38 million drop. General Fund Reductions From 2019‑20 Ongoing Levels CSU Is Allocating Some Amount Percent Federal Relief Funds for Core Operations. In discussions CSU $299.0 6.9% with our office, both universities UC $302.4 8.1% emphasized that they are using Campuses 259.2 7.7 the bulk of their federal campus Office of the President 27.3 12.7 Agriculture and Natural Resources 9.2 12.7 relief funds to address revenue UCPatha 6.7 12.7 declines in their noncore programs a General Fund reduction was offset by a $31.5 million increase in campus assessments. Overall and cover extraordinary costs support for UCPath increased $24.8 million (37 percent). related to COVID-19. According to staff at the Chancellor’s Office, CSU campuses are allocating Figure 6 at least a portion of their federal Tuition Has Remained About Flat Over the Last Ten Years campus relief funds to assist their Annual Tuition Charges for a Full‑Time Resident Undergraduate core programs. Any federal relief funding allocated either to noncore $12,000 or core programs is available only UC on a one-time basis. 10,000 Universities Have Taken 8,000 Several Actions to Respond to 6,000 Fiscal Challenges. Given core CSU funding reductions, both CSU and 4,000 UC have sought to reduce their core spending by holding a portion 2,000 of faculty and staff positions vacant (that is, suspending most 2010-11 2012-13 2014-15 2016-17 2018-19 2020-21 hiring) and forgoing general salary increases for most employee www.lao.ca.gov 5 analysis full gutter 2021-22 BUDGET year of information available). (As we discuss involving debt service, facility maintenance, and in An Analysis of University Cash Management new statutory requirements.) Issues, UC also borrowed externally in 2020-21 to Salaries Are Another Cost Pressure Facing help it cover both its noncore and core operating the Universities. After covering benefits and expenses.) debt-service payments, the universities typically face decisions about salaries. In its budget plan for Base Increases 2021-22, CSU does not anticipate funding general Governor Proposes Base Increases. salary increases for any employee group. For most The Governor proposes providing ongoing employee groups, the CSU Chancellor’s Office has augmentations of $112 million to CSU and negotiated two-year contract extensions through $104 million to UC, reflecting 3 percent General 2021-22 that do not provide salary increases. Fund increases over 2020-21 levels. These (One employee group—the California Faculty proposed increases partially restore the universities Association—has a contract extension that expires to their 2019-20 levels. In addition to the 3 percent at the end of 2020-21.) While UC’s 2021-22 budget base increase, the budget would provide a plan also forgoes salary increases for many $57 million augmentation for CSU pension and employee groups, the plan anticipates salary retiree health cost increases, resulting in a total growth of $82 million to fund previously agreed ongoing base augmentation of $169 million. (Unlike upon increases for represented employee groups, CSU, UC would have to accommodate retirement faculty merit increases, and a 1.5 percent general benefit cost increases from within its 3 percent salary increase for certain nonrepresented staff. base augmentation.) Universities Likely Would Use Remaining First Call on Base Augmentation Likely Is Funds for Restoration. After weighing salary Covering Increases in Certain Operating Costs. decisions, campuses likely would prioritize restoring Like most government agencies, the universities some of the reductions they incurred in 2020-21. tend to experience operating cost increases each Most notably, campuses likely would resume some year, such as rising pension and health care costs. hiring in 2021-22—filling a portion of vacant faculty For CSU, most of these types of cost pressures and staff positions. These hires could support are driven by requirements in state law and other some combination of more courses and more external factors, such that campuses have little student support services. Campuses also might flexibility to directly affect these costs. Relative consider undertaking more building maintenance to CSU, UC has somewhat greater flexibility to projects in 2021-22. As base General Fund support adjust the policies driving these cost pressures. would remain below pre-pandemic levels under For example, UC determines the share of health the Governor’s budget, campuses likely would not premiums it subsidizes for employees and retirees. be able to fully fund all of these priorities, absent It also sets its own policies determining the further drawing down their reserves. size of pension benefits for new employees and State Budget Has Limited Capacity for its annual employer contribution. (Though UC Giving Universities Additional Ongoing Funding. has greater flexibility in setting its own pension While the fiscal challenges currently facing the policies, reducing its employer contribution rate universities suggest that more ongoing base would slow its progress in fully funding its pension support than the Governor’s proposed level could system and increase out-year cost pressures.) be warranted, the state’s ability to expand ongoing Based on information provided by the segments CSU and UC support is limited. As we noted in and the administration, we estimate these types The 2021-22 Budget: Overview of the Governor’s of operating costs will increase by $114 million at Budget, we and the administration project annual CSU and $76 million at UC. (We include pension state operating deficits that grow over the outlook and health care cost increases for both segments, period. Specifically, the administration anticipates along with a few other segment-specific costs state operating deficits of $7.6 billion in 2022-23, growing to $11.3 billion by 2024-25. 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET Consider Proposed Base Increases as by race/ethnicity, gender, and socioeconomic Starting Point. The proposed 3 percent base status. Both the CSU Board of Trustees and the increases could serve as a starting point for UC Board of Regents have expressed concern legislative deliberations. The 3 percent increases over student achievement gaps and developed would help the universities cover some increases multiyear plans to eliminate them. CSU’s plan aims in their operating costs and leave some funding to eliminate gaps by 2025, whereas UC’s plan aims remaining for salary and staffing increases while still to eliminate gaps by 2030. The Legislature also has being attentive to the state’s tight fiscal outlook. In sought to raise attention to student equity gaps— May, the Legislature will get updated state revenue for example, by requiring the universities to submit estimates and be in a better position to assess the performance reports each March that contain data state’s ongoing budget capacity. In light of that on persistence and graduation rates for low-income updated information, the Legislature then could students and their peers. The Governor’s proposal revisit the size of the proposed university base further elevates gaps among student racial/ethnic increases. Regardless of the level of support the and socioeconomic groups to be of state-level Legislature ultimately decides to provide, it could concern. consider adopting language having each segment Establishing Explicit State Equity Goals Could report key information about its budget plans in the Be Beneficial. In recent years, the state has taken fall. Specifically, such reports could include each a number of steps to improve student outcomes segment’s projected core funding, spending by at CSU and UC, but it has not yet set any specific program area, operating deficits, budget reserves, performance goals. The absence of explicit goals and specific actions taken to implement budget makes it difficult for the Legislature to hold the plans. These reports could help the Legislature universities accountable for their performance. keep better apprised of how the segments are Adopting goals, including equity-based goals such responding to remaining fiscal challenges. as the ones proposed by the Governor, could foster greater transparency and accountability—helping to Student Equity Gaps concentrate attention and resources on key areas. Governor Sets Student Equity Goals for Governor’s Expectation Is More Ambitious the Segments. As a condition of receiving base Than UC’s Internal Equity Plan. For CSU, the increases in 2021-22, the Governor proposes requiring CSU and UC to Figure 7 submit by June 30, 2022 multiyear Universities Have Notable Gaps in Graduation Rates plans to reduce their student equity Rates for First‑Time, Full‑Time Freshman gaps by 20 percent each year, fully eliminating them by 2025. The CSU UC administration indicates the plans Four Six Four Six would need to focus on eliminating Year Year Year Year longstanding achievement gaps Race/Ethnicity among student racial/ethnic groups White 43% 70% 73% 87% and socioeconomic groups. The Asian/Pacific Islander 29 68 76 89 proposed budget bill language Latino 21 57 58 79 does not specify exactly how Black 16 48 54 77 equity gaps are to be measured, Gender but it directs the segments to Female 32% 65% 74% 88% establish common metrics. Male 22 58 64 83 Proposal Focuses on a Financial Status Longstanding Issue. As Figure 7 Not a Pell Grant recipient 36% 67% 74% 87% Pell Grant recipient 20 57 63 83 shows, both CSU and UC have Note: Four-year data is for entering 2015 cohort. Six-year data is for entering 2013 cohort. notable student achievement gaps www.lao.ca.gov 7 analysis full gutter 2021-22 BUDGET Governor’s equity goals align with the goals CSU Online Education already has established through its multiyear equity Governor Proposes That Universities Sustain plan. By comparison, the Governor’s goals would a Higher Level of Online Education. The have UC accelerating its equity plan. UC has Governor also links his proposed base increases expressed some concern with the accelerated time for the universities to a requirement that they adopt line, particularly given the absence of additional policies by June 30, 2022 designed to maintain state funds to reach the more ambitious goals. To the share of their online courses and programs at fulfill the Governor’s expectations, UC campuses a level that is at least 10 percentage points higher likely would have to redirect resources from other than their share in 2018-19. operating areas to enhance its student support Expanding Online Education Has Key services. Trade-Offs. Online education has at least two As Proposal Lacks Repercussions for Falling key benefits. First, online courses can provide a Short, Legislative Oversight Will Be Key. One or more flexible learning environment, enabling more both of the segments might fall short of eliminating placebound students, working adults, and other their student equity gaps by 2025. The Governor’s nontraditional student groups to attend college proposal, however, contains no repercussions were and complete courses. Second, online courses the universities not to meet the established equity can mitigate demand for on-campus classrooms goals. Thus, it likely would fall on the Legislature to and other instructional spaces. Online courses, regularly review the universities’ performance in this however, can have drawbacks. For example, area and consider appropriate responses, whether research suggests that online courses tend to have budget or policy responses. Reviewing university lower completion rates than in-person instruction, performance over the next several years could and gaps are greater for Black and Latino students. be especially important, as the pandemic, shift to Partly in response to both these perceived benefits remote operations, and recent budget shortfalls and drawbacks, the state began funding efforts might have exacerbated student equity gaps. Since to improve online education several years ago. the onset of the pandemic, disadvantaged students For example, the 2013-14 budget provided each are more likely to have had difficulty accessing university segment $10 million ongoing General computers, reliable internet connectivity, and quiet Fund to create new online courses, encourage workspace. Some high school students also might faculty participation in teaching online courses, be entering college somewhat less well prepared and provide associated faculty professional than in the recent past. By regularly interacting development. with the universities to examine their student equity Pandemic Led to Opportunities for Exploring outcomes and strategies, the Legislature would be New Ways of Delivering Instruction. With the better positioned to make midcourse policy and sudden move to large-scale remote instruction budget adjustments. necessitated by the pandemic, campuses, faculty, Adopt Equity Goals but Strengthen Oversight. and students have had to adapt to new ways of Were the Legislature supportive of the Governor’s teaching and learning. These experiences could equity goals, we recommend enhancing associated provide the Legislature useful data as to which legislative oversight. Specifically, we recommend courses were particularly well suited to online the Legislature modify the existing March university formats, what barriers faculty and students faced, performance reports to include the common and the costs campuses incurred to transition equity-gap metrics that are developed. As part of courses from in-person to online formats. these March reports, the Legislature also could Proposed Requirement Is Arbitrary and direct the segments to provide revised goals, Lacks Justification. Despite the potential benefits time lines, and implementation plans were they of expanding online education, we have a few to be found falling short of meeting established concerns with the Governor’s specific proposal. equity goals. First, the administration has not justified whether 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET the proposed 10 percentage point increase is recent high school graduates could apply and be warranted given student demand for online courses admitted to CSU and UC campuses but would start and campus facility issues. Second, all campuses, and complete their lower-division coursework at a regardless of their baseline, are expected to community college. The administration does not increase their online offerings by the same propose a target number of students who would percentage point. A more refined analysis might qualify for this new pathway, but the proposed indicate a higher or lower level of online education budget bill language calls for roughly half of the is warranted at any particular campus. Without dual admits to meet CSU or UC’s existing freshman a clearer rationale for setting online enrollment admission requirements. The remaining half of targets, campuses could make poor decisions dual admits would be conditionally admitted that work counter to promoting student success. to a CSU or UC campus, with their eventual For example, arbitrary increases in online courses university enrollment dependent on their academic potentially could work counter to the Governor’s performance in community college coursework. proposed expectation to eliminate equity gaps. According to the administration, a dual admission Reject Online Education Proposal and pathway would be intended to accomplish Direct Segments to Instead Report Key several objectives, including expanding access Baseline Information. Given the arbitrariness for underrepresented and placebound students, of the proposed 10 percentage point increase reducing student costs, improving student in online courses, we recommend rejecting the outcomes, and simplifying the transfer process. Governor’s proposal. However, we understand Proposal Aims to Address Shortcomings the administration’s desire to maintain the current With Transfer Process. Historically, community momentum toward developing and improving college students have had to navigate a complex online courses. To this end, we recommend the and confusing array of academic pathways and Legislature instead adopt budget bill language course expectations to successfully transfer to CSU directing the universities to report on their and UC. This complexity can cause students to experiences with online education. Such a accumulate excess units at the community college report should include: (1) data on pre-pandemic level, repeat courses once they arrive at CSU or enrollment in online courses for each campus, UC, and discourage some students altogether (2) analysis as to which courses are most suitable from transferring. In discussions with our office, the for online instruction, (3) an estimate of the fiscal Department of Finance (DOF) emphasized several impact of expanding online education, (4) a plan ways a dual admission policy could reduce this for improving student access and outcomes using complexity for students. For example, high school technology, and (5) an assessment of the need graduates could receive greater clarity as to what for additional faculty professional development. is required of them to enroll at CSU and UC. The To ensure this information is available to assist administration also noted that the dual admission next year’s budget deliberations, we recommend policies could necessitate greater coordination requiring the universities to submit this information between community colleges and CSU and UC by November 2021. Such a report would give the campuses, potentially improving the quality of Legislature a better basis to determine how to advising and other student services. support online education at the universities in the Proposal Aims Specifically to Streamline UC coming years. Transfer Pathways. In 2010, the state sought to simplify transfer between community colleges Dual Admissions and CSU by creating the “associate degrees for Governor Proposes a Dual Admission transfer.” These degrees establish a common Pathway. A third condition of the Governor’s set of lower-division course requirements across proposed base increases for the universities is community college and CSU campuses, and they that they create a dual admissions pathway with guarantee community college students not only the community colleges. Under the new pathway, admission to the CSU system but the ability to www.lao.ca.gov 9 analysis full gutter 2021-22 BUDGET complete their bachelor’s degree with 60 units with the existing transfer pathways available to of upper-division coursework. While this effort students, (3) whether the pathways would be has helped simplify the process for students developed at the systemwide level or by each interesting in attending CSU, these degrees do not CSU and UC campus, and (4) whether the new offer the same guarantees for students interested associated degrees relating to UC would benefit in attending UC. In 2018, the UC Office of the only students in the dual admission pathway or all President entered into an agreement with the interested transfer students. We withhold making a California Community Colleges Chancellor’s Office recommendation on this proposal until these details to pilot UC-specific associate degrees for transfer are available. Upon receiving more information, we in biology and chemistry. These UC-specific could provide a further analysis of the more fully degrees have many similarities, but are not developed proposal. identical, to the CSU-specific degrees. To further Tuition Expectations these recent efforts, the Governor’s proposed expectation would direct UC either to develop Governor Expects Universities to Hold UC-specific degrees in more subject areas or Tuition Flat. The Governor’s Budget Summary accept the existing CSU-specific transfer degrees indicates the administration’s intent that CSU and in these areas. Such an approach has the potential UC hold resident undergraduate tuition levels to further simplify the transfer process to UC, as flat in 2021-22. While the proposed budget bill well as better align UC and CSU pathways. does not explicitly contain this expectation, the Dual Admission Pathway Comes With Risks. bill maintains language from the previous three Though a dual admission pathway has potential budget acts establishing repercussions were the benefits, it also has potential drawbacks—possibly universities to increase tuition. Specifically, this working at cross-purposes with the state’s language authorizes DOF to reduce General Fund recent efforts to simplify the transfer process. For support for the universities were they to increase example, if only a portion of students are eligible resident undergraduate tuition levels. The reduction for dual admission as freshmen, then all other is tied to the additional cost for state financial aid interested community college transfer students programs resulting from the tuition increase. would still need to navigate one or more of the Increasing Tuition Could Expand Budget myriad other transfer pathways. Depending on how Capacity. Increasing tuition could expand the universities implement the dual admission policy, state’s budget capacity in one of two ways: by the new pathway also could disproportionally supplementing state funding increases for the benefit certain community college students. For universities or by freeing up state funding for high example, a few community colleges typically priorities in other areas of the budget. Given the account for a disproportionate share of transfer fiscal challenges facing campuses and the state’s students. Depending upon how it would work, a limited capacity to fully restore the universities’ dual admission pathway might further benefit those ongoing support, tuition increases could be a key community college campuses that already have option for the universities and the state to consider well-established relationships with certain CSU or in the coming years. UC campuses. Financial Aid Typically Covers Tuition for More Information Is Needed to Fully Assess Low-Income Students. One key consideration Proposal. According to DOF, the administration surrounding tuition increases is the financial plans to submit trailer bill legislation in the coming impact on California students. For students with weeks with more detail about the proposal. financial need (typically low-income and many Currently, key details are lacking. In particular, middle-income students), state and university the administration should provide greater clarity financial aid programs are designed to fully cover regarding: (1) the portion of high school graduates tuition, including any tuition increases. Because of who would be eligible for dual admission, (2) how these policies, higher-income students are the ones the new dual admission pathway would interact to bear the cost of tuition increases. 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET The Move to Remote Instruction Has In contrast, other institutions (including CSU and Raised Questions About Tuition Levels. As UC) elected to hold tuition flat, perhaps feeling that universities around the nation have moved to during the pandemic was a poor time to increase remote instruction, new considerations have student charges. Some institutions even offered emerged around tuition setting. Some universities, discounts to their students, perhaps recognizing particularly highly selective private ones, adopted that students were needing to adapt to instructional tuition increases for the 2020-21 academic year, modes they might otherwise not have chosen. The likely in recognition that their underlying cost Legislature, the CSU Board of Trustees, and the structures had not fundamentally changed. Faculty UC Board of Regents likely will want to weigh all remained teaching and facilities continued to be of these considerations as they contemplate future maintained, even if operating at reduced capacity. tuition decisions. ENROLLMENT In this section, we focus on enrollment at the UC enrollment targets for either the 2020-21 or universities. We begin by providing background on 2021-22 academic years. In the case of CSU, recent enrollment practices and trends. We then the Chancellor’s Office was left to determine describe the Governor’s approach to enrollment the number of resident students to enroll in this year, which we follow with our analysis and 2020-21. Though UC did not face any new recommendations were the Legislature to want to enrollment expectations in the 2020-21 budget, pursue potential enrollment growth at CSU and UC. the 2019-20 budget provided UC funding to enroll 4,860 more resident undergraduate students in Background 2020-21 over the level in 2018-19. UC reports that State Often Sets Enrollment Targets for the it has met the 2020-21 target, as discussed further Universities. In most years, the state budget below. has established systemwide resident enrollment Overall Resident Enrollment Increased in Fall targets for CSU and UC. When these targets 2020. As Figure 8 on the next page shows, total require enrollment growth, the state typically resident enrollment increased from fall 2019 to provides associated General Fund augmentations. fall 2020 at both CSU and UC. The trends in the Historically, the state has set targets for the underlying composition of enrollment, however, upcoming academic year, but some recent budgets varied across the two university systems. At CSU, have set the targets for the following year (for for undergraduates, new enrollment was virtually example, setting a target in the 2019-20 budget for flat, but continuing enrollment grew. Graduate the 2020-21 academic year). Setting an out-year enrollment also grew, entirely due to growth in new target allows the state to better influence admission students. In contrast, at UC, new undergraduate decisions, as the universities typically have already enrollment grew and new graduate enrollment made their decisions for the upcoming academic declined. While the universities’ overall resident year before the enactment of the state budget in enrollment increased in fall 2020, nonresident June. Since 2015-16, five of the last six budgets enrollment decreased, as the box on the next have set enrollment targets for the universities, with page describes in more detail. (In addition to one of these budgets setting an out-year target for the fall-to-fall growth, UC experienced a notable CSU and four of these budgets setting out-year increase in enrollment during the summer targets for UC. 2020 term. After factoring in this summer growth, State Did Not Set Targets in the 2020-21 UC anticipates exceeding its 4,860 student growth Budget. Deviating from the state’s recent practice, target for 2020-21.) the 2020-21 budget did not include CSU or www.lao.ca.gov 11 analysis full gutter 2021-22 BUDGET Proposals 2021-22 or 2022-23. In the absence of these targets, the universities would have flexibility to Governor Does Not Propose Enrollment make their own enrollment decisions over the next Targets for CSU or UC. The Governor’s couple of months for the 2021-22 academic year. 2021-22 budget does not set specific enrollment The universities also likely would set their own expectations for either university system for either targets to guide their fall 2022 admission decisions. Assessment Figure 8 CSU’s and UC’s Trends in New and Setting Enrollment Targets Continuing Resident Enrollment Differ Is a Key Responsibility of the Fall Resident Headcount State. Though the Governor proposes connecting base funding Change From 2019 in 2021-22 to expectations related 2018 2019 2020 Amount Percent to student equity gaps, online CSU instruction, and dual admissions, Undergraduate he does not propose establishing New 115,450 119,018 119,194 176 0.1% enrollment expectations. Without Continuing 291,673 290,939 294,616 3,677 1.3 such expectations, the Legislature Subtotals (407,123) (409,957) (413,810) (3,853) (0.9%) would not have clarity regarding Graduate how many students the universities New 17,565 17,494 20,360 2,866 16.4% are to serve. This approach would Continuing 29,274 28,886 28,646 -240 -0.8 generate confusion for both the Subtotals (46,839) (46,380) (49,006) (2,626) (5.7%) state and the universities and could Totals 453,962 456,337 462,816 6,479 1.4% lead to contending objectives and UC muddled accountability. Undergraduate New 54,910 54,326 56,918 2,592 4.8% State Could Still Influence Continuing 128,035 131,340 130,528 -812 -0.6 Fall 2022 Admission Decisions. Subtotals (182,945) (185,666) (187,446) (1,780) (1.0%) In addition to the importance of Graduate setting clear expectations, we think New 6,760 6,885 6,783 -102 -1.5% the state’s practice of setting those Continuing 24,263 24,495 24,527 32 0.1 expectations for the following Subtotals (31,023) (31,380) (31,310) (-70) (-0.2%) academic year has merit. Because Totalsa 213,968 217,046 218,756 1,710 0.8% of the timing of campuses’ a Excludes postbaccalaureate enrollment, for which new and continuing breakouts are not available. In fall 2020, UC enrolled a total of 134 resident postbaccalaureate students—10 fewer admission decisions, the state students than in fall 2019. University Nonresident Enrollment Declined in Fall 2020 Of the approximately 482,000 students the California State University (CSU) served in fall 2019, 25,600 (5.3 percent) were nonresidents. In fall 2020, new nonresident undergraduate enrollment at CSU declined by 7.9 percent. The decline in new nonresident graduate enrollment was greater, at 40 percent. Nonresident enrollment comprises a larger share of total enrollment at the University of California (UC). Of the approximately 285,100 students UC served in fall 2019, 58,700 (21 percent) were nonresidents. Though nonresident enrollment also dropped at UC in fall 2020, the declines were smaller. New nonresident undergraduate enrollment dropped by 7.2 percent and new nonresident graduate enrollment dropped by 18 percent. At both segments, the declines were primarily due to notable drops in the number of new international students. 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET has already lost most of its ability to influence fall • Return to In-Person Instruction. Both 2021 admission decisions. By setting a target for universities have announced plans to resume the 2022-23 academic year, however, the state in-person instruction in fall 2021, assuming could still influence campuses’ upcoming admission the state and nation have made sufficient decisions. progress to curb the pandemic. The impact of Several Factors Suggest Overall Enrollment resuming in-person instruction on enrollment Demand Is Uncertain. As the Legislature demand is not yet known. Some students may weighs how much enrollment to expect from the have deferred enrolling in college during the universities, one factor usually under consideration pandemic and opted to wait until in-person is overall student demand to attend the universities. instruction resumed. As both segments did Many competing factors likely will affect CSU not experience notable resident enrollment and UC enrollment demand in the coming years, declines in fall 2020, however, this impact may including: not be significant. • High School Graduates. DOF projects Longstanding Eligibility Policy Might the number of high school graduates in Suggest Enrollment Growth Is a Lower Priority. California to increase by 1.4 percent in Historically, the state has expected CSU to draw 2020-21 (affecting fall 2021 demand) and by its freshman admits from the top 33 percent of the 0.3 percent in 2021-22 (affecting fall 2022 state’s high school graduates, with UC drawing demand). An increase in the number of high from the top 12.5 percent. As we have noted in school graduates increases the number of previous analyses, CSU and UC have been found students who are eligible to enroll at CSU and to be drawing from beyond these pools in recent UC as freshmen. years, and likely continue to do so. In past periods, the state has expected the universities to tighten • Community College Students. New freshman admission policies when they were found community college transfer enrollment has to be drawing from beyond these pools. When the been steadily increasing at both universities, universities tighten their admission policies, they and it continued to grow in fall 2020. The effectively redirect a portion of their lower-division trends at the universities are associated with enrollment to the community colleges. increases in community college transfer-level course enrollment. In 2020-21, overall A New Dual Admission Pathway and Other community college enrollment is down, which New Expectations Also Could Affect University could have implications for university transfer Enrollment. Another factor the Legislature may enrollment over the next few years. How wish to consider is the potential impact of the community college enrollment might rebound new expectations that the Governor proposes in the aftermath of the pandemic, however, is linking to the university base increases in 2021-22. uncertain. In particular, we think the Governor’s proposed dual admission pathway potentially could reduce • Economy. According to the Bureau of Labor lower-division enrollment at the universities by Statistics, California’s unemployment rate encouraging more students to begin their studies increased from around 4 percent in February at the community colleges. The Governor’s equity 2020 to over 16 percent in April 2020. While and online education expectations also could have the rate has fallen since then, the most some impact on enrollment levels. For example, recent estimate (9 percent in December student success initiatives that improve persistence 2020) remains above pre-pandemic levels. rates and encourage more students to study full Student demand for the universities (at the time would contribute to enrollment increases. undergraduate and graduate levels) might be affected by these economic trends, but the precise impact they might have at CSU and UC over the next few years is not known. www.lao.ca.gov 13 analysis full gutter 2021-22 BUDGET Recommendations Legislature could set an expectation that the universities hold enrollment flat in 2022-23. If Set Enrollment Target for 2022-23. We the Legislature wished to support enrollment recommend the Legislature set enrollment growth, we estimate the General Fund cost of expectations for the universities for the 2022-23 every 1 percent growth in resident enrollment academic year. Given the various countervailing would be $34 million at CSU and $24 million at factors cited above, as well as the state’s limited UC. (These estimates are based on the traditional capacity to support new ongoing spending, the marginal-cost formula.) STUDENT SUPPORT In this section, we focus on student support students). Federally subsidized and unsubsidized programs, with a particular emphasis on food, loan programs also are available to assist students. housing, mental health, and technology programs, These grants and loans can be used for any cost of as well as emergency grants. The Governor has five attendance, including housing, food, transportation, proposals in this area, together totaling $90 million and books and supplies. In addition to federal and ($45 million ongoing and $45 million one time). state programs, UC has its own institutional aid Three of the proposals involve CSU and two involve program funded using a portion of student tuition UC. After providing background on student support and fee revenue. The university indicates this programs, we describe each of the proposals in program covers all costs of attendance for students this area, then assess those proposals, and make with financial need, after assuming a self-help associated recommendations. expectation ($10,500) that can be met through any combination of work and borrowing. (Although CSU Background also has an institutional aid program, its funds are Many Students Report Difficulty Covering sufficient only to provide tuition coverage, without Basic Needs. The term “basic needs” generally additional aid available for living costs.) refers to living costs that affect students’ Targeted Programs Also Support Basic well-being. Definitions vary, but they almost always Needs. In addition to traditional aid programs, include food and housing and may also include many campuses provide programs targeted toward other components, such as mental health and basic needs. These programs include on-campus technology. Previous surveys suggest a notable food pantries, emergency housing, and health share of university students have difficulty covering services (including mental health services), among certain basic needs. In particular, in surveys others. These targeted programs are funded conducted before the pandemic, 42 percent through a mix of sources, including state funds, of CSU undergraduates and 47 percent of UC philanthropy, and, in some cases, student fees. undergraduates reported very low or low food As Figure 9 on the next page shows, the state security. (As these surveys have low response has funded several basic needs initiatives in rates, respondents might not be representative of recent years. Some of these initiatives expanded all students.) existing on-campus efforts whereas others created Traditional Financial Aid Programs Provide new programs. Some initiatives also sought to Support for Basic Needs. The primary way the better connect students with off-campus public federal government, the state, and universities assistance programs, such as the CalFresh food support living costs during the college years is assistance program. Prior to 2019-20, state through financial aid. Many students with financial initiatives were supported with one-time funds. In need qualify for a federal Pell Grant (worth up to 2019-20, the state provided ongoing funding for $6,345 annually) and a state Cal Grant access several initiatives, totaling $6.5 million ongoing award (worth up to $1,648 annually for most General Fund at CSU and $23.8 million ongoing 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET General Fund at UC. (The difference in ongoing $3 million for CSU and $1 million for UC. The funding levels primarily reflected differences in the universities have also directed some institutional segments’ requests that year.) funds, including from philanthropy, to provide During Pandemic, Some Students Likely Are emergency student aid. Having More Challenges With Basic Needs. Proposals The state does not have comprehensive data on the impact of the pandemic on student financial Governor Proposes Ongoing Funds for Mental need, largely because financial aid applications Health and Technology at CSU and UC. The use income data from two years prior to the award Governor proposes to provide CSU and UC each year. However, surveys suggest many students had with $15 million ongoing General Fund for student unanticipated financial needs due to the pandemic. mental health services and access to technology In a California Student Aid Commission survey (electronic devices and internet connectivity). The of financial aid applicants across all segments provisional language does not specify what portion conducted in late spring 2020, over 70 percent of of funds are to be used in each of the two areas, respondents reported experiencing a loss of income with the universities having discretion to determine due to the pandemic. Students also reported the split. CSU and UC would be required to report increased concern about paying for various living by March 1 annually how the funds were distributed costs, including housing and food, health care, and to campuses and spent. technology. (This survey had a response rate of Governor Proposes Ongoing Funds for CSU 12 percent.) Basic Needs Initiative. This proposal would Relief Funds Have Provided Emergency provide $15 million ongoing General Fund to Grants to Students. The universities received a sustain and expand this existing program. This first round of federal relief funds in spring 2020, program is part of the Graduation Initiative 2025, and they are scheduled to receive a second round a systemwide effort to increase graduation rates in the coming weeks. (We provide further detail and close achievement gaps. According to CSU, on both rounds of funding in our recent post, the Basic Needs Initiative supports a broad range Second Round of Federal Higher Education Relief of activities, including food pantries, emergency Funds.) Campuses must spend a portion of these housing, emergency grants, and (since the start funds for student aid. Across the two rounds, the of the pandemic) the distribution of laptops and minimum portion for student aid totals $525 million mobile hotspots. As under the mental health and at CSU and $260 million at UC. Under the new technology proposal, CSU would be required to federal legislation (relating to second-round funding), grants Figure 9 may support students’ regular State Has Funded Several Basic Needs Initiatives costs of attendance or emergency expenses related to COVID-19. General Fund, Unless Otherwise Noted (In Millions) The new legislation includes a 2017-18 2018-19 2019-20 2020-21 requirement for institutions to CSU prioritize aid for students with Food and housing $2.5 $1.5 $15.0 — exceptional need, such as Pell Rapid rehousing — — 6.5 $6.5 Grant recipients. In addition to Mental health services — — 3.0a — the federal relief funds, the state Totals $2.5 $1.5 $24.5 $6.5 provided funds in the 2020-21 UC Budget Act for emergency grants Food and housing $2.5 $1.5 $15.0 $15.0 to undocumented students Rapid rehousing — — 3.5 3.5 (who were generally excluded Mental health services — — 5.3 5.3 from receiving aid under the first Totals $2.5 $1.5 $23.8 $23.8 round of federal relief), allocating a Reflects one-time Mental Health Services Fund. www.lao.ca.gov 15 analysis full gutter 2021-22 BUDGET report by March 1 annually how the funds were guiding policy rationale. Moreover, the state’s distributed to campuses and spent. (This proposal approach to allocating funds between segments does not apply to UC, which received $15 million and among campuses is inconsistent and has ongoing for a similar purpose in 2019-20. UC has a not directly tied funding to need. For example, comparable, existing annual reporting requirement sometimes UC and CSU receive the same funding for these funds.) level for a given initiative, and other times CSU Governor Proposes One-Time Funds for receives a higher funding level to reflect its higher Emergency Grants at CSU and UC. The enrollment. The segments, in turn, sometimes Governor proposes to provide $30 million to CSU allocate funds to campuses evenly, sometimes and $15 million to UC. The provisional language in proportion to enrollment or other measures specifies that each segment would allocate the of student demand, and sometimes through funds to campuses based on their headcount of competitive grants. Pell Grant recipients, as well as undocumented Governor’s Proposals Would Add to This students qualifying for resident tuition. Campuses Uncoordinated Approach. The Governor may award grants to students who self-certify that proposes to create a new mental health and they meet the following criteria: technology program on top of the existing basic needs programs. That new program combines • Have an emergency financial need. two distinct objectives—increasing student mental • Meet the financial eligibility requirements to health resources and increasing digital equity— receive a Pell Grant or (for undocumented without a clear nexus between the two. At CSU, students) a Cal Grant. the proposed program’s objectives would overlap • Are currently enrolled full time with a grade with those of the separately funded Basic Needs point average of at least 2.0 in one term Initiative. Moreover, it is unclear how the new funds during the past academic year or meet certain are intended to interact with existing ongoing full-time employment conditions. programs (such as the rapid rehousing program) or proposed one-time initiatives (such as the Assessment emergency grants). Opportunity Exists to Coordinate State Proposals Address a Longstanding Problem and Federal Relief Funding. The administration Exacerbated by the Pandemic. Despite the lack did not have the benefit of knowing about the of comprehensive data measuring students’ unmet new federal relief package when developing its needs relating to food, housing, mental health, and budget proposals, as the federal legislation was other concerns, the available survey data suggests not enacted until late December 2020. Now that unmet needs are substantial. Moreover, these that substantial new federal funds have been needs have likely increased for some students allocated for student aid, the Legislature can during the pandemic. The Governor’s proposals consider what state funding, if any, it would like address this sizable and timely problem. to add in this area. Unfortunately, as with many To Date, State Has Taken a Piecemeal other groups impacted by the pandemic, there is Approach to Addressing Basic Needs. Over no comprehensive data measuring the increase the past four years, the state has funded multiple in students’ financial need under COVID-19, basic needs initiatives at the universities. However, or the amount of unmet need remaining after the state’s overarching strategy for addressing accounting for traditional and emergency financial students’ root problems remains unclear. The state aid programs. As a result, the Legislature has no lacks both a definition of student basic needs and a easy way to determine if additional state funds are way of measuring demand for programs supporting warranted. them. In the absence of this information, funding Opportunities Remain to Leverage Public levels for basic needs initiatives tend to reflect Assistance Programs. Over the past several years, budget expediency (balancing available funding the state has worked to increase student enrollment with the segments’ requests), without a strong 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET in CalFresh. Nonetheless, a recent report from could design state aid to supplement federal aid, the California Department of Social Services such as by providing summer-term assistance estimates that between 290,000 and 560,000 to students who would receive federal aid in students eligible for CalFresh across California’s the spring. If the Legislature provides additional public segments (including the community colleges) funds for emergency student aid in 2021-22, we were not enrolled as of 2018-19. The state has recommend requiring the segments to report on an opportunity to further increase CalFresh how they distribute and use the additional funding, enrollment in 2020-21 and 2021-22 as a result of as this could help guide future state budget the new federal relief legislation. That legislation decisions. The state required similar reports for expands student CalFresh eligibility during the the emergency aid it provided to undocumented COVID-19 emergency by removing the standard students in 2020-21. work requirement for certain students who are very Expand Efforts to Increase Student Utilization low-income or eligible for work-study. Moreover, of Public Assistance Programs. While the the state has opportunities to translate the lessons segments’ existing basic needs programs provide learned from its CalFresh student enrollment efforts CalFresh enrollment assistance, there are likely to various other public assistance programs (such opportunities to expand student enrollment in as Medi-Cal, the Earned Income Tax Credit, and other public assistance programs, which could unemployment insurance) that students may be help students cover other costs, including underutilizing. housing, mental health, and technology costs. The Legislature could direct the segments to partner Recommendations with the relevant state and local agencies to explore Clarify Objectives of Proposals Before strategies to increase utilization of other public Approving Ongoing Funds. If the Legislature assistance among college students. wishes to provide additional ongoing funding for Consider Developing Coordinated Strategy basic needs, we recommend clarifying the scope of to Meet Students’ Basic Needs. Beyond its each proposal and how it would relate to existing immediate budget decisions in 2021-22, the financial aid and basic needs programs. In cases Legislature has an opportunity to begin shaping where multiple programs serve similar objectives the state’s longer-term strategy around students’ (such as CSU’s Basic Needs Initiative and the basic needs. To move away from the current existing rapid rehousing program), the Legislature piecemeal approach, the state would need to could consider consolidating the programs to establish overarching objectives, concretely define make them easier for students to navigate and students’ basic needs, measure the amount of universities to administer. In cases where one need in the state, align state funding levels and program serves notably different objectives (such allocations to that need, identify ways to track as mental health and technology), the Legislature progress over time, and coordinate with traditional could consider separating it into two programs. student financial aid programs as well as other Modify Emergency Grants Proposal to public assistance programs. Developing this more Reflect New Federal Relief. We recommend the holistic strategy would take time, and it would Legislature direct CSU and UC during hearings require coordination among the segments and to report on how campuses plan to distribute other stakeholders, but the Legislature might begin the upcoming federal relief funds for student aid. considering what first steps it might wish to take After obtaining this information, the Legislature toward these ends. We encourage the Legislature will be in a better position to target the proposed to ensure that any holistic strategy around state emergency aid funds. If some students are students’ basic needs also take into account the excluded from the new round of federal relief state’s broader fiscal situation, which at this time (as undocumented students were under the first is made more challenging by projected out-year round), the Legislature could target state funds to operating deficits. support those students. Alternately, the Legislature www.lao.ca.gov 17 analysis full gutter 2021-22 BUDGET FACULTY PROFESSIONAL DEVELOPMENT In this section, we focus on faculty professional and UC each to expand online education. CSU development, particularly around online instruction. has used the funds to create incentives for faculty We first provide background on the issue, then to offer fully online courses in subjects with high describe the Governor’s proposals to provide enrollment demand. UC has used the funds for the one-time funding for additional online-focused Innovative Learning Technology Initiative, which faculty professional development. Next, we provides grants for faculty to develop online and assess the proposals and offer associated hybrid courses that students at any campus may recommendations. access. In 2019-20, the state also provided the Office of Planning and Research with $10 million Background ongoing for the California Education Learning CSU and UC Routinely Provide Faculty Laboratory, an intersegmental program that Professional Development. Common types similarly aims to expand online and hybrid course of faculty professional development include offerings. In addition to these programs, the state workshops, conferences, consultations, and has supported multiple one-time initiatives at the online resources on topics such as course design, segments to develop and expand the use of open pedagogy, and student support. At both segments, educational resources in online courses. these activities are commonly delivered by the Proposal campuses’ centers for teaching and learning, as well as in other settings. Campuses support faculty Governor Proposes One-Time Augmentation professional development through a mix of fund for Faculty Professional Development sources, including core funds, federal funds, and Focused on Online Education. The Governor private grants. proposes one-time General Fund augmentations More Faculty Have Been Participating in of $10 million at CSU and $5 million at UC for Professional Development During Pandemic. faculty professional development related to Since the onset of the pandemic, both segments online education. The administration indicates have offered professional development to support the proposal is intended to support faculty faculty with the rapid transition to online instruction. as they continue to adapt to teaching online At UC, centers for teaching and learning served during the pandemic. The provisional language 6,700 faculty in 2019-20—more than twice as many specifies that the funds are to support “culturally as in the previous year. At CSU, about 60 percent competent professional development,” which the of faculty participated in professional development administration suggests would mean integrating focused on online instruction in summer 2020. principles of equity into the program. Based CSU indicates this was much higher participation on conversations with the administration, the than normal for summer professional development proposed amount reflects available resources in the programs. During the pandemic, federal relief funds Governor’s budget, as well as the relative number have been available to support these types of of faculty at each segment. activities. Based on institutional reporting, at least Assessment 13 CSU campuses and 2 UC campuses had used some funds from the first round for faculty or staff Governor Has Identified Important Area training in online instruction as of December 31, of Focus. At CSU and UC, faculty entered the 2020. pandemic with varying levels of experience teaching State Has Funded Various Initiatives Intended online. Providing additional support to faculty to Improve Online Instruction. As mentioned potentially could increase their confidence and earlier in this report, the state provided $10 million satisfaction while improving the quality of online ongoing General Fund support in 2013-14 to CSU instruction and raising student course completion 18 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET rates. In addition, the proposed emphasis on development needs under COVID-19 than the cultural competence could help reduce equity Governor’s proposed funds. The Governor’s gaps in online course completion. These objectives proposed funds would reach campuses no sooner are important, particularly if the state were to than July 2021—more than a year after the shift to pursue a long-term strategy of sustaining higher online instruction, and within months of when both levels of online education beyond the pandemic, CSU and UC intend to resume primarily in-person as the Governor has proposed. (We discuss the instruction. Governor’s online education proposal in our “Base Recommendation Support” section.) Further Needs Assessment Is Important to Reconsider Proposal After Receiving Obtain. The administration has not undertaken Online Education Report. We recommend the a full assessment of the need for additional Legislature reject the Governor’s proposal to professional development in this area. Lacking provide additional funding for faculty professional such an assessment, some key information remains development in 2021-22, as federal relief funds and unknown. Most notably, it is unknown how many other institutional funds are available to address faculty at CSU and UC need additional support the immediate needs faculty have for improving with online instruction, what types of support they online instruction. Though we recommend not would benefit from, and the cost of providing that providing a state augmentation at this time, the support. The administration also seems to miss Legislature could revisit this issue upon learning an opportunity to draw upon lessons learned from more about unmet faculty professional development recent professional development activities. These needs. Specifically, the Legislature could direct lessons learned could be pivotal in designing future the segments to include an assessment of the initiatives in this area. need for additional faculty support as part of Forthcoming Federal Relief Funds Could the online education reports we recommended Support Additional Professional Development. developing earlier in the “Base Support” section. In addition to the remaining funds provided under More information about faculty professional the first round, CSU and UC are expected to development needs could allow the Legislature to receive $592 million and $261 million, respectively, determine whether a one-time augmentation might in institutional relief under the second round of be warranted in the future or existing ongoing federal funds. These federal funds are better professional development funding might be timed to support immediate faculty professional sufficient. DEFERRED MAINTENANCE In this section, we focus on deferred maintenance and operations of their buildings from maintenance issues at the universities. We first their support budgets. When campuses do not set provide background on deferred maintenance aside enough funding from their support budgets to backlogs, then describe the Governor’s proposals maintain their facilities or when they defer projects, to fund deferred maintenance projects at CSU they begin accumulating backlogs. These backlogs and UC. Next, we assess the proposals and offer can build up over time, especially during recessions associated recommendations. when campuses sometimes defer maintenance projects as a way to help them cope with state Background funding reductions. Both universities report having Campuses Have Sizable Maintenance large backlogs. CSU estimates its backlog totals Backlogs. Like most state agencies, CSU and $4 billion across all of its campuses. UC has not UC campuses are responsible for funding the shared a precise estimate, but staff at the UC Office www.lao.ca.gov 19 analysis full gutter 2021-22 BUDGET of the President report the total backlog is more submitted to our office long lists of projects they than $8 billion. potentially could support with the proposed State Has Provided Funds to Address funding. Both lists contain projects with costs Backlogs. In the years following the Great totaling in excess of the amount proposed by Recession, the state provided one-time the Governor, with CSU’s list of projects totaling funding to help the universities address their $741 million and UC’s list totaling $250 million. The maintenance backlogs. Figure 10 shows the universities are revisiting their lists to determine amounts appropriated by the state each year from which projects they would undertake within the 2015-16 through 2020-21. Funding over the period proposed funding level. Under the administration’s totaled $678 million. proposal, CSU’s and UC’s final project lists would be authorized by DOF after enactment of the Universities Are Developing Long-Term budget. Budget bill language would direct the Plans to Address Backlogs. To help guide future administration to report to the Legislature on which state funding decisions, the Legislature in the projects were funded within 30 days after the funds Supplemental Report of the 2019-20 Budget Act are released to the universities. directed the universities to develop long-term plans to quantify and address their maintenance Assessment backlogs. In January 2021, CSU submitted its maintenance plan to the Legislature. In the plan, Deferred Maintenance Is a Prudent Use of CSU estimates it would need to spend $308 million One-Time Funding. In The 2021-22 Budget: annually to adequately fund maintenance California’s Fiscal Outlook, we advised the and prevent its backlog from growing. This is Legislature to direct any immediate surplus funding $126 million more than it currently spends annually toward one-time actions that either strengthen on maintenance ($182 million). To eliminate its the state’s budget resiliency or help address existing $4 billion backlog, CSU estimates it would the extraordinary public health and economic have to spend an additional $402 million each year impacts of the pandemic. Addressing deferred over the next ten years. UC has not yet submitted maintenance could be viewed as strengthening the its maintenance plan to the Legislature. According state’s budget resiliency in that it pays for largely to staff at the UC Office of the President, the report unavoidable costs that will grow if not addressed. will be submitted sometime between March and Funding projects that help reduce UC’s utility costs July of this year. over time also could be beneficial, though these projects could be lower priority than those deferred Proposals maintenance projects that would have significant cost escalation were they to be left unaddressed. Governor Proposes Addressing Deferred Maintenance at the Universities. The Governor Proposed Project Authorization Time Line Is proposes to provide CSU and UC each $175 million Problematic. While we think the administration’s in one-time General Fund support for this purpose. Specifically, Figure 10 CSU could use the funds for deferred maintenance projects, State Has Provided Funding to whereas UC could use the funds Address Deferred Maintenance at the Universities either for deferred maintenance General Fund, Unless Otherwise Noted (In Millions) or energy efficiency projects. The 2015‑16 2016‑17 2017‑18 2018‑19 2019‑20 2020‑21 administration indicates that the CSU $25 $35 — $35 $239a — dual purposes of the funding for UC 25 35 — 70b 179a,b $35b UC stemmed from UC’s request to Totals $50 $70 — $105 $418 $35 pursue energy efficiency projects. a The 2020-21 budget package allowed CSU and UC to repurpose unspent 2019-20 deferred maintenance funds for Proposed Projects Are other operational purposes. b In each of these years, $35 million came from state-approved university bond funds. Forthcoming. Both universities 20 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2021-22 BUDGET focus on addressing deferred maintenance at least the $175 million each proposed by the is reasonable, we are concerned with the Governor. As it deliberates on the Governor’s other administration’s proposal to notify the Legislature of one-time proposals and receives updated revenue the approved projects after the funds are released. information in May, the Legislature could consider Such an approach would give the Legislature no providing more one-time funding for this purpose. ability to review the list of projects and ensure the Regardless of the exact dollar amount provided, projects are consistent with intended objectives we recommend modifying the proposed notification and legislative priorities. process so that the Legislature receives the list of projects 30 days before the funds are released Recommendations to campuses. Requiring advance notification is Provide Funding but Modify the Project consistent with the state’s approach to authorizing Notification Process. Given the sizeable projects for previous deferred maintenance funds maintenance backlogs at each segment, we and would allow for more meaningful legislative recommend the Legislature provide CSU and UC oversight in how the universities use state funds. LAO PUBLICATIONS This report was prepared by Jason Constantouros and Lisa Qing. It was reviewed by Jennifer Pacella and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 21 LEGISLATIVE ANALYST’S OFFICE