The 2023-24 Budget: College of the Law, San Francisco

2023-24 BUDGET The 2023-24 Budget: College of the Law, San Francisco GABRIEL PETEK | LEGISLATIVE ANALYST | MARCH 2023 SUMMARY The Governor’s budget proposes to increase base General Fund support for the University of California College of the Law, San Francisco (UC Law SF) by $2.2 million (12 percent) in 2023-24. After accounting for other revenue increases (primarily from student tuition revenue), UC Law SF’s total ongoing core budget would increase by $5.8 million (7.7 percent). We recommend the Legislature consider the base General Fund augmentation of 12 percent an upper bound. The proposed percentage increase is the largest among the education segments. The school’s associated expenditure plan also includes augmentations for new hiring, innovation, and operating expenses and equipment (OE&E)—items that could be revisited if the state’s General Fund condition worsened. Additionally, we recommend the Legislature reject the Governor’s proposal to provide one-time funding for the school’s Urban Alchemy program. Given campus safety is part of the school’s core operations, we recommend program costs be covered using the school’s core ongoing funding. Introduction from state General Fund. Remaining core funding comes from investment income, scholarly publication This brief analyzes the Governor’s budget income, fee revenue, and the State Lottery Fund. proposals for UC Law SF. The brief first provides Beyond core funding, UC Law SF receives noncore background on the law school. It then describes funding from certain self-supporting auxiliary the Governor’s budget proposals and the school’s programs (including its housing and parking budget plan. The brief concludes by providing three programs). In addition, the school receives noncore associated recommendations. funding from private donations as well as external Background grants and contracts. UC Law San Francisco Is a Public Law School. Employee Compensation Is School’s UC Law SF, formerly Hastings College of the Law, is Largest Expense. Core funds support UC Law affiliated with UC but has its own governing board SF’s core operations, including faculty and staff (known as the Board of Directors). Of the school’s compensation. The school also uses core funds to more than 1,000 students, approximately 95 percent provide merit-based student financial aid. UC Law are enrolled in the Juris Doctor (JD) program (the SF currently spends around 30 percent of the most common degree students pursue to enter the tuition revenue it generates from each JD cohort legal field). The school also offers three master’s on financial aid. programs, one of which is a joint Health Policy and State Often Provides the School With General Law program with UC San Francisco (UCSF). Fund Base Increases. Each year, the law school Tuition Revenue Is Law School’s Largest Fund faces pressure to cover cost increases associated Source. UC Law SF received a total of $123 million with employee compensation, OE&E, student in ongoing funding in 2022-23 (excluding state financial aid, and enrollment growth, among other funding provided for lease revenue debt payments). factors. Over the past decade, the primary way As Figure 1 on the next page shows, this funding the school has covered its core operating cost came from “core” and “noncore” sources. Of the increases is through state General Fund base school’s core funding, just over 70 percent comes augmentations. (The school also receives state from student tuition revenue and one-quarter comes General Fund adjustments for its lease revenue bond www.lao.ca.gov 1 2023-24 BUDGET debt service and, in certain years, specific program Student Enrollment Has Grown the Past Two initiatives.) As Figure 2 shows, the size of UC Law Years. After hovering at approximately 950 full-time SF’s base adjustments has varied since 2015-16. equivalent (FTE) students from 2016-17 through Average annual growth in the school’s General 2020-21, the school grew its enrollment notably Fund support during this period (excluding 2020-21) in 2021-22. That year, it enrolled 155 additional was 11 percent. FTE students, with its total enrollment reaching UC Law SF Recently Increased Tuition 1,099 students. The bulk of the growth (144 FTE Charges. From 2012-13 through 2021-22, UC Law students) was in the school’s JD program, with SF held enrollment fees flat at $43,486 for resident the remaining growth in its master’s programs. students. For the 2022-23 academic year, the In 2022-23, the school is continuing to experience UC Law SF Board of Directors increased tuition higher-than-typical growth, with total enrollment charges for resident students by 3 percent to estimated to reach 1,175 FTE students. The bulk $44,791. The board also increased supplemental of the growth (57 FTE students) continues to be in tuition charges for nonresident students. After the school’s JD program, with master’s programs holding the supplemental tuition charge flat at growing by 19 FTE students. Though still relatively $6,000 from 2012-13 through 2021-22, the board small programs, the school’s master’s programs increased the supplemental charge by 7 percent to doubled in size from 2020-21 through 2022-23. This $6,420 in 2022-23. is partly attributable to the addition of the new Master of Science in Health Policy and Law program launched in 2022-23. Figure 1 School Is Responsible for University of California College of the Law, Campus Safety. UC Law SF is San Francisco Receives Funding From Many Sources located in downtown San Francisco $123 Million in 2022-23 between the Civic Center and the Tenderloin District. Over the years, the school has faced public safety issues. It has contracted with the UCSF police department for campus Noncore Funds patrols and responses to security issues. The school also has used UCSF Public Safety Ambassadors, Other Fundsa who lack police powers, to staff its Tuition and Fees buildings and security posts and report issues as appropriate to police personnel. The school has paid for these contract costs using its ongoing core funds. In August 2020, the Urban Alchemy program Private Gifts, Contracts and Grants General Fund was piloted by UC Law SF to Core Funds further promote campus safety. Federal Funds Other Fundsb This program relies less heavily on traditional methods of policing in favor of sidewalk safety services a Includes auxiliary enterprises, program fees, and endowment payouts. (including interrupting public drug b Includes income from scholarly publications, investment income, overhead and internal transfers, fee revenue, usage, noise disturbances, and and the State Lottery Fund. public urination and defecation). 2 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Figure 2 State Has Provided Law School With Base Augmentations in Most Years (Dollars in Millions) 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Base General Fund adjustment $1.0 $1.0 $1.1 $1.1 $1.4 -$0.5 $2.1 $2.0 Percent change in General Fund 11.0% 10.0% 9.0% 9.0% 10.0% -4.0% 14.0% 12.0% Percent change in ongoing core funds 1.9 1.9 1.9 1.9 2.5 -0.9 3.5 3.0 The school has been using $1.4 million annually School’s Budget Plan of its ongoing core funds redirected from the UC Law SF Is Planning to Increase Student UCSF contract for the Urban Alchemy program. Tuition Charges in 2023-24. Resident tuition is The school has supplemented this funding with scheduled to increase by $2,240 (5 percent), reaching $3 million one-time General Fund that the state $47,031 in 2023-24. The nonresident supplemental provided in 2021-22, to be spent evenly over three tuition charge is also scheduled to increase for years (through 2023-24). The program prioritizes the second consecutive year. It is set to grow by employing individuals who were formerly incarcerated $514 (8 percent), reaching $6,934 in 2023-24. or homeless. UC Law SF Anticipates Enrolling More McAllister Tower Renovation Project Students in 2023-24. The school is planning for Continues. Built in 1929 and purchased by the law continued enrollment growth in both its JD and school in 1978, the McAllister Tower has served as master’s programs. Compared to the past two the school’s main student housing facility. In 2017, years, however, the school is planning for lower the school adopted a seismic safety policy. Under levels of growth. UC Law SF anticipates growing this policy, the McAllister Tower was deemed in JD enrollment slightly—by 17 FTE students need of seismic safety upgrades. The cost of the (1.5 percent) in 2023-24. It anticipates growing associated renovation project is currently estimated enrollment in its master’s programs by 7 FTE at $230 million. The 2022-23 Budget Act provided students (13 percent). Most of this growth is expected UC Law SF with $90 million one-time General Fund to come from the Health Policy and Law program. to cover approximately 40 percent of the project UC Law SF’s Core Funding Per Student Is cost. UC Law SF indicates that the remaining Increasing. In addition to the Governor’s proposed project costs will be split between conventional $2.2 million General Fund increase, the school debt-financing ($103 million) and the historic tax expects to generate an additional $3.6 million in credit equity program ($37 million), which is a federal tuition revenue as a result of planned tuition increases program focused on the rehabilitation of certified and enrollment growth. Altogether, the school historic buildings. The renovated building will add five expects its core funding to increase $5.7 million beds, bringing the total number of beds to 272. The (7.7 percent). As Figure 3 on the next page shows, renovation project is scheduled to begin construction on a per-student basis, the school’s core funding in January 2024. increases by nearly $3,500 (5.6 percent). Governor’s Proposals UC Law SF Is Budgeting for Several Cost Increases. As Figure 4 on the next page shows, Governor Has Two Budget Proposals for UC Law SF is planning for several cost increases in UC Law SF. First, the Governor’s budget includes 2023-24. Its largest planned cost increase is for lease an ongoing General Fund base augmentation of payments on a new multiuse facility (198 McAllister). $2.2 million (12 percent) to “support College of the UC Law SF also plans to fund a total of six new Law costs” in 2023-24. Second, the Governor’s positions—one new ladder-rank professor, two budget includes $3 million one-time General Fund existing vacant ladder-rank professors, one long-term for the campus’ Urban Alchemy program, with the contract professor, and two lecturers. The next funds available for expenditure over the next three largest planned expense is for student financial aid. years (through 2025-26). www.lao.ca.gov 3 2023-24 BUDGET Figure 3 School’s Core Funding Increases Notably Ongoing Core Funds (Dollars in Millions, Except Per-Student Amounts) Change From 2022-23 2021-22 2022-23 2023-24 Actual Revised Proposed Amount Percent Core Funds Student tuition and fees $48.1 $52.7 $56.3 $3.6 6.8% Base General Fund supporta 16.8 18.8 21.0 2.2 11.5 Otherb 1.9 2.2 2.1 — -2.1 Totals $66.8 $73.7 $79.4 $5.8 7.7% Full-time equivalent students 1,101 1,175 1,199 24 2.1% Core funding per student $60,679 $62,706 $66,203 $3,497 5.6 a Excludes ongoing support for lease revenue bond debt service and one-time funds. b Includes income from scholarly publications, investment income, overhead and internal transfers, fee revenue, and the State Lottery Fund. School Is Requesting Additional One-Time Figure 4 Funding Relating to Name Change. The state School’s Spending Plan Supports provided UC Law SF $885,000 one-time General Several Increases Fund in 2022-23 for expenses relating to the Core Spending Increases, 2023-24 (In Thousands) school’s name change. The school indicates that it intends to seek additional one-time state funding Spending Component Amount of up to $2 million to complete name change and 198 McAllister lease paymentsa $2,088 rebranding activities. Faculty hiring 1,225 Student financial aid 1,189 Recommendations Salary pool increase (3 percent) 1,006 Recommend Treating Proposed Base Increase Innovationb 327 Operating expenses and equipment 241 as an Upper Bound. We recommend the Legislature Benefit cost increases 98 treat the Governor’s proposed $2.2 million Health Policy and Law master’s program 44 (12 percent) base General Fund increase for the Other adjustmentsc -460 school as an upper bound. Throughout the education Total $5,758 budget—across K-12 education, the community a In addition to the McAllister Tower renovation, the school recently constructed a new, adjacent, multiuse facility at 198 McAllister Street. colleges, and the public universities—the Governor The school is incurring new lease payments for that building, which it has proposed relatively high base increases, plans to cover using core funds. b Reflects funding the school plan’s to use for developing new activities with UC Law SF receiving the largest percentage and expanding existing activities in further of its strategic plan. c Certain operating costs will be reduced during the renovation of the increase. For all of these segments, we recommend 100 McAllister building. the Legislature treat the base increases proposed in January as upper bounds. From within its budget plan for 2023-24, UC Law SF can accommodate Beyond these expenses, UC Law SF intends to several core cost increases, including new hiring increase to its overall employee salary pool by and salary increases, as well as cost increases for 3 percent as well as cover employee benefit cost OE&E and activities relating to innovation. Were state increases. UC Law SF also has identified funding revenues to weaken over the coming months, the for innovation. This funding will be directed to Legislature could consider downward adjustments at develop and enhance certain activities, such as the that time. If the base increase for the school were to development of internet redundancy services. be reduced, the school could adjust its spending in various ways, including, for example, by revisiting its allotments for OE&E and innovation. 4 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Recommend UC Law SF Fund Campus A Couple of Options Exist for Covering Safety Program From Core Budget. The Urban Remaining Name Change Costs. As of Alchemy program seeks to achieve an important January 2023, the school has incurred $1.8 million in goal of promoting and maintaining campus safety. costs associated with its name change. Specifically, Given campus safety is a key part on the school’s it has spent a total of $890,000 on external contracts ongoing operations, it is unclear why the school is with several firms to implement needed changes not funding all program costs from its core operating relating to its internet domain and other re-branding budget. Relying on one-time state support for key efforts. It also has incurred legal costs totaling ongoing operations is poor budgetary practice. $867,000. (Some of these legal costs ultimately We recommend the school, as it has done in the past, might be covered through the school’s insurance use its ongoing core funds for campus safety costs. policy.) Given these costs exceed the state’s one-time To accommodate the cost of the Urban Alchemy appropriation of $885,000, the school has had to program, UC Law SF indicates it might need to raise cover excess costs to date using campus reserves. tuition. The school has raised its tuition charges in Beyond costs already incurred, the school has 2022-23 and 2023-24. If that additional revenue is identified additional outstanding physical signage insufficient to cover the school’s operating costs, costs totaling $1.4 million. The state could provide the including campus safety, UC Law SF could consider school with additional General Fund for these costs, additional tuition increases in the out-years. In the but campus reserves are available to cover such meantime, the school has $1 million remaining from costs. We estimate the school’s reserve currently the 2021-22 Budget Act that can be spent during equates to nearly five months of expenditures. 2023-24 for the Urban Alchemy program. Even for a small agency (which benefits from higher reserve levels), this is a relatively sizeable reserve. www.lao.ca.gov 5 2023-24 BUDGET 6 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET www.lao.ca.gov 7 2023-24 BUDGET LAO PUBLICATIONS This report was prepared by Ian Klein, and 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, California 95814. 8 LEGISLATIVE ANALYST’S OFFICE