The 2024-25 Budget: College of the Law, San Francisco

2024-25 BUDGET The 2024-25 Budget: College of the Law, San Francisco GABRIEL PETEK | LEGISLATIVE ANALYST | MARCH 2024 SUMMARY The Governor’s budget proposes a $2.2 million (11 percent) General Fund base increase for the College of the Law, San Francisco (CLSF) in 2024-25. After accounting for other revenue increases (primarily from student tuition revenue), CLSF’s total ongoing core funding would increase by $4.5 million (5.6 percent). We recommend the Legislature reject the General Fund base augmentation for CLSF. Providing an ongoing General Fund increase contributes to the state’s projected budget deficits. Moreover, even without a General Fund increase, the school still would have additional revenue from other core fund sources to cover some operating cost increases in 2024-25. INTRODUCTION This brief analyzes the Governor’s proposal and the school’s corresponding plans January budget proposal for CLSF. The brief for 2024-25. The brief concludes by providing an first provides background on the law school. associated recommendation. It then describes the Governor’s budget BACKGROUND CLSF Is a Public Law School. CLSF, formerly and fee revenue and 31 percent comes from state Hastings College of the Law, is affiliated with General Fund. Remaining core funding comes the University of California (UC) but has its from various sources, including the State Lottery own governing board—the Board of Directors. Fund, certain investment earnings, and income The Board of Directors oversees the school’s from scholarly publications. Beyond core funding, finances and makes key decisions, such as setting CLSF receives noncore funding from certain employee compensation levels. The board also sets self-supporting auxiliary programs (including its the school’s tuition levels and enrollment targets. housing and parking programs). In addition, the Of the school’s approximately 1,100 students in school receives noncore funding from private 2023-24, 95 percent are enrolled in the Juris Doctor donations as well as external grants and contracts. (JD) program (the most common degree students CLSF Recently Increased Its Tuition pursue to enter the legal field). The school also Charges. As Figure 2 on the next page shows, offers three law-related master’s programs. CSLF increased its JD tuition charges during Tuition Revenue Is Law School’s Largest and shortly after the great recession, then Fund Source. CLSF received a total of $122 million held tuition flat from 2012-13 through 2021-22. in ongoing funding in 2023-24. As Figure 1 on the For the past two consecutive years, CLSF next page shows, this funding came from “core” has raised JD tuition charges—by 3 percent and “noncore” sources. Of the school’s core in 2022-23 and 5 percent in 2023-24. Nonresident funding, 68 percent comes from student tuition students pay a supplemental tuition charge. www.lao.ca.gov 1 2024-25 BUDGET CLSF has also recently increased Figure 1 these charges—by 7 percent in 2022-23 and 8 percent in 2023-24. CLSF Receives Funding From Many Sources Despite the recent increases, $122 Million, 2023-24 CLSF tuition charges remain lower than the average tuition charges of UC’s four JD programs. While resident CLSF JD tuition was about 5 percent below the resident Noncore Funds tuition levels of UC’s JD programs from 2012-13 through 2018-19, Otherb it was almost 20 percent below Tuition and Fees in 2023-24. State Often Provides Base General Fund Augmentations. Private Some years, the primary way CLSF has covered its operating Federal General Fund Otherª cost increases has been through Core Funds state General Fund base augmentations. As Figure 3 shows, the size of the CLSF’s base ª Includes the State Lottery Fund, certain investment earnings, and income from scholarly publications. b Includes income from auxiliary enterprises and payouts from endowments. adjustments has varied over CLSF = College of the Law, San Francisco. the past eight years. CLSF also receives state General Fund adjustments for its lease revenue Figure 2 bond debt service and, in certain years, specific program initiatives. CLSF's Tuition Levels Unlike UC and the California State Have Started Diverging From UC Law Schools University (CSU), the state has not Resident Tuition Charge for JD Programs, Unadjusted Dollars funded enrollment growth at CLSF directly, and there is no marginal $70,000 cost calculation used to determine state funding per student. In the 60,000 past, the state has provided 50,000 General Fund base augmentations UC Averageª to the school regardless of whether 40,000 enrollment increased or decreased. 30,000 Total Enrollment Is Almost College of the Law, San Francisco Flat in 2023-24. As Figure 4 on 20,000 page 4 shows, CLSF enrollment 10,000 remained nearly flat from 2015-16 through 2020-21. CLSF then 2009-10 2011-12 2013-14 2015-16 2017-18 2019-20 2021-22 2023-24 experienced two years of notable ª Reflects average tuition charge of UC's four law schools. growth—with enrollment increasing UC = University of California; and CLSF = College of the Law, San Francisco. 16 percent in 2021-22, followed by 5.1 percent in 2022-23. 2 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Figure 3 State Has Provided Law School With Base Augmentations in Most Years (Dollars in Millions) 2016-17 2017-18 2018-19 2019-20 2020-21a 2021-22 2022-23 2023-24 Base General Fund adjustment $1.0 $1.1 $1.1 $1.4 -$0.5 $2.1 $2.0 $2.2 Percent change in General Fundb 10% 9% 9% 10% -4% 14% 12% 12% Percent change in ongoing core 1.9 1.9 1.9 2.5 -0.9 3.5 3.0 3.0 fundsc a Base General Fund was reduced in response to the pandemic-related recession. b Reflects base General Fund adjustment over the amount of total ongoing General Fund provided the previous year. c Reflects base General Fund adjustment over total ongoing core funds provided the previous year. During these two years, enrollment grew in the The current AFSCME and AFT bargaining school’s JD program as well as its master’s agreements expire June 30, 2024 and programs. In 2023-24, CLSF expects total enrollment October 31, 2024, respectively. New agreements are to decline by 13 full-time equivalent (FTE) students still under negotiation for 2024-25. Given its small (1.1 percent). The majority of the decline is from the size and affiliation with UC, CLSF participates in JD program, which is expected to decline by 22 FTE certain UC benefit programs, including the University students. CLSF did not meet its entering JD class of California Retirement Plan and UC health target in 2023-24. This decline in JD enrollment and retiree health programs. As discussed in is expected to be partially offset by enrollment The 2024-25 Budget: The University of California, increases in two master’s programs. the costs of these programs have been increasing Employee Compensation Is School’s Largest over time. In addition to personnel costs, CLSF Expense. Each year, CLSF faces pressure to spends around 30 percent of the tuition revenue it cover cost increases associated with the school’s generates from each JD cohort on financial aid. operations. Personnel costs (including salaries and benefits) Figure 4 comprise roughly 50 percent of the school’s total operating costs. CLSF Enrollment in 2023-24 Roughly 60 percent of the school’s Is Slightly Down From Prior Year personnel (including faculty) Full-Time Equivalent Students are not represented whereas 40 percent are represented by 1,400 labor unions. Specifically, school Master's Programs personnel is represented by the 1,200 Juris Doctor Program American Federation of State, 1,000 County and Municipal Employees (AFSCME) and the American 800 Federation of Teachers (AFT). 600 In prior years, CLSF has provided general salary increases and 400 merit increases, as applicable, for 200 its non-represented personnel. It has provided salary adjustments 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 for its represented employees Estimated consistent with their associated CLSF = College of the Law, San Francisco. collective bargaining agreements. www.lao.ca.gov 3 2024-25 BUDGET CLSF Maintains Reserves. Like other higher revenues. As of 2021-22, CLSF had built up its education segments, CLSF maintains reserves reserve to 5.5 months of operating expenditures. to mitigate risks and manage potential cash flow This level has since declined to 4.2 months issues. The Board of Directors adopted a policy of operating expenditures as a result of CLSF to maintain a minimum reserve level equivalent to using some reserves to offset increased ongoing 5 percent of the school’s total annual operating operating costs in 2023-24. GOVERNOR’S PROPOSAL Governor Proposes General Fund Base propose to defer this base augmentation as he does Augmentation. The Governor’s budget proposes with the UC and CSU base augmentations. The to provide CLSF with an ongoing General Fund administration indicates it took a different approach base augmentation of $2.2 million (11 percent) to for CLSF because it is a small agency with smaller “support operating costs.” The Governor does not reserve amounts and less access to borrowing. SCHOOL’S 2024-25 PLANS CLSF Is Planning to Increase JD Student decline by 8 FTE students (0.7 percent) in 2024-25. Tuition Charges. Resident tuition is scheduled The school expects this drop to be partially offset to increase by $2,352 (5 percent), reaching by a small anticipated increase in master’s program $49,383 in 2024-25. The nonresident supplemental enrollment (expected to grow by 5 FTE students). tuition charge is also scheduled to increase for Core Funding Per Student Is Increasing. the third consecutive year. It is set to grow by Beyond the Governor’s proposed $2.2 million $554 (8 percent), reaching $7,488 in 2024-25. General Fund increase, the school expects to Even with these tuition increases, the school’s generate an additional $2.3 million in tuition JD tuition would remain below the tuition level of revenue as a result of its planned tuition all of UC’s JD programs. increases. Altogether, the school expects its core CLSF Enrollment Is Projected to Remain funding to increase $4.5 million (5.6 percent). Nearly Flat in 2024-25. The school is projecting As Figure 5 shows, on a per-student basis, the a second consecutive year of nearly flat total school’s core funding increases by approximately enrollment. CLSF anticipates JD enrollment to $4,100 (5.9 percent). Figure 5 School’s Core Funding Continues to Increase (Dollars in Millions, Except Per-Student Amounts) Change From 2023-24 2022-23 2023-24 2024-25 Actual Revised Proposed Amount Percent Core Ongoing Funding Student tuition and fees $51.0 $53.2 $55.4 $2.3 4.2% General Funda 18.8 21.0 23.2 2.2 10.6 Otherb 3.3 1.3 1.3 — 2.9 Totals $73.1 $75.4 $79.9 $4.5 5.6% Full-time equivalent students 1,155 1,142 1,139 -2.8 -0.2% Funding per student $63,280 $66,046 $70,170 $4,124 5.9 a Excludes lease revenue bond debt service and one-time funds. b Includes State Lottery Fund, certain investment earnings, and income from scholarly publications. 4 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET CLSF Is Budgeting for Several Cost Figure 6 Increases. As Figure 6 shows, CLSF is planning for several cost increases in 2024-25. Its largest School’s Spending Plan Has Several planned cost increase is for student financial aid. Components CLSF also plans to fund a total of nine new Changes in Core Spending, 2024-25 (In Thousands) positions, including six new tenure-track faculty and three lecturers. CLSF reports that despite Spending Component Amount the anticipated decline in enrollment, the college Student financial aid $2,257 is hiring additional faculty to work towards an Faculty hiring 1,891 Salary pool increase (3 percent) 1,032 American Bar Association goal of having a minimum Operating expenses and equipment 302 share of classes taught by full-time faculty. Beyond Benefit cost increases 101 these expenses, CLSF intends to increase its overall Health Policy and Law master’s program start-up 48 employee salary pool by 3 percent as well as cover Office renta -586 Transfersb -1,403 employee benefit cost increases. These costs Total $3,642 are partially offset by savings associated with a a Reflects savings from lower rent costs associated with three university reduction in certain rental payments and transfers. facilities. b Reflects reduction in funding transferred to certain programs outside of CLSF Plans to Use Reserves to Cover Some the school. Operating Costs. To cover expected operating costs, CLSF plans to use $4.2 million of its reserves June 30, 2025. Even with the projected decline in in 2024-25. This would be the third consecutive year reserves, CLSF still would have reserves equating that CLSF went into its reserves to pay for some to 3.3 months of operating expenses. CLSF of the school’s ongoing operating costs. CLSF projects that its reserves will begin to increase estimates its reserves will drop to $24 million as of again in 2027-28. RECOMMENDATION Reject Proposed General Fund Base school still would have $2.3 million in additional Augmentation. As we discuss in The 2024-25 tuition and fee revenue that it could use to cover Budget: Overview of the Governor’s Budget, some components of its spending plan. Given it the state faces large projected operating deficits could not cover all of its spending priorities, the over the next few years. Providing CLSF with school indicates it likely would consider various an ongoing General Fund base augmentation cost-containment measures, including potentially in 2024-25 contributes to those deficits. We providing smaller salary increases or hiring fewer recommend the Legislature reject this proposal new faculty. If the state budget situation were to and retain state funding for CLSF at its existing improve in 2025-26, the state could offer CLSF a level. Without a General Fund augmentation, the base increase at that time that it could afford. www.lao.ca.gov 5 2024-25 BUDGET 6 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET www.lao.ca.gov 7 2024-25 BUDGET LAO PUBLICATIONS This report was prepared by Ian Klein, and reviewed by Jennifer Pacella and Carolyn Chu. 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