The 2025-26 Budget: College of the Law, San Francisco

2025-26 BUDGET The 2025-26 Budget: College of the Law, San Francisco GABRIEL PETEK | LEGISLATIVE ANALYST | MARCH 2025 SUMMARY Brief Covers the College of the Law, San Francisco (CLSF). This brief analyzes the Governor’s budget proposals for CLSF. In 2025-26, CLSF would receive $101 million in total core funding, reflecting a $15 million (17 percent) increase from 2024-25. Both of CLSF’s main sources of core funding would increase, with tuition revenue projected to increase $4.3 million (7.8 percent) and state General Fund proposed to increase $11 million (40 percent). Recommend Rejecting Base Augmentation. The Governor proposes to provide CLSF with an unrestricted General Fund base augmentation of $2.4 million. The existing 2025-26 budget plan contains a $1.8 million base reduction for CLSF pursuant to Control Section 4.05 of the 2024-25 Budget Act. Taken together, CLSF would see a net General Fund base increase of $507,000 (2.2 percent). Whereas state support for CLSF would increase, the 2025-26 budget plan for the University of California (UC) and California State University (CSU) includes reductions in state support. We recommend the Legislature reject the proposed General Fund augmentation for CLSF. The state is facing projected deficits the next few years, has no plan as to how it would maintain the higher level of spending for the school moving forward, and, typically, the state reduces, rather than increases, spending when facing deficits. Even with no additional state support, the school’s ongoing core funding still would grow due to the projected increase in tuition revenue. This tuition revenue would help cover some of CLSF’s new spending priorities. State Already Made Major Contribution to McAllister Tower Project. The 2022-23 Budget Act provided CLSF with $90 million one-time General Fund to bring McAllister Tower up to current seismic standards and deliver a certain number of student housing units. Specifically, the school indicated it would deliver 257 beds (252 renovated beds and 5 new beds) at below-market rents. This was the only student housing project that the state provided with up-front General Fund cash, with the understanding that doing so would notably reduce project costs and reduce associated rental rates. To deliver the project, CLSF would use the state funds, federal historic tax credits, and a small campus contribution, while covering the remainder using conventional debt financing. Recommend Rejecting Proposed Augmentation for McAllister Tower Project. The school now is requesting that the state authorize an additional $151 million for the project. With the additional funding, the school indicates it could provide the original 257 beds, plus an additional 23 new beds, at below market rents, while also reducing rents among its existing housing stock (of 437 beds). The Governor’s proposal includes $11 million General Fund annually for the next 30 years to cover associated debt service for the project. We recommend rejecting this request. There was no expectation from the state that CLSF would require additional state funds to complete the McAllister Tower project. Rejecting this proposal would provide budget relief to the state. The school could revisit its project design and financing options to ensure it could still deliver at least 257 beds at below-market rates. The school’s reserve currently is healthy, which could help as the school reconsiders its financing options. www.lao.ca.gov 1 2025-26 BUDGET INTRODUCTION This brief analyzes the Governor’s January corresponding plans for 2025-26. The brief budget proposals for CLSF. The brief first provides concludes by assessing those proposals and background on the law school. It then describes providing recommendations. the Governor’s budget proposals and the school’s BACKGROUND In this section, we provide some basic to bring McAllister Tower up to current seismic information about CLSF, its funding, and its core standards. With the state funding, conventional operating costs. debt financing, and federal historic tax credits, CLSF Is a Public Law School. CLSF, formerly the school indicated it would be able to complete Hastings College of the Law, is affiliated with UC the project and provide 257 beds at below-market but has its own governing board, the Board of rents (an estimated 10 percent below market rates). Directors. The Board of Directors oversees the Of the 257 beds, 252 were renovated existing beds school’s finances and makes key decisions, such as and 5 were to be new added beds. setting employee compensation levels. The board Total Enrollment Estimated to Decline in also sets the school’s tuition levels and enrollment 2024-25. Figure 1 shows CLSF enrollment over the targets. The school’s main academic offering is past 25 years. Since 2000, CLSF enrollment peaked a Juris Doctor (JD) program, the most common in 2009 at 1,336 full-time equivalent (FTE) students, degree students pursue to enter the legal field. then fell notably from 2011-12 to 2015-16, before The school also offers three law-related master’s leveling off for a few years. CLSF experienced two programs. The school has five buildings—two are years of notable growth in 2021-22 and 2022-23— academic facilities; one is a mixed-use facility with growing by a combined 22 percent. In 2024-25, classrooms, offices, and student housing; one is CLSF expects total enrollment to decline by 39 FTE primarily a student housing facility that is currently students, for a total of 1,128 FTE students. This under renovation; and one is a parking garage. decrease is primarily attributable to a decline in State Provided Support for Student Housing JD enrollment, which is estimated to fall by 38 FTE Project in 2022-23. Historically, state general students. Master’s enrollment is expected to obligation bonds and state lease revenue bonds decline by one FTE student. In 2024-25, 94 percent funded the construction and renovation of CLSF’s of students are enrolled in the JD program. academic facilities. The school historically has funded its housing and parking programs through Figure 1 user charges. The state recently departed from CLSF Enrollment Remains Below Its Peak this longstanding practice for the McAllister Full-Time Equivalent Students Tower project. In fall 2022, CLSF applied to the state to receive funding for the McAllister 1,600 Tower project as part of the state’s new Student 1,400 Housing Grant Program. The state ended up 1,200 excluding the project from that program, as the 1,000 800 project had a large seismic component and was 600 deemed not to meet that program’s parameters. 400 200 Despite not being part of the Student Housing Grant Program, the 2022-23 Budget Act provided 2000-01 2005-06 2010-11 2015-16 2020-21 2024-25 CLSF $90 million one-time General Fund (cash) CLSF = College of the Law, San Francisco. 2 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Funding Tuition Revenue Is Law School’s Largest Fund Figure 2 Source. CLSF received a total of $131 million in ongoing funding in 2024-25. As Figure 2 shows, CLSF Receives Funding this funding came from “core” and “noncore” From Several Sources sources. Of the school’s core funding, 66 percent $131 Million, 2024-25 comes from student tuition and fee revenue and 31 percent comes from state General Fund. The small amount of remaining core funding comes from various sources, including the State Lottery Noncore Funds Fund, certain investment earnings, and income from scholarly publications. Beyond core funding, Otherb CLSF receives noncore funding from certain Tuition and Fees self-supporting programs (including its housing and parking programs). In addition, the school receives Private noncore funding from the federal government in the form of grants and contracts. It also receives Federal General Fund Core noncore funding from private donations as well as Othera Funds other external grants and contracts. CLSF Continues to Increase Tuition Charges. a Includes the State Lottery Fund, certain investment earnings, and income from scholarly As Figure 3 shows, CLSF increased its resident publications. JD tuition charges in the early 2010s, then b Includes income from auxiliary enterprises and payouts from endowments. CLSF = College of the Law, San Francisco. held tuition flat from 2012-13 through 2021-22. Figure 3 Tuition Level Remains Below UC Average, Despite Recent Increases Resident Tuition Charge for Juris Doctor Programs, Unadjusted Dollars $70,000 60,000 50,000 UC Averageª 40,000 30,000 20,000 College of the Law, San Francisco 10,000 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 a Reflects average tuition and fee charges for UC's four law schools. www.lao.ca.gov 3 2025-26 BUDGET For the past three years, CLSF has raised JD tuition over the past decade. CLSF also receives state charges—by 3 percent in 2022-23, 5 percent in General Fund adjustments for its lease revenue 2023-24, and 5 percent in 2024-25. Nonresident bond debt service and, in certain years, specific students pay a supplemental tuition charge. CLSF program initiatives. Unlike UC and CSU, the state also has increased these charges over the same has not funded enrollment growth at CLSF directly, period—by 7 percent in 2022-23, 8 percent in and there is no marginal cost calculation used 2023-24, and 8 percent in 2024-25. Despite the to determine state funding per student. In the recent increases, CLSF’s JD tuition charge remains past, the state has provided General Fund base lower than the average tuition charge of UC’s four augmentations to the school regardless of whether JD programs. While resident CLSF JD tuition was enrollment increased or decreased. about 5 percent below the resident tuition levels of State Support Has Increased as a Share of UC’s JD programs from 2012-13 through 2018-19, it Total Funding. As Figure 5 shows, after adjusting was 15 percent below in 2024-25. for inflation, total core funding per student in CLSF Provides Student Financial Aid. CLSF 2024-25 is similar to what it was in 2015-16. provides tuition discounts for some students based In 2024-25, state support makes up one-third on merit. The school has a tuition discount rate of of CLSF’s core funding, compared to just over approximately 30 percent. CLSF maintains tuition one-fifth a decade ago. Meanwhile, tuition and fee discounts to recruit students and to mitigate the revenue, which accounted for over three-quarters impact of fee increases on accessibility. of CLSF’s core support a decade ago, now makes State Often Provides CLSF With a Base up about two-thirds. General Fund Augmentation. Some years, the CLSF Maintains Healthy Reserves. Like primary way CLSF has covered its operating cost other higher education segments, CLSF maintains increases has been through an unrestricted state reserves to mitigate risks and manage potential General Fund augmentation. As Figure 4 shows, cash flow issues. The Board of Directors adopted the size of CLSF’s base augmentation has varied a policy to maintain a minimum reserve level Figure 4 State Has Provided Law School With a Base Augmentation in Most Years Ongoing General Fund (Dollars in Millions) $2.5 16% Annual Percent Changeb 14 2.0 12 1.5 10 Base General Fund Adjustment 8 1.0 6 4 0.5 2 -2 -0.5 -4 -1.0 -6 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21a 2021-22 2022-23 2023-24 2024-25 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. 4 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Figure 5 CLSF's Core Funding Per Student Is Nearly $80,000 Core Funds Per Full-Time Equivalent Student, 2024-25 Dollars $90,000 80,000 70,000 60,000 50,000 Tuition and Fee Revenuea 40,000 30,000 20,000 10,000 State Fundingb Other CLSF Incomec 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 a Includes funds for financial aid. b Includes ongoing General Fund support, state support provided for debt service on state lease revenue bonds, and the State Lottery Fund. c Consists of income from scholarly publications, investment income, overhead and internal transfers, and fee revenue. In 2023-24, excludes $4 million CLSF transferred to its reserve account. CLSF = College of the Law, San Francisco. equivalent to 5 percent of the school’s total annual providing instruction-related services (including operating revenues. CLSF estimates that its faculty and support staff). The number of positions 2024-25 year-end reserves will total $36 million, in this category grew from 127 to 165 in 2024-25 equating to five months of operating expenditures. (a 30 percent increase). All other position categories The Government Finance Officers Association (academic support, student services, and historically has recommended that government institutional support) grew in size by an average agencies hold at least two months of unrestricted of 10 percent, while facilities and maintenance budgetary fund balances. personnel did not grow. Employee Compensation Is School’s Largest Spending Expense. CLSF estimates that its personnel costs CLSF’s Workforce Has Been Growing in (including salaries and benefits) comprise roughly Tandem With Enrollment. Over the last decade, half of its core operating costs in 2024-25. That the number of individuals employed by CLSF has year, CLSF provided its faculty a 3 percent merit increased. In 2015-16, CLSF’s workforce totaled increase, while other staff eligible for a general 231 individuals. By 2024-25, this total had grown salary increase also were provided a 3 percent to 278 individuals (increasing by 21 percent). This increase. Given its small size and affiliation with growth is in line with the growth in enrollment UC, CLSF participates in certain UC benefit over the same period. The student-to-employee programs, including the University of California ratio at CLSF has been roughly four to one Retirement Plan and UC health and retiree health since 2015-16. CLSF’s student-to-faculty ratio programs. As discussed in The 2025-26 Budget: is currently ten to one (inclusive of its master’s The University of California, the costs of these programs) and has held close to that level for the programs have been increasing over time. past decade. Since 2015-16, the most notable change in personnel has been the growth in those www.lao.ca.gov 5 2025-26 BUDGET Financial Aid Costs Are Largest of Remaining School Is Operating From a Deficit Position Operating Costs. CLSF faces various operating in 2024-25. CLSF reports it has a $2.9 million costs beyond employee salary and benefits. In deficit in 2024-25. It estimates core operating costs 2024-25, CLSF estimates that financial aid costs total $87 million, while it anticipates core revenues account for nearly 20 percent of its operating totaling $84 million. Recent salary enhancements expenditures. The remainder of the school’s and the hiring of additional lecturers and staff operating costs includes operating equipment and primarily drive the operating deficit. CLSF plans to expenses (utilities, rent, and supplies), as well as utilize reserves to address the deficit. safety and security contracts. 2025-26 BUDGET In this section, we discuss the Governor’s CLSF indicates this level of funding would allow for 2025-26 budget proposals for CLSF and the rents across its housing portfolio to be reduced school’s corresponding 2025-26 spending plan. by 20 percent, a slightly greater discount than originally projected. The proposal is for the state Governor’s Proposals to fund remaining project costs ($151 million) in Governor Proposes Net Unrestricted place of the school covering the costs, as originally General Fund Augmentation for CLSF. The planned. The Governor’s budget provides the first Governor’s budget proposes a $2.4 million ongoing year of General Fund support to cover the debt unrestricted General Fund base augmentation service associated with funding Phase 2 of the to “support College of the Law costs.” Whereas project, with an expectation that $10.1 million will most state agencies are not receiving unrestricted be provided to the school annually over the next General Fund augmentations under the Governor’s 30 years for this purpose. The administration does budget, the administration indicates it took a not have this project going through the State Public different approach for CLSF because the school Works Board review and oversight process, as it did is small and currently has an operating deficit. for the school’s last academic facility project. While the Governor proposes an ongoing General School’s 2025-26 Plans Fund base augmentation, the school would also be subject to a $1.8 million ongoing General CLSF Is Planning to Increase JD Student Fund base reduction. This reduction is pursuant Tuition Charges. In 2025-26, CLSF is scheduled to Control Section 4.05 of the 2024-25 Budget to increase both its resident and nonresident tuition Act, which applied up to a 7.95 percent ongoing charges, representing the fourth consecutive year reduction to the “state operations” component of both of these charges would grow. Resident tuition most state agencies’ budgets. CLSF is subject to is scheduled to increase by $3,704 (7.5 percent), this reduction in 2025-26. The net effect of the two reaching $53,087. Even after accounting for this actions in 2025-26 is an ongoing General Fund proposed increase, the school’s resident JD tuition base increase of $507,000 (2.2 percent). level would be 13 percent below the average Governor Proposes State Support for resident tuition level of UC’s four JD programs. McAllister Tower Project, Phase 2. Phase 2 of The school’s nonresident supplemental tuition the project comprises the renovation of the interior charge is scheduled to increase by $1,198 of the facility. Additional building amenities would (16 percent), reaching $8,686. CLSF notes that the also be updated, including support and event large increase in the nonresident supplemental spaces. The school now estimates that the project tuition charge is to bring that rate more in-line with could deliver somewhat more beds than originally UC’s four JD programs while also generating more estimated (23 additional beds, or 280 total beds). revenue. CLSF also plans to maintain its policy of discounting tuition charges by a maximum of 30 percent in 2025-26. 6 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET CLSF Enrollment Is Projected to Remain The remainder ($532,000) consists of covering Nearly Flat. CLSF anticipates JD enrollment higher costs for operating expenses and to decline by one FTE student (-0.1 percent) in equipment, office rent, and program start up. (This 2025-26. This drop is expected to be offset by table lists all of CLSF’s new spending priorities.) a small increase in master’s program enrollment CLSF Expects to Have a Deficit in 2025-26. (which is expected to grow by two FTE students). In Similar to its budget situation in 2024-25, CLSF also total, the school’s enrollment is projected to be 1,129 expects to have a $2.9 million deficit in 2025-26. FTE students in 2025-26. CLSF has begun identifying ways to address its Core Funding Per Student Increases operating deficit. As part of this process, CLSF Substantially Under Governor’s Proposed is reevaluating its staffing levels in certain areas Budget. Beyond the Governor’s proposed net base outside of instruction and direct student support. increase of $507,000 and proposed $10.1 million CLSF has identified $1.5 million in associated ongoing General Fund debt service augmentation, ongoing operational reductions. CLSF plans to use the school expects to generate an additional reserves to cover the remaining deficit. The school $4.3 million in tuition revenue as a result of its estimates that its 2025-26 year-end reserves will planned tuition increases. Altogether, the school total $34 million. Even with the projected decline in expects its core funding to increase by $14.6 million. reserves, CLSF still would have reserves equating As Figure 6 shows, on a per-student basis, the to 4.1 months of operating expenses, a healthy school’s core funding, including the new ongoing reserve level. CLSF projects that it will no longer debt service, increases by approximately $12,900 operate from a deficit position in 2026-27. (17 percent). School Is Planning to Move Forward With CLSF Is Budgeting for Several Cost Increases. McAllister Tower Renovation, Phase 2. With CLSF has identified $4.8 million in new spending the Governor’s proposed ongoing General Fund priorities (excluding debt service for the McAllister support for the McAllister Tower renovation, CLSF Tower, Phase 2 project). The school’s largest is planning to issue university revenue bonds in planned cost increase is $2.5 million for student July 2025 to begin Phase 2 of the project. The financial aid. CLSF also plans to increase its overall school plans to sell the bonds all at once to ensure employee salary pool by 3 percent (at a cost of that cash for the entirety of Phase 2 of the project $1.1 million), hire additional faculty ($521,000), and is in place for the awarding of construction services cover employee benefit cost increases ($105,000). and other related costs. Figure 6 School’s Core Funding Increases in 2025-26 (Dollars In Millions, Except Per-Student Amounts) Change From 2024-25 2023-24 2024-45 2025-26 Actual Revised Proposed Amount Percent Ongoing Core Funds Student tuition and fees $54.0 $55.2 $59.4 $4.3 7.8% General Funda 24.0 26.3 36.9 10.6 40.3 Otherb -2.0 5.2 4.9 -0.2 -4.7 Subtotals ($76.1) ($86.6) ($101.2) ($14.6) (16.9%) Full-Time Equivalent Studentsc 1,167 1,128 1,129 1 0.1% Core Funding Per Student $65,207 $76,751 $89,631 $12,881 16.8% a Includes ongoing support provided for debt service on state lease revenue bonds. In 2025-26, the Governor’s budget includes a $10.1 million ongoing augmentation for university bond debt service for the McAllister Tower renovation project. b Includes State Lottery Fund, certain investment earnings, and income from scholarly publications. c Consists of students enrolled in the school’s Juris Doctor and master’s programs. www.lao.ca.gov 7 2025-26 BUDGET ASSESSMENT In this section, we assess the Governor’s budget seismic retrofit of the facility. As proposed, this proposals and school’s budget plans. amount equated to approximately 40 percent of the Given State’s Fiscal Condition, Unclear project’s cost. The amount was in line with what How Higher Proposed Spending Would Be CLSF identified would be needed in state support Sustained. CLSF’s 2025-26 budget plans are built to provide below-market housing units. At that on an assumption that ongoing state General Fund time, CLSF planned to finance the remaining costs support will grow by $10.6 million (40 percent) through conventional debt, funded by student in 2025-26. Given the state budget condition housing fees, and a federal historic tax credit and projected out-year deficits, the state has no program. Under the original time line, construction plan as to how it would be able to sustain these was to begin on the facility in July 2023. There was spending increases in 2026-27. Typically, when no expectation that CLSF would request additional facing deficits, the state acts to contain, rather than state support to complete a Phase 2 of the project. increase, its costs. CLSF Indicates Previous One-Time Support Is CLSF Could Revisit Aspects of Its Spending No Longer Sufficient to Provide Below-Market Plan. Some of CLSF’s planned spending increases Rents. Since 2022, CLSF has moved forward with are unavoidable, such as the need to cover the seismic retrofit of the facility, but has not taken rising benefit costs, similar to other agencies. action to renovate the remainder of the facility as However, other planned increases, such as salary originally planned. CLSF notes that, from 2022 to increases for nonrepresented faculty and staff, are 2024, the remaining project costs have increased discretionary. The Legislature may want to assess from $129 million to between $185 million and these planned increases in light of compensation $194 million due to construction cost escalation decisions for other state and university employee and historic preservation costs. A portion of groups. Additionally, student financial aid that cost ($34 million) is projected to be funded comprises the majority of the school’s proposed with proceeds from a federal historic tax credit spending costs. Particularly in light of its projected program, while the remainder ($151 million) would 2025-26 operating deficit, CLSF could reevaluate its be covered with ongoing General Fund debt service proposed financial aid spending. support under the administration’s proposal. CLSF canceled its original debt financing plan due to the CLSF’s Out-Year Budget Projections Are Built cost increase. It indicates this action was taken as on Risky Assumptions. CLSF projects that it will the rents the school would have needed to charge no longer operate from a deficit position in 2026-27. its students to cover the increase in project costs This projection is partly built on an expectation that would no longer make the housing units below the school will continue to be provided General market rates. Fund base augmentations of at least 10 percent in 2026-27 and into the out-years. Given the state’s New McAllister Tower Proposal Is Different projected deficits, an expectation that it would be From Previous Request. Specifically, the able to provide CLSF with continued General Fund Governor’s new proposal would not only result in support at that level is unlikely. CLSF’s projections reduced housing rents for McAllister Tower, but also assume it continues to increase its JD tuition across the entire campus housing portfolio. The charges by 5 percent in 2026-27 and 2027-28 and proposed funding would be used to also reduce 3 percent in 2028-29, though it is unclear if the rents at the school’s other student housing facility Board of Directors would continue to support rising by about 20 percent. In sum, 717 beds—280 at tuition charges. McAllister Tower and 437 at the other facility— would be available at below-market rates. This McAllister Tower Project Has Already amount exceeds the initial expectation of 257 beds, Received Substantial State Support. Specifically, at a single student housing facility, being offered at the 2022-23 Budget Act allocated $90 million a below-market rate. one-time General Fund to CLSF to cover the 8 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET McAllister Tower Project Differs From Other Recent Figure 7 State-Supported Student McAllister Tower Project Differs From Other Recent Housing Projects. As Figure 7 State-Supported Student Housing Projects shows, the state recently provided Recent Student Housing Projects UC with General Fund debt service support for five student housing Project Costs Bed projects. The state contributed just State Nonstate Affordablea Standard Totals over one-third of the total project CLSF, McAllister Tower $241 $43 717b 717 costs for these five UC projects UC Projectsc combined. For the McAllister San Diego $100 $265 1,100 210 1,310 Tower project, the state would be Berkeley 100 265 310 790 1,100 responsible for 85 percent of the Santa Cruz 89 106 320 120 440 project costs. Additionally, the new Irvine 65 16 300 — 300 Los Angeles 35 29 358 84 442 student housing units generated a Affordable student housing for the UC projects is defined as 30 percent of 50 percent of the area by the UC facilities are required to median income for a single-room occupancy unit type. meet the definition of “affordable” b CLSF indicates McAllister Tower would have 280 beds. An additional 437 beds already are available through the school’s 198 McAllister facility. CLSF is not subject to the affordability requirement that specified in Chapter 262 of 2021 applies to the UC student housing projects. CLSF indicates it plans to use the state support for the (SB 169, Committee on Budget 100 McAllister Tower project such that it could charge rent for all 717 beds that is 20 percent below market rates. These rates would be higher than those for the UC student housing projects. and Fiscal Review). The McAllister c Includes UC projects approved in 2022-23 for the Student Housing Grant Program. Tower proposal would allow the CLSF = College of the Law, San Francisco. school to provide below-market rates, but those rates likely would Furthermore, the state was clear with all other not meet the statutory definition of affordable. student housing projects that schools needed Additionally, the UC projects are in various stages to have plans in place to deal with cost overruns of construction, with the San Diego project to ensure the projects could be completed and already complete. The McAllister Tower project is the number of affordable beds delivered without behind the original construction schedule and will requiring additional state support. not be operational until fall 2027, at the earliest. RECOMMENDATIONS Reject General Fund Base Augmentation. meet that standard. There was no expectation Given the state’s fiscal condition, we recommend from the state that CLSF would require additional the Legislature reject the Governor’s proposed base state funds to complete the McAllister Tower General Fund augmentation. Under this approach, project. Moreover, UC student housing projects the school’s ongoing core funding still would received a smaller share of state support, yet have grow by $2.2 million (3 percent) in 2025-26 due to generally remained on track and are delivering the expected increase in tuition and fee revenue. the agreed-upon number of affordable-rent beds. This funding would help cover some of CLSF’s Rejecting this proposal would provide budget relief spending priorities. to the state. The school could revisit its project Reject McAllister Tower, Phase 2 Funding. design and financing options to ensure it could As noted in The 2025-26 Budget: Higher still deliver at least 257 beds at below-market Education Overview, given the state’s budget rates. The school’s reserve currently is healthy, condition, we recommend that a strong case be which could help as the school considers its made for any new higher education spending. financing options. Phase 2 of the McAllister Tower project does not www.lao.ca.gov 9 2025-26 BUDGET 10 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET www.lao.ca.gov 11 2025-26 BUDGET LAO PUBLICATIONS This report was prepared by Ian Klein, and reviewed by Jennifer Pacella and Ross Brown. 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. 12 LEGISLATIVE ANALYST’S OFFICE