Tuesday, May 13, 2014

The May Revise

The bottom line for UC in the May Revise – as far as one can tell from the official document and the governor’s news conference earlier today – is that there is no significant change since the January proposal (which is less than the Regents are requesting).  Although the governor spent some time discussing his plans for CalSTRS (teacher pensions), there was no sign of any change in approach with regard to the UC pension.  Thus, the Regents’ point that the state funds CSU pensions via CalPERS but seems to disown the UC pension remains unanswered. [Page 67 of the May Revise document - see link below - lists various state pension payments but explicitly excludes UC in a footnote.]

The May Revise includes the governor’s “rainy day” fund plan (which requires voter approval in November once the legislature puts it on the ballot).  That plan complicates budget accounting methodology since the payments into the fund are treated as an expenditure.  I have reworked the figures somewhat in the table below (scroll all the way down to the bottom of this posting).  Note that when we aggregate the rainy day fund and the “regular” reserve in the General Fund, the combined reserve falls during 2014-15.  A fall in the combined reserve suggests a deficit – which is not the general public impression in this election year.  

There is some prepayment of Schwarzenegger’s Economic Recovery Bonds which, if subtracted from “revenue and transfers” would turn the modest deficit into a modest surplus.  You can argue about how it should be treated since once you prepay, you can’t get it back.  In any event, there is the discrepancy between the state controller’s cash statements (which show a negative reserve starting the current 2013-14 fiscal year) and the governor’s accrual number (which shows a positive figure).  In an earlier post on this blog, we noted that the General Fund through April 2014 (the big tax receipt month), had a negative reserve of $10 billion which means that a lot of revenue relative to spending would have to come in during May and June 2014 to produce a positive number at the end of June.

At the news conference, when asked about court funding, the governor lumped both court funding and university funding together and gave his usual sermon about doing more with less, coming up with innovations such as online courses, etc.  Below in italics is the relevant text from the May Revise on higher ed.  You can find the May Revise document at
Multi‑Year Stable Funding Plan: University of California and California State University

As proposed in the Governor’s Budget, the May Revision continues the commitment to a multi‑year stable funding plan for higher education.  The plan prioritizes higher education by providing new funds to continue reinvesting in the public universities, with the expectation that the universities will improve the quality, performance, and cost effectiveness of the educational systems. The plan is rooted in the belief that higher education should be affordable and student success can be improved without dramatic increases in costs to the state or to students.

Funding Stability
The plan provides each segment up to a 20 percent increase in General Fund appropriations over a four‑year period (2013‑14 through 2016‑17), representing about a 10 percent increase in total operating funds (including tuition and fee revenues).

The plan assumes a freeze on UC and CSU resident tuition from 2013‑14 through 2016‑17 to avoid contributing to higher student debt and tuition levels.

Student Success
The plan expects UC and CSU to decrease the time it takes students to complete a degree, increase the number of students who complete programs, and improve the rate of transfer of community college students to four‑year colleges and universities.

In addition to efforts by the UC, CSU, and CCC to meet student success goals, the Governor’s Budget includes $50 million to promote innovative models of higher education at the campus level that result in more bachelor’s degrees, improved four‑year completion rates, and more effective transfers between the community colleges and the universities.

The multi‑year plan directs the universities to prepare three‑year sustainability plans that set targets for key measures adopted in statute in 2013

May Revise $billions           2013-14     2014-15
- - - - - - - - - - - - - - - - - - - - - - - - - - -
Reserve at start of year          $2.4        $3.9
Revenue & transfers*             102.2       105.3
Expenditures                     100.7       106.2
Surplus/deficit                   +1.5        -0.8
Reserve at end of year             3.9         3.1**
- - - - - - - - - - - - - - - - - - - - - - - - - - -
*Transfers include -$1.6 billion in prepayment of Economic Recovery Bonds each year.

**$1.5 billion in regular reserve; $1.6 billion in rainy day fund.

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