Thursday, February 21, 2019

New LAO report on Higher Ed Budget

Figure 20 from LAO report
The Legislative Analyst's Office (LAO) has released an analysis of Gov. Newsom's higher ed budget proposals.

Excerpts from the LAO report:

Compensation Decisions Are a Key Part of University Budgets. The largest of the Governor’s proposed augmentations for the California State University (CSU) and University of California (UC) are increases in employee salaries and benefits. The Governor’s budget, however, supports increases for all CSU employees whereas it supports increases only for represented employees at UC. We encourage the Legislature to consider the extent to which the segments are attracting and retaining employees when evaluating CSU’s and UC’s compensation decisions. (p. 1)

Recommend Increasing Transparency and Accountability for Student Success Initiatives. The Governor proposes funding student success initiatives at both segments ($45 million for CSU’s Graduation Initiative and $50 million for a new UC initiative). Were the Legislature interested in supporting these initiatives, we recommend linking the funding to the segments achieving certain performance expectations (such as improving graduation rates, reducing excess units, and narrowing achievement gaps by specified amounts). (p. 2)

Many Proposed Capital Outlay Projects Have Merit, but Some Not Justified. We have concerns with 4 of CSU’s 18 proposed projects and 2 of UC’s 7 proposed projects. We have concerns when projects are especially costly without justification, when the space requested is not warranted given existing facility utilization, and when promising, less costly alternatives exist. We recommend the segments not proceed with these six projects, though the segments could resubmit project proposals if they found ways to lower costs or better substantiate need. (p. 2)

Opportunities Exist for Making Tuition More Predictable. The Governor calls for more fiscal predictability for students and their families. The best way to promote such predictability is through sizeable state reserves—sufficient to sustain university spending during an economic downturn and prevent steep tuition hikes. One way to free up General Fund for higher reserves is to have student tuition cover a share of proposed 2019-20 cost increases. In tandem with building higher reserves, we encourage the Legislature to adopt a policy explicitly establishing what share of cost nonfinancially needy students should pay. Such a policy would improve budget transparency and aim to treat student cohorts similarly, whether enrolling in college during good or bad economic times. (p. 2)

UC Drawing From Beyond Its Traditional Eligibility Pool. According to the state’s most recent eligibility study, UC drew from 13.9 percent of high school graduates in 2015-16. This is higher than UC’s traditional pool (12.5 percent). More recent studies undertaken by the UC Academic Senate also conclude that UC is drawing from beyond its traditional eligibility pool. Given UC is already meeting its historical commitment to freshman access, the Legislature could treat further enrollment growth at the university as a lower priority. (p. 43)

UC Debt Service Costs Rising in 2019-20. According to the Office of the President, the university plans to issue bonds in March 2019 to finance several previously approved projects. The bond issuance will increase the University of California’s (UC’s) debt service costs. To cover these costs, the university has requested $15 million in additional state General Fund. The Governor’s budget proposal does not include funds for this cost increase. The Legislature may wish to factor this higher cost into its budget decisions for the university.

Other elements in the report argue that UC faculty are paid more than other top public universities. (The report stops short of saying UC faculty are overpaid.) The skepticism about two UC capital projects seems based on the idea that instead of more classrooms, there should be more online education.

You can find the full report at:

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