From the Legislative Analyst's Office (LAO):
...CARES Act Funds Are Likely Insufficient to Address Total Impact of COVID-19 Outbreak. To date, the data on the fiscal impact of the COVID-19 outbreak on campuses and students is incomplete and inconsistent. Nonetheless, initial data suggest that the federal relief funding provided under the CARES Act likely will be insufficient to address the full effects of the outbreak. For example, through March 2020, UC reported $310 million in lost revenue and higher costs on its general campuses due to the COVID-19 outbreak. This is $180 million more than UC is receiving in federal institutional relief funds through the CARES Act. (Of the $260 million UC is receiving in federal relief funding, $130 million each is allocated for student financial aid and institutional aid.) As UC’s and other institutions’ costs grow as the effects of the outbreak and recession continue, we expect adverse programmatic effects will deepen.
Other Federal Programs Might Provide Relief to Higher Education Institutions. While CARES Act higher education relief grants likely will not be sufficient to cover all of the costs campuses incur in responding to the outbreak, other federal programs could provide some additional relief. Most notably, the Federal Emergency Management Agency is reimbursing state and local agencies for certain disaster-related COVID-19 costs. (We plan to examine the impact of these federal reimbursements on higher education institutions in a forthcoming post.)
State Does Not Have Comparable Ability to Fund Relief Packages. Unlike the federal government, California is required under the State Constitution to enact a balanced budget each year. In large part because of this requirement, the state has very limited options to provide stimulus and relief packages compared the federal government. Notably, apart from internal borrowing and drawing down its reserves, the state does not have the immediate ability to help campuses cover remaining costs after they have exhausted their federal relief funding. Moreover, like other state and local agencies, campuses not only are facing extraordinary, unexpected costs but they also will be affected by the state’s deteriorating budget condition.
Critical for State to Provide Higher Education Institutions With Early Budget Signals. Though the exact magnitude of the drop in state revenues remains highly uncertain, economic data to date suggest the drop could be substantial. In responding to past budget crises, the state typically has started by taking actions such as deferring the timing of payments and repurposing unspent funding from prior years—actions that help preserve ongoing programs. The state then typically has been compelled to enact budget reductions. Given how quickly the current budget crisis has emerged, the higher education segments will have little time to make programmatic adjustments in response to state budget decisions. By August, campuses already will have set their course schedules for the fall academic term (if not begun classes) and staffed accordingly. The less notice campuses receive, the less likely they will be to accommodate programmatic cuts in 2019‑20 and 2020‑21, and the more likely they are to reduce, if not deplete, their reserves. Low reserve levels, in turn, could result in campuses having cash flow problems in 2020‑21 and entering 2021‑22 in a particularly vulnerable fiscal position.
Vigilant Oversight Will Be Key to Assessing Remaining Needs and Building State Budget. Given the amount of flexibility the CARES Act provides higher education institutions and the Governor, we recommend the Legislature conduct oversight hearings focused on the federal higher education relief funds and adopt associated reporting requirements for each of the higher education segments. Understanding the timing of when institutions receive funding, how the funds were spent, and what student and institutional needs remain will help the Legislature make key budget decisions moving forward...
Full report at https://lao.ca.gov/Publications/Report/4225.
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