Budget and Finance

On May 13, 2005, Governor Arnold Schwarzenegger released his revision to the proposed 2005/06 state budget, as he does each year based on the State of California’s actual revenue receipts. The governor’s revised budget fully funds the Compact for Higher Education, which provides the California State University system with enrollment growth funding, a base budget increase, and funding for mandatory costs such as insurance premium increases. The CSU Trustees have determined that a pool of funds equal to a 3.5% compensation increase will be made available for salary adjustments. Actual increases may vary as a result of collective bargaining negotiations at the system level.

For San Diego State University, once mandatory costs and costs related to salary adjustments have been met, about $5.9 million will be available to meet essential campus needs. The President’s Budget Advisory Committee and Senate Committee on Academic Resources and Planning will be deliberating during the next few weeks.

Welcome back to campus for the Spring, 2005 semester. In an ongoing effort to keep the campus community apprised of budget issues related to the State of California, this is Budget Update # 26.

On January 10, 2005, Governor Arnold Schwarzenegger released his proposed budget for the state of California for fiscal year 2005 / 06. Included in his proposal is a very welcome increase in funding for the California State University system. The proposal includes funding for enrollment growth of 2.5% as well as a general budget increase for the CSU. The increase is comprised of additional general fund support and revenues from increases in the state university fee. In total, the increase for the CSU is $211.7 million.

These increased revenues will be used to fund the higher costs of instruction driven by higher enrollments as well as additional student financial aid to cover the increased cost of state university fee for the neediest students. The increased funds will also be used to establish a 3.5% compensation increase pool. Subject to collective bargaining, the pool will be used to fund salary increases and other compensation adjustments. For the first time in several years, the increased state funding is sufficient to cover increases in mandatory costs such as health and dental benefits. In past years, requirement for the campus to fund these increased costs out of existing funds diminished the amount of funding actually available for instruction and operations.

Overall, this is a good beginning budget proposal for the CSU and consequently for San Diego State University. Of course, the budget process now moves into the legislative realm. In May, the state’s revenue picture for 2005 / 06 will be reviewed and revised according to actual revenue receipts, and budget deliberations will begin in earnest. We will continue to keep the campus informed as the budget develops — most likely to take place in May when the revenue revision is known.

I believe that we can look forward to 2005 / 06 as a year of opportunity to move forward. It is gratifying to know that we have come through a very difficult period with the least possible disruption on campus. I thank each of you for your individual and collective contribution to that achievement.

On July 31, 2004 Governor Arnold Schwarzenegger signed California’s 2004/05 Budget. The press release may be viewed at:

http://www.calstate.edu/pa/news/2004/budget0405.shtml

While the final state budget contained several changes relative to the California State University, the most significant was funding for an additional 1.87% 2004/05 enrollment for the CSU system as a whole. The Chancellor’s Office asked each CSU campus to determine if additional enrollment, beyond its 2004/05 budgeted enrollment based on the Governor’s initial January and revised May budgets, could be still accommodated at such a late date in the admission cycle. For the reasons stated below, San Diego State University chose not to accept additional enrollment and related funding for 2004/05:

The university sent out fall admission letters in early March 2004 and required successful applicants to respond with letters of intent by early May. Based on several considerations, including registration deadlines and housing availability, the university decided that it was too late to re-open fall 2004 admission.

SDSU does have a limited spring 2005 admission cycle to accommodate local community college students who have signed SDSU Transfer Studies Degree agreements. But again, the university decided it was too late to expand the spring 2005 admission period for out-of-service-area transfer students. Communication issues were a prime concern: most community college counselors are aware that SDSU normally doesn’t have a spring admission cycle for out-of-service area transfer students, and it is too late to notify them of such a potential change in policy.

In addition, the just-completed "golden handshake" offered to retiring faculty resulted in a significant reduction in the number of tenured faculty and requires the university to take a conservative approach to accepting additional 2004/05 enrollment growth at this time.

For all of these reasons, SDSU chose not to accept any additional enrollment and related funding for 2004/05.

The final state budget also provided additional funding identified as Outreach Restoration. However, since the campus did not make reductions to its student outreach programs when the governor’s initial budget was announced in January 2004, this additional funding ($500,000) is available for general campus budget purposes.

The Cabinet Budget Committee will meet in late October following student enrollment census, at which time the campus will know how actual enrollment and revenue compares to the projections upon which the campus 2004/05 budget was based. Revenue receipts can vary significantly with changes in the relative numbers of full or part-time students, in-state or out-of-state students and undergraduate or graduate students. Relying on fall semester actual enrollment and revenue, and considering the additional funds made available in the final state budget, the CBC will make a recommendation to the President at that time.

These last several budget years have been trying for the entire campus community. The current year is actually the year when the most significant impacts of the accumulated reductions will be felt, especially in terms of a greatly reduced work force resulting from retirements and non-renewal of temporary appointments. Yet this current year is also a year when we may begin to be cautiously optimistic that, with some stability in the form of the new higher education compact between the CSU and the governor, the worst may now be over. In fiscal years 2005/06 and 2006/07, SDSU has agreed to accept more than the average enrollment growth to make up for the 1.87% additional growth we could not accommodate this year. Such agreements give us the ability to plan in a more reliable environment than we have experienced over the past three years. I look forward to that planning with confidence that the good efforts each of you have put forth during these difficult times will serve us well.

On May 11, two days before he announced his budget revisions, Governor Schwarzenegger announced a new compact with the California State University and the University of California systems. The compact calls for increased state funding for higher education, beginning in 2005/06 and continuing through 2010/11, conditional on state budget circumstances at that time.

The compact supports CSU base budget increases of 3 percent in 2005/06 and 2006/07 and 4 percent in 2007/08 through 2010/11. In the last three years of the compact, 2008/09 through 2010/11, an additional 1 percent increase would address core academic support needs, including instructional equipment, instructional technology, libraries and building maintenance. Beginning in 2005/06, the compact supports funding for enrollment growth of approximately 2.5 percent annually.

The compact also endorses a student fee policy that assumes undergraduate resident fees will increase 14 percent in 2004/05 and 8 percent for each of the following two years, the equivalent of 10 percent annually for the three-year period. Significantly, and again contingent on the requisite state budget support, the revenue from the fee increases would remain with the CSU and not be used to offset reductions in state funding, as has been the case in the past. With the recently approved increase in the San Diego State University IRA fee, total academic year undergraduate fees at SDSU would increase next year from $2,488 to $2,936. Graduate resident fees would increase 20 percent for teacher credential candidates and 25 percent for all others. Further increases of no less than 10 percent are scheduled in both 2005/06 and 2006/07. Nonresident tuition in 2004/05 is still expected to increase 20 percent, as originally proposed by the governor. It is also expected that at least 20 percent of the revenue generated from the resident fee increases next year will be set aside for state university grant financial aid. The CSU Board of Trustees is expected to act on fee increases for 2004/05 at its meeting May 19.

The governor’s higher-education compact includes long-term goals for accountability, student fees, financial aid and program quality. For additional information, please link to CSU Budget Information and Updates at: Budget & Finance

Earlier last week, Governor Schwarzenegger also signed Executive Order S-8-04, authorizing a previously negotiated two-year service credit early retirement incentive for faculty. Details will be forthcoming.

On May 13, the campus Cabinet Budget Committee recommended to President Weber a distribution of the 2004/05 SDSU budget shortfall, totaling $18.8 million, prorated to the campus divisions based on their relative budget size. The recommendation incorporates revenue from the IRA fee, which was approved by the president and which will transfer $2.4 million in state general funds from Athletics to Academic Affairs in order to support 490 additional course sections. This transfer of state funding was made possible as a result of President Weber’s approval of an increase in the IRA fee, which is expected to generate $4.8 million for support of Athletics in 2004/05. President Weber has accepted the CBC’s recommendation.

If the legislature concurs with the governor’s new compact and the state’s fiscal situation continues to improve, the campus does not expect any further reductions in fiscal year 2004/05. For more detail regarding the pending reduction, including a brief recap of its impact, please go to: Budget & Finance

The compact seems to recognize the serious consequence to CSU campuses of three years of successive budget reductions and the importance to the state of protecting higher education from further cuts. The campus should be proud of the cooperative and open process it has followed in coping with significant, cumulative funding reductions in order to protect course sections and minimize, to the extent possible, negative impact on faculty, staff and students. I am grateful for the unfailing good will and commitment of the entire campus community that has continued throughout these challenging times.

Just before the holiday break, Governor Arnold Schwarzenegger proposed a mid-year budget reduction for the state that would translate into a one-time $23.8 million reduction for the California State University in 2003-04 and a permanent reduction of $74.6 million, effective July 1, 2004. Of these amounts, the Governor designated that $12.5 million of the one-time reduction and $52 million of the permanent reduction come from student outreach programs.

The CSU Chancellor’s Office reacted to the proposed budget reductions by stressing the importance of maintaining commitment to student-outreach programs, and by further emphasizing the importance of allowing the CSU the flexibility to determine how to make the budget reductions. Initial information from the Chancellor’s Office suggests that the response to any mid-year budget cut would be to reduce the system and campus annualized enrollment target by 1%. This would mean a reduction of 3,336 full-time equivalent students for the CSU and 282 for SDSU. The campus Cabinet Budget Committee was scheduled to meet on February 26, but will now be convened in late January to advise the President on how to address the campus mid-year budget reduction, currently estimated to be $1.8 million in 2003-04. The CSU cannot determine the final mid-year reduction until after the State Legislature acts on the Governor’s proposed decrease.

The Governor also has issued two executive orders, one for a hiring freeze and one establishing restrictions on contracts for services and equipment. Although the CSU is exempt from mandatory compliance, Chancellor Charles Reed has expanded his November 2001 partial freeze on hiring and has restricted new service contracts, equipment and travel.

Each university president may grant exceptions to the expanded hiring freeze, on a case-by-case basis, when such exceptions are necessary to maintain the educational mission of the university. Specific campus procedures to implement these actions will be issued shortly.

It is anticipated that the Governor’s budget request for 2004-05, normally submitted on January 10, could require additional CSU reductions — above the $74.6 million — even assuming voters approve a $15 billion economic recovery bond issue on the March ballot. Because reliable information has historically not been available much before the Governor submits his revised budget in May, the campus will, again, need to use its best judgment to determine the likely extent of any further reductions and plan accordingly. We will continue to keep you informed as information becomes available and as recommendations are provided to the President. The next budget update will be issued as soon as we have any additional information, which is likely to be at least a week following the Governor’s January 9 state budget proposal.

I greatly appreciate the commitment of each of you to the continuation of service to our students during these increasingly difficult times. No doubt our biggest challenges lie ahead. I have confidence in the ability of the campus community to persevere in the face of these challenges.

On Wednesday, November 19, 2003, the California State University Board of Trustees adopted a 2004-05 budget for the CSU that requests $546 million. This amount would restore funds cut from the CSU budget over the past two years, and would fund enrollment growth in 2004-05.

Although the Trustees sent the budget request forward to newly elected Governor Arnold Schwarzenegger, at the same time they acknowledged the budget is unlikely to be funded. The Legislature has previously indicated that enrollment growth would not be funded in 2004-05. The State’s budget situation is severe. Governor Schwarzenegger has indicated he will honor funding obligations for K-12 schools, and continues to state that he will not raise taxes.

While the new governor will not make public his specific budget proposal until January, it is likely that 2004-05 will be a year of significant budget reductions, even greater than we have experienced in the past two years. San Diego State University has tried to position itself for further cuts, but, depending on the magnitude of the reduction, the relatively small one time reserve the campus has set aside may well be inadequate to cover the impact. Further, mandatory costs such as previously negotiated faculty salary increases and significant insurance premium increases will not be funded by an additional state appropriation and must come from existing campus resources.

These unfunded mandatory increases will have the effect of increasing the total negative budget impact to campus programs.

It is not known at this time if the CSU Board of Trustees will consider an increase in the State University Fee students (tuition) to offset state budget reductions. No doubt an increase in 2004-05, following increases of 30% in 2003-04 and 10% for undergraduate/15% for graduate students in Spring 2003, would be unpopular with students. We should all remember that even with these increases our academic year mandatory undergraduate fees total $2,488, half the national average ($4,694) for tuition at public universities.

The campus Cabinet Budget Committee will meet in February to begin deliberations regarding the 2004-05 budget. If the special legislative session called by the Governor last week results in a mid year reduction, the CBC is prepared to meet as necessary to provide a recommendation to the President.

The campus has managed the budget reductions of the past two years in a remarkably effective manner, with little visible impact. I have been deeply grateful for the calm resolve of us all. It is my hope that in the face of much more severe impacts that cannot be as effectively mitigated, we will maintain our determination to get through this as best we can.

In a presentation to the California State University Board of Trustees at its meeting last week, the Chancellor’s Office staff detailed preliminary 2004-05 CSU budget requirements totaling $543.5 million. The requirements included funding for mandatory costs, such as insurance and benefit increases; restoration of the 2003-04 budget cuts; and other CSU budget priorities.

The Chancellor’s Office presentation was made in the context of the Legislature’s intent that the Governor’s 2004-05 budget not include any new funding for employee salary increases, inflation adjustments, or enrollment growth at the University of California or CSU. In addition, state agencies, including the CSU and the UC, received budget instructions from the Department of Finance to submit a 20 percent reduction plan for 2004-05. This plan assumes that no other corrective action would be taken to address an outstanding $7.9 billion state budget shortfall estimated for next year. It also assumes the continuation of measures included in the state’s 2003-04 budget such as support budget debt financing and restoration of higher vehicle license fees.

The CSU presentation did not address a possible 20% reduction. The Chancellor’s Office indicated a 20 percent reduction would equate to $482.6 million for the CSU, which would translate to a potential loss of 82,306 full-time students (111,000 individual students) and the related loss of 16,000 faculty and staff, or would require an 89 percent increase in the State University Fee. A 20 percent reduction to San Diego State University’s $185 million state appropriation would equate to $37 million. Once more definitive information is available in mid-January about the Governor’s proposed 2004-05 budget and its possible impact on the CSU, the campus will begin discussions about how to address such impacts. For more information regarding the CSU preliminary budget presentation.

As a separate but related matter, both houses of the Legislature passed an early retirement incentive bill, AB 457, which, if approved by the Governor, would authorize the CSU to offer up to two additional years of service or two additional years of age credit, or both, for employees who retire within a designated period, prior to January 1, 2005, if certain other conditions are met. The early retirement incentive is subject to the collective bargaining process for represented employees. Additional information will be provided as it becomes available.

The campus Cabinet Budget Committee met last week to discuss how to implement in 2004-05 an additional $2.5 million reduction that was addressed with one-time funds this year. It is anticipated action will be taken on this and any other critical budget issues within the next several weeks.

At this time, the campus does not anticipate further reductions to its current year budget, but, as indicated above, next year may present a challenge greater than any we have addressed to date. Our continued, collective effort should be to carefully manage our current resources; limit, to the extent possible, any long-term commitments that are not absolutely essential; and develop plans that will enable us to protect the long-term interests of the university community. Your continued patience and cooperation are appreciated.

On August 2, Governor Gray Davis approved the 2003-04 state budget. The Legislature, attempting to respond to a $38 billion state budget deficit, reduced the California State University (CSU) budget $84.5 million in addition to the reductions included in the Governor’s budget proposed last spring.

In order to address a portion of the total anticipated reduction, the CSU Board Trustees, July 16, approved a 30% increase in the State University Fee for all students. Consequently, campus resident fees this fall increased to $1,244 for undergraduates and $1,349 for graduate students from last spring’s $1,007 and $1,088, respectively.

This late fee increase, approved after most of our students have registered and paid their fees for the fall, will not be billed and due until later in the fall semester. As in the past, the campus will be allocated a portion of its fee increase revenue to adjust State University Grant awards (student financial aid) to cover the full amount of the fee increase. The full-year benefit from last spring’s fee increase, combined with the fee increase for the fall, will generate almost $11.5 million for the campus which will be used to offset a budget shortfall for 2003-04 of more than $27.2 million, including unfunded mandatory costs such as employee health insurance premium increases.

The CSU will offset the balance of the legislative reduction by decreasing the system’s planned enrollment growth from 7 percent to 4 percent, which equates to $60 million for the CSU.

In the case of SDSU, instead of increasing our budgeted enrollment from 27,201 full-time equivalent students (FTES) in 2002-03 to 28,675 FTES in 2003-04 (an increase of 1,474 FTES or 5.4 percent), enrollment will be adjusted to increase to 28,223 FTES (an increase of 1,022 FTES or 3.8 percent) which is very close to our actual 28,242 FTES in 2002-03. The legislative budget included language directing the Department of Finance not to include any funding for enrollment growth for the CSU or University of California in the Governor’s 2004-05 budget request.

The university’s Cabinet Budget Committee previously had recommended and the President had approved the use of one-time reserves for any budget shortfall beyond what was included in the Governor’s proposed budget, so SDSU’s share of the additional reduction ($2.5 million) will not impact current year operations. The campus reduction plan for 2003-04 approved last spring in response to the Governor’s proposed budget can be found at Budget & Finance.

All available information suggests that there could be additional reductions later this fiscal year or certainly in 2004-05. I understand and share the desire for a conclusion to this ongoing budget turmoil, but it is likely the uncertainty will continue so long as the state’s structural budget problem remains. With your cooperation and commitment, we will continue to maintain services to the university community and prudently plan for the future.

On May 14, Governor Gray Davis announced a revised budget proposal for fiscal year 2003-04 based on current revenue projections that indicate the states deficit has grown by another $3.6 billion to a total of $38.2 billion.

The revised budget indicates only a $5 million additional reduction for the entire California State University bringing the CSU’s net reduction to $260.7 million. The governor’s proposal continues to provide for a 25% fee increase for undergraduate students and 20% fee increase for graduate students. The CSU Trustees postponed a vote on increasing student fees, pending more information on legislative proposals that may impact the final state budget. It is possible the Trustees would implement higher fee increases if the final budget has greater reductions for the CSU.

Indeed, much remains to be done before the state has a final budget. Three proposals are in circulation in the Legislature, according to the Chancellor’s Office publication, CSU Leader:

1. A Senate Republican proposal that calls for a 7% across-the-board cut, which would cost the CSU an additional $182 million;
2. An Assembly Democratic proposal that includes an additional $69.5 million cut to the CSU;
3. An Assembly Republican proposal which requires an additional $200 million reduction to the CSU.

It remains to be seen which of these proposals, or others that might be forthcoming, will be adopted by the Legislature. More detailed information from the CSU Chancellor’s Office is available through CSU Leader at http://www.calstate.edu/CSULeader.

At San Diego State University, the Cabinet Budget Committee has continued to meet and has heard divisional plans to implement our planning number of an $11.4 million net reduction to the campus general fund budget. The CBC will meet again on May 29 to vote on a recommended budget for SDSU for 2003-04.

The recommendation likely will be based on our current planning number of $11.4 million, which assumes a 25% and 20% increase in undergraduate and graduate fees. The CBC will also include a recommended approach for addressing any further budget reductions that may result from a final state budget.

More than 9000 students have applied to participate in Commencement exercises at SDSU this weekend. It is a tribute to each faculty and staff member that those students will graduate with little, if any, negative consequence resulting from the immense budget turmoil in which we have been operating. You all have my sincere thanks and admiration for completing a difficult year so successfully.

Since my last budget update on February 11, little has changed at the state or system level. Earlier this month, a contingent from SDSU, including President Stephen Weber, Vice President Theresa Mendoza, representatives from the SDSU Ambassadors for Higher Education, and myself, participated in CSU Legislative Days. The purpose of the visit to Sacramento was to explain to legislators the consequences of Governor Gray Davis’ proposed budget on campus operations and to impress on lawmakers that the proposal, while difficult, would be manageable. We indicated that anything less than the governor’s proposed budget would be much more difficult to implement and more disruptive of campus services, particularly if decisions about the budget are made after the beginning of the fiscal year on July 1.

At the campus level, the Cabinet Budget Committee (CBC) recommended to President Weber a budget reduction plan for the 2003-04 fiscal year. The Senate Committee on Academic Resources and Planning concurred with this recommendation. The President approved the CBC recommendation on March 21.

To recap the assumptions we are using: Based on the governor’s proposed budget for 2003-04, the general fund short fall that remains after the 2002/03 mid-year reduction, is $28.3 million. This includes offsets for unfunded mandatory costs, such as benefit and insurance increases. Consistent with our continuing priority to provide classes necessary to meet the needs of enrolled students, the CBC recommended funding $4.5 million in course-section costs as an institutional obligation, bringing our total general fund shortfall to $32.8 million. After applying $21.4 million in revenue from the proposed state university fee increase and the state appropriation for enrollment growth, the remaining general fund shortfall is $11.4 million. (In Budget Update No. 17, the shortfall was projected to be $11.3 million).

The required $11.4 million reduction has been prorated to all areas based upon their general fund budgets. Funds for financial aid, utilities, insurance, benefits, and other institutional costs were not subject to reduction.

Each vice president will be working with his or her respective division to develop a plan to address the planned reduction. The approved reductions are as follows:

For additional information, please visit the SDSU Budget & Finance Web site, or information from the California State University, Office of the Chancellor.

The campus has been very prudent in holding vacant positions and not making permanent financial commitments. These steps will prove to be very beneficial in managing the reduction amount with the least disruption possible. We believe that if the governor’s proposed budget holds, we can provide a reasonable level of service to our students. However, as I’ve indicated previously, the state budget shortfall is extreme, and so far there is little indication of consensus among lawmakers as to a solution.

I will continue these budget updates as information becomes available. The next significant milestone is the so-called "May revise," when the state Department of Finance publishes revised revenue projections based on this year’s tax collections. We expect the announcement to come in mid-May.

As always, I appreciate the good will and commitment of our faculty and staff. I would also like to take this opportunity to thank the members of the Cabinet Budget Committee, who spend many hours reviewing information, discussing alternatives and crafting workable recommendations for the President in the best interests of San Diego State University.

Late last week the CSU Chancellor’s Office provided more details about the distribution by campus of the $326.1 million system wide reduction called for in the governor’s proposed 2003-04 budget. Consistent with the governor’s proposal, the Chancellor’s Office designated campus reductions by specific category. Using the Chancellor’s Office estimate, the impact on SDSU’s 2003-04 budget includes:

The Chancellor’s Office estimate, then, put the total shortfall for SDSU at $33.2 million.

On the revenue side, the governor’s 2003-04 budget proposes that California State University student fees be increased by 25% for undergraduate students and 20% for graduate students. These increases are in addition to the 10% and 15% increases that were effective this Spring semester. Revenue from these increases would generate about $12.1 million for SDSU in 2003-04. This revenue would be used to cover part of the $33.2 million shortfall stated above, leaving a shortfall of $21.1 million.

On January 22, the university’s Cabinet Budget Committee made a recommendation to President Weber to address $3.1 million of the above shortfall this year by using $700,00 institutional funds and prorating $2.4 million to the university’s divisions as permanent reductions. President Weber approved the CBC recommendations on January 29, 2003. Each division is now in the process of determining how best to meet its share of this reduction, leaving $18 million to be addressed.

Also on the revenue side, the Chancellor’s Office recently finalized campus enrollment targets for 2003-04. In a widely publicized move, the Chancellor’s Office agreed to increase enrollment growth by 7% system wide in 2003-04, an additional 2% over its earlier 5% target. The governor had proposed $150 million in funding which the CSU will use to cover the costs associated with the 7% enrollment growth. In an effort to maintain academic quality, and given the myriad of budget unknowns, SDSU has accepted a revised enrollment target for 2003-04 of 28,675, or 5.42% greater than the current year revised budget target. (That compares to an estimated actual FTES in 2002-03 of 28,241.) We would receive $11.1 million in appropriations and revenue for this enrollment growth.

Our challenge then, given the information we have now, would be to cover the essential costs necessary to meet our targeted student enrollment, which we estimate will include permanently funded additional faculty costs of $4.4 million, with $11.1 million in new funds and at the same time cover a budget shortfall of $18 million.

A further challenge, and perhaps the biggest challenge, is to plan effectively in an environment of severe uncertainty. It is generally accepted that the state budget will be late; but recently, some have suggested that adoption of a final budget may come as late as October, or even December. Much of the governor’s proposed budget could change between now and then. For example, if the proposed 2003-04 student fee increases are not approved or if the final budget does not contain funds for the enrollment growth, our situation would be much more difficult.

Almost without exception, response to these campus budget updates has been positive. One understandably frustrated reader, however, recently asked:

"Why doesn’t the SDSU administration just tell us what the budget reduction will be so we can begin to plan?"

I believe we all share that sentiment. We have been waiting for clarification from the Chancellor’s Office on how the CSU reduction would be allocated to campuses. As of February 5, we now have that information. Remembering that the budget is still only a proposal and may not be final for many months, we nonetheless have numbers we can begin to use for planning purposes. The bottom line — $18 million shortfall, $4.4 million enrollment costs, $11.1 million new funds leaves us approximately $11.3 million short in 2003-04, based on what is currently proposed.

The Cabinet Budget Committee will begin a series of biweekly meetings to discuss strategies, priorities and implementation issues and will provide its recommendations to President Weber. I will continue to keep the campus updated.

In the meantime, I continue to be grateful for the continued determination on this campus to serve our students, maintain our academic quality, conserve our resources and work together through this difficult problem.

California Governor Gray Davis released his proposed 2003-04 state budget on Friday, January 10. Always complex, the budget detail has many "ins and outs" for 2003/04. This SDSU budget update attempts to present detailed information as we currently understand it.

The governor’s proposed budget includes a reduction for the California State University of $326.1 million. This number includes the $59.6 million mid-year reduction allocated in 2002/03. To the extent that we at SDSU handle our share ($3.1 million) of that amount this year, we will not have to address it next year.

In addition to the $326.1 million cut, the CSU also must:

• offset $78.6 million in unfunded mandatory cost increases; and
• permanently cover a $43 million reduction made as a one-time cut at the beginning of 2002/03.

The total of these impacts is $447.7 million.

The governor’s proposed budget assumes that the CSU Board of Trustees will authorize an increase in the State University Fee of 25 percent for undergraduate and 20 percent for graduate students for 2003-04. This increase would be in addition to a fee increase of 10% for undergraduate students and 15% for graduate students this spring. Collectively the fee increases would generate $212 million for the CSU in 2003-04. Of this amount, the CSU will set aside $70 million for student financial aid. CSU student fees remain some of the lowest in the country, and with the set-aside funds for additional financial aid, our neediest students would continue to receive the financial help they need to continue their educations.

The governor’s proposed budget also includes $45 million in additional state support not provided for over enrollment in 2002-03. This amount plus the student fee revenue of $142 million (after the financial aid set-aside) reduces the budget impact to $260.7 million system wide

Unlike previous budgets, the governor’s proposal specifies where cuts are to be made. However, because the political process of finalizing the budget will take several months during which a lot could change, the focus of this message is on the total cut. A very preliminary estimate is that San Diego State University’s share of the $260.7 million CSU cut would be approximately $21 million in 2003-04. On the positive side, SDSU anticipates enrollment growth funding of approximately $8.8 million in 2003-04.

We expect more definitive information from the Chancellor’s Office within the next several weeks about how the reductions would impact the campus. At the state level, legislative hearings will begin shortly. In May, the governor will submit a revised budget based on updated state revenue projections (the "May Revise"). The legislature will then pass a budget bill for the governor’s signature. It is quite possible the budget will again be delayed past the July 1 deadline.

Our Cabinet Budget Committee will meet throughout the spring semester and into the summer, working with Senate leadership and using the most current information available, to develop a recommendation to the President for the campus 2003-04 budget. As time progresses, the available information will become more precise and reliable. However, we may experience a very long period of time when there is not enough information upon which to act.

Many questions surely will arise as the state budget process unfolds. I will continue these budget updates frequently until we have a final campus budget in place for 2003-04. We are facing a very difficult period, but the many responses to my previous emails give me continued confidence we can work through this problem effectively as a campus community.

As I indicated in my most recent budget message, Gov. Davis has proposed mid-year reductions for the California State University of $59.6 million, as part of his plan to tackle the state’s fiscal crisis. On December 16, 2002, the California State University Board of Trustees met in special session to address the growing pressures on the CSU budget. The Trustees approved an increase of 10% in the State University Fee for full-time undergraduate students and an increase of 15% for full-time graduate students, effective spring semester 2003.

The fee increase will generate approximately $30 million for the CSU, of which $10 million will be set aside for financial aid. (Financial aid will be recalculated for spring 2003, and additional aid will be provided to eligible students.) The CSU will apply the remaining $20 million to the mid-year budget reduction. That means SDSU will be facing an approximate mid-year reduction of $3 million, instead of the $5 million projected earlier.

Some background information on student fees may be helpful. The Trustees determine the amount of the State University Fee for all campuses. The fee was last increased in 1994-95. In 1998-99 and 1999-2000, the fee was actually decreased by 5% in each of those two years. CSU fees are among the lowest nationwide. A recent article in the Chronicle of Higher Education indicated that tuition and fees in public, four-year institutions nationwide average $4081 for an academic year. Institutions established by the California Post secondary Education Commission as collectively comparable to the CSU have average tuition and fees of $4584.

CSU fees average $1926, including campus-specific fees. SDSU fees, including campus-specific fees, are $1874, lower than the CSU average. The fee increase of $144 ($72/ semester) means CSU fees at $2070 will be at 50% of the national average and at 45% of the comparison group average. SDSU fees at $1942 will be at 48% of the national average and at 42% of the comparison group. The following chart clearly illustrates these comparisons:

The Cabinet Budget Committee, which includes three Senate officers and the Associated Students President, has scheduled a special meeting on January 22, 2003, to develop a recommendation for the President on the mid- year reduction. By that date, the Governor’s proposed 2003-04 budget will be announced, and we will have preliminary information about how his proposed budget may affect the CSU and SDSU. The CBC’s recommendation on the current mid-year reduction will be made in the context of the Governor’s proposal for 2003-04.

In response to my many budget updates, I am occasionally asked, "When are you going to give us some good news?" The good news for now is that in spite of the uncertainty and increasing severity of the state’s fiscal condition, the campus has done an excellent job of preparing for what may lie ahead. Through careful utilization of resources, the university has met its students’ academic and support needs for the fall semester and will be able to do so for spring, in spite of the mid-year reduction.

I appreciate your many comments and encouragement and am grateful for the part each of you has played in helping to find solutions to this unfolding problem.

On Friday, December 6, Governor Davis announced plans to address the state’s growing budget deficit, estimated at between $21 billion and $30 billion. His message proposed $10.2 billion in budget cuts for the balance of the current fiscal year. Also on Friday, the CSU Chancellor’s Office issued a press release explaining the impact of the proposed budget cuts on the CSU for the remainder of fiscal year 2002-03.

The CSU will be required to permanently reduce its state appropriation for the current year by $59.6 million, in addition to the $43 million in previous cuts which earlier had been described as one-time. These cuts, combined with $22.8 million in unfunded costs for health benefit premium increases and salary increases, bring the total funding shortfall for the CSU to $125 million in 2002-03.

At SDSU, we have already permanently covered our share of the unfunded benefit/ salary increases ($2.7 million). We addressed our share of the $43 million reduction ($3.078 million) from one-time funds. We now have decisions to make this year about our share of the additional cut of $59.6 million, which is approximately $5 million. We will also need to address the $3.078 million in next year’s budget.

The Board of Trustees will hold a special meeting on December 16 to discuss and act upon this new budget information. After we have learned the results of the Board of Trustees discussion, our campus Cabinet Budget Committee will meet early in the new calendar year to make a recommendation to the President about how to address this mid-year budget reduction.

In his press release, Chancellor Reed said, "There are immense challenges ahead for the California State University. This year is a problem, but next year could be a catastrophe." At SDSU, we have been planning carefully to be in a position to handle significant budget reductions with as little impact as possible on services and our campus population. We are in a good position to get through this year with few such impacts. Next year will be a great challenge. Unfortunately, at this time, specific information about what we may face is sketchy. As soon as additional information is available, we will pass it along. I can only urge that we continue to stay informed and go about our campus business with the dedication that is the hallmark of SDSU.

Since my last budget update September 6, 2002, the university has determined its fall semester enrollment. We have actual, as opposed to projected, revenue figures for fall and a more precise enrollment projection on which to base a revenue estimate for spring. We also have updated information on expenditure requirements that were not funded in the beginning 2002-03 general fund budget.

Our tuition and fee revenue is $2 million greater than estimated, due in significant part to additional enrollment. The Chancellor’s Office informed us that we will receive approximately $1,044,000 in additional state funding to offset over-enrollment costs. Utility expenditures are $764,000 higher than anticipated because of costs associated with installation of the new cogeneration plant. The benefits budget has a projected balance of $2 million, assuming we are fully funded for increased retirement contributions to PERS and have reserved sufficient funds for anticipated health program increases in January 2003.

With this information, the Cabinet Budget Committee met on November 7 and recommended to President Weber the allocation of $2.2 million to cover the cost of additional course sections to meet enrollment demand, and $20,000 for acquisition of software to comply with federal regulations related to international students, leaving a one-time institutional reserve fund of $8.2 million. President Weber has accepted the CBC recommendations.

Now that state elections are over, we are awaiting developments in the state’s financial situation. The state Legislative Analyst is estimating a state revenue shortfall of $21 billion or more. We have no information as to how this projected shortfall will impact our campus.

Governor Davis has called the legislature into special session beginning December 2, but there is no indication about when further information will be available. We should continue to limit expenditures, particularly ongoing commitments.

One of the most frequently asked questions about the budget impact is, "Will there be a golden handshake?" Governor Davis issued an Executive Order on October 4, 2002, authorizing state agencies to participate in an Early Retirement Program, if savings could be achieved by a resulting permanent reduction in force. On October 9, Chancellor Reed sent a memorandum to CSU presidents indicating that because of continued staffing requirements associated with enrollment growth the CSU could not document Early Retirement Program savings. Therefore, the CSU will not be participating in the program.

I continue to be heartened by the campus support as we learn about these ongoing budget uncertainties. We have been prudent but responsive to our student population. We have maintained a commitment to daily business while preparing as best we can for an uncertain future.

The campus 2002-03 Support Budget can be found on Budget and Finance web site. The 2002-03 beginning general fund budget of $268 million is detailed here. We do not update the web site with revenue adjustments throughout the year, so you may wish to retain these budget updates for future reference. Please feel free to contact Ken Perry (perry@mail.sdsu.edu), our new campus budget officer, Ed Bulinski (bulinski@mail.sdsu.edu), or me with any questions or comments.

On Monday, June 3, the University’s Cabinet Budget Committee (CBC) met to finalize its recommendation for the campus 2002/03 General Fund budget. Although the state budget process is not yet complete, SDSU must begin the fiscal year with a spending plan based on the most current information available. The CBC made its recommendations assuming the final state budget will be similar to the proposal put forth by Governor Gray Davis in May. This is the normal campus process. This year, however, because of the state’s severe financial crisis, it is possible that further reductions could be made in the final budget, either now or later in the year. The CBC’s recommendations allow for such a scenario.

In making its recommendations, the CBC sought to achieve several important objectives:

1. In recent years, our highest priority has been to provide a sufficient number of faculty to meet our estimated enrollment demand. Our 2002-03 estimated enrollment will be at least 493 FTES more than our budget target of 27,040 FTES.
2. Existing support services should be maintained by avoiding reductions to any division’s current base budget.
3. In order to maintain overall institutional quality, additional funding was proposed for several select initiatives, including tenure-track hiring, advancement activities, and doctoral program support.
4. Finally, a significant reserve of one-time funds should be maintained in order to continue the disciplined allocation and use of resources that has served the campus so well this year.

I have approved funding to provide for the faculty necessary to support our estimated enrollment demand; the addition of some new (not as many as we would like) tenure-track faculty; ongoing doctoral program expenses in Computational Sciences as well as Engineering and Math/Science programs; replacement of support previously provided by Extended Studies summer programs (courses are now offered through regular state-funded university programs); continued expansion of the university’s fund-raising and public relations efforts; the accommodation of students with disabilities’ and compliance with new reporting requirements related to international students.

As recommended, I also approved setting aside sufficient funds to cover our estimated 2002-03 budget reduction while still maintaining a one-time reserve of $5.9 million. This reserve will be critical to helping us address any further budget reductions, any additional enrollment demand, or any unfunded mandatory costs, such as the 80 percent increase in the employer contribution to the state retirement system (PERS).

Over the next several weeks, legislative budget deliberations will continue. The legislature is required to present the governor with its amendments to his budget by June 15. While this requirement was not met (it is often missed, even in a good year), current political analysis suggests that the governor and legislature may well reach a budget agreement early in July. Once the state budget is finalized, the campus community will be informed of the budget’s impact on the CSU and, as soon as possible thereafter, SDSU.

A summary of the approved allocations, including the total General Fund amount by division, can be found at http://bfa.sdsu.edu/fm/bp/pdf/June2002a.pdf .

I commend the Cabinet Budget Committee for presenting a budget that meets essential requirements while maintaining a prudent reserve for future funding shortfalls.

Because of the careful planning of the broadly representative Cabinet Budget Committee and the good work of the men and women of SDSU who have been careful with expenditures, we are able to begin the coming fiscal year with a relatively sound budget. But this is no time to let down our guard. Many are concerned that there will still be a mid-year correction and that 2003-04 will also be very difficult. None of us knows what lies ahead, but so far we have weathered the storm by working constructively together. We must continue those efforts.

In my last update, I indicated the campus was awaiting an analysis by the Chancellor’s Office of the impact on the CSU of the Governor’s May budget revision. While we have a better picture of the impact on the system, we have not yet received all of the campus detail. For our immediate campus budget planning, we have estimated our share of the system reductions and unfunded mandatory cost increases.

To begin on a positive note, the revised budget maintains the enrollment growth funding included in the Governor’s January budget and proposes funding an additional 1% enrollment increase which equates to $19.5 million in new system funding. The Chancellor’s Office most likely will defer any decision on how to allocate these funds assuming they are included in the final budget. The CSU Board of Trustees approved a 15% increase in nonresident tuition which is expected to generate $11.8 million in new system funding.

At the same time, however, the revised budget requires the CSU to permanently reduce its base funding by $20 million, most of which relates to the amount allocated last year for the increased cost of natural gas. There is a further one-time reduction of $43 million of which $38 million is expected to be prorated to the campuses. There are also unfunded mandatory cost increases that the system will have to address including increased electricity costs ($22 million), employee health benefit increases ($16.5 million), compensation increases beyond the compensation pool, 2001-02 carry-forward, and tuition increase revenue ($4.2 million), and an 80% increase in the State contribution rate to the retirement system.

Although campus information related to the system reductions and unfunded mandatory costs is not available we have made our own estimates in order to develop a preliminary campus budget plan for next year. I have summarized below our expected additional funds and cost savings as well as our estimated share of the permanent and one-time reductions and the unfunded mandatory cost increases.

The Governor’s revised budget includes a greater reduction to the CSU ($63 million) than the January budget ($29.5 million) but the maintenance and possible enhancement of the enrollment growth funding is encouraging. In addition, the availability of current year and anticipated budget year utility savings, in spite of increased electricity costs, has enabled us to preserve needed funding for additional course sections and other critical University programs. The entire campus has worked hard throughout the current fiscal year to achieve these goals, and we are to be congratulated.

The campus Cabinet Budget Committee will meet on June 3 to formalize recommendations to President Weber for next year’s budget At issue is how to allocate the funding we estimate is available. Although the new funding requested and needed by all areas of the University is much greater than what is available, it is anticipated that we will be able to fund our increased course section requirements and avoid passing back any reductions to campus divisions and operating departments.

The CBC budget recommendation must be made before the State adopts a final budget, so we must provide for uncertainty. Following President Weber’s decision on the CBC recommendations, I will provide another budget update to the campus community.

Virtually every media analysis of the California budget situation has suggested that the adopted 2002-03 budget will be addressed again by the Governor and Legislature following the November elections. Many predictions indicate that 2003-04 will be even more difficult than 2002-03. We will continue to be vigilant in observing budget developments and keeping the campus community informed.

The campus has adopted a culture of discipline and cooperation during this emerging budget crisis. This is a combination of virtues that will serve us well as we go forward. My continuing thanks to you for your involvement in and commitment to SDSU.

As you are no doubt aware, the Governor issued his revised budget for the State, based on a drastically decreased revenue picture. The State budget shortfall is now anticipated to be $23.6 billion, almost double what was projected when the Governor released his state budget in January.

The CSU Chancellor’s Office is analyzing the implications for the CSU of the revised state budget. Preliminary information reported in the news media may not reflect the full impact on the CSU, and, therefore, on San Diego State University.

We anticipate a more detailed analysis will be available mid-week next week. As soon as we receive the information from the Chancellor’s office, we will share with you our understanding of its implications for the SDSU budget.

Some time has passed since my previous budget update. Since that time, the Legislature has ratified the Governor’s proposed one-time budget deductions for this current fiscal year. In that process, the actual reduction for the California State University was determined to be $29.5 million instead of the $35 million previously anticipated. This means that the current year reduction for SDSU is $2.3M instead of the $2.7M we had previously planned. In response to the university’s Cabinet Budget Committee recommendation, the President approved the pro rata distribution of the campus budget reduction be adjusted to reflect this lower number. The major divisions had previously been given the responsibility to meet a proportionate share of the reduction, so this change simply lessens the requirement this year. The President has also approved applying all unallocated current year funding (currently $6.2M) toward mitigating the reduction for 2002-03. Since the 2002-03 Governor’s Budget submittal to the legislation in January, this campus has been informed that its share of the initial reduction is $3.7M. In addition there will be an estimated $1.6M decrease in the amount available to the campus for State University Grant financial aid.

As I have indicated in previous messages, the State will review its revenue status in mid-May when more reliable information about tax receipts will be available.

At that time, the Governor will revise his budget proposal for fiscal year 2002-03. Legislative deliberations about the budget will begin in earnest. Most predictions indicate that the Legislature will not meet the constitutional requirement to present a final budget to the governor by June 15, for his approval by July 1. When the state’s budget has been greatly delayed in the past, we have been able to continue essential operations, including payroll, though occasionally vendor payments have been delayed.

Following the gubernatorial election in November, it is anticipated that more review of the state’s budget picture will take place. The predictions remain sobering. Therefore, while we may begin next fiscal year in relatively good shape and presumably will have funds to cover our enrollment-growth costs, we must remain disciplined until the many unknowns become resolved.

I appreciate the patience and good will of the campus during this period. As soon as information is available from the Governor’s revised budget in May, I will send another update. I anticipate this will be sometime in mid-May.

On Thursday, January 10, Governor Davis announced his proposed 2002-03 state budget. An informative summary of the budget as it impacts the CSU has been provided by Chancellor Reed and will be available on the Budget and Finance web site. I urge you to read that message. Essentially, the CSU is slated to receive new funds for enrollment growth, compensation (1%), maintenance and operating costs for new space, and other basic operating costs such as health benefit premium increases. But there is also a system wide $20 million budget reduction. This budget proposal is based upon several assumptions that must be proven valid before it could be implemented. First, the state must successfully sell the energy bonds necessary to repay the general fund for electricity purchased during the energy crisis. Second, the current projections regarding state tax revenues must hold. Third, a sufficient number of legislators from both parties must support the governor’s budget, which requires a two-thirds vote for passage.

If those assumptions prove to be correct, this budget would mean that SDSU would receive its share of the compensation increase, fixed and operating costs, and $5.7 million for enrollment growth. The enrollment growth funding would be reduced by our share of the $20 million reduction.

While the governor’s budget establishes a much better starting place than I had imagined, there are still several months to go before the 2002-03 budget is finalized. The Legislative Analyst’s Office will publish an analysis of the budget in February, and the Legislature will then begin its deliberations. The "May revise" will incorporate information about actual revenues received. Also during this time, the issue of the energy bonds must be resolved. It is also possible that the budget will not be approved by June 30 and that the budget debate could extend into late summer. In short, Thursday’s release of the budget by governor Davis was the first step in what may become a protracted budget process.

Thus, I advise that the campus continue its current prudent approach to a budget that still leaves many issues unresolved. Beginning this month, the Cabinet Budget Committee will meet monthly to review developing issues. The campus Strategic Planning group will also meet regularly. I continue to be grateful for your comments as the budget unfolds. It is clear the campus community is actively involved in efforts to understand the budget process, and we are, therefore, better positioned if difficult decisions must be made.

As the calendar year draws to a close, I would like to share additional information about the campus budget, including some good news!

In my previous message I indicated the campus had received an additional payback requirement of $769,000, in addition to an earlier payback of $1.9 million. Since that time, we have received written notice from the Chancellor’s Office that the exact amount of the previous cut was $1,971,760, an amount $32,650 more than we had estimated. The total payback, then, is $2,740,760, about 1.4% of our state appropriation.

At a meeting held on December 13, 2001, the Cabinet Budget Committee discussed how to handle the additional one time budget payback of $769,000 plus the $32,650 to make the difference from our initial estimate, which totals $801,650. Following a good deal of discussion, the CBC recommended that the $801,650 be distributed back to the divisions, just as the earlier reduction was.

A major concern expressed during the CBC discussion was the impact of the reductions at the academic department level. Provost Nancy Marlin indicated that the Office of Academic Affairs would absorb its portion of the second reduction within its centrally held academic equipment resources, rather than distribute it to the college / departmental level, as occurred with the first reduction. Provost Marlin is the best source of detailed information on this point, and has said she would respond to any questions or requests for clarification.

The good news I mentioned earlier is in regard to the funding of a significant mandatory cost, and it outweighs the impact of both budget reductions in terms of "avoided impact." By way of background, the Public Employees Retirement System investment performance for the past several years had been such that the contribution paid from campus funds had been reduced to zero, and the budget for this purpose had been taken back by the state. In 2001-02, the requirement for a campus contribution to PERS was reinstated. We were concerned that this estimated $6 million cost would not be funded from the state because of the budget problems. In fact, we just received confirmation that the CSU system did receive additional funds from the state sufficient to cover this cost. If we had not, the combined effect of this unfunded cost and the two paybacks would have totaled almost $9 million for SDSU, severely hampering our ability to prepare for the budget reduction we expect next year.

There is still little information about the extent of the state’s budget deficit or related impact on the campus 2002-03 budget. Our efforts to date are intended to position the campus budget to absorb centrally as much of the 2002-03 reduction as possible, minimizing the impact at departmental levels. We will provide additional information in mid to late January after publication of the Governor’s budget.

I do appreciate your continuing involvement and comments.

On Monday, November 19, CSU Chancellor Reed notified President Weber of a further budget reduction impacting the current fiscal year. This is a one-time reduction applicable to our state appropriation, which is in addition to the previously announced 1 percent reduction. This most recent action results in a total of $35 million the CSU has been required to return to the State of California within a month’s time, and a total of $2,741,000 that SDSU must pay back this fiscal year.

In an earlier budget memo, I indicated that the campus Cabinet Budget Committee would give President Weber a recommendation on how to implement the first budget reduction. The CBC recommendation was that the 1 percent reduction ($1.9 million) be distributed among the campus divisions. This action would enable the campus to retain as much flexibility as possible to reserve funds to put toward the anticipated more severe budget impacts in fiscal year 2002-03. The president accepted that recommendation. Each cabinet officer is responsible to determine how best to comply with his or her division’s portion of the reduction within available resources.

In light of the information received about this second reduction, the CBC will convene early in December to make an implementation recommendation to the President. Once the President has made his decision on that recommendation, I will send out another budget update memo.

The governor has announced a special session of the legislature to be convened in January specifically to address the state budget. We will keep you informed of any additional impacts on the campus.

On November 14 the California Legislative Analyst’s Office (LAO) released its projections for California’s fiscal outlook. In the report accessible at http://www.lao.ca.gov/2001/fisc_outlook/ Fiscal_Outlook_2001.pdf 

Legislative Analyst Elizabeth Hill projects that the current 2001-02 fiscal year will end with a budget deficit of $4.5 billion instead of a previously projected reserve of $2.6 billion. The LAO projects a budget deficit of $12.4 billion for the 2002-03 fiscal year. In both cases, the LAO has assumed that the state and national economies will emerge from recession in spring 2002. If the emergence of the economic recovery is delayed by six months, the LAO predicts the budget deficit will grow by another $3 billion to $4 billion. The LAO’s report is 41 pages and it is written for ease of reading. You may find it useful to review. It is important that in the face of these latest developments we remain committed to working together as a campus community to overcome these challenges. Our university is better prepared today to deal with difficult economic times than it has ever been. Your feedback has been very helpful. Just after my previous budget memo (on the partial hiring freeze) I encountered someone on campus who said, "Why can’t you send out some good news!" While it may not seem there is much good news, I do feel gratified that we have many good people involved in a number of ways to review the problems as they arise, and we have reliable mechanisms for sharing information and developing recommendations that take into account all the many complexities of the university.

Thank you for your responses to my earlier budget memos. Each one has been thoughtful and constructive.

On November 7, 2001, the Chancellor of the California State University system notified campus presidents of a partial hiring freeze effective immediately. The purpose of a hiring freeze at this point in the year is to preserve options should additional budget reductions be required.

The hiring freeze does not apply to tenure-track hiring, and SDSU’s provost has determined that tenure-track searches underway will continue. Due to the need to meet Spring 2002 course section requirements, the current hiring freeze will also not apply to lecturers, teaching associates and graduate assistants.

Other positions will be filled only if they are essential to SDSU’s mission. In cases where an appointment is authorized, temporary appointments and internal staff reassignments will first be considered in order to accomplish critical functions related to vacant positions.

The Center for Human Resources will work closely with the Provost and vice presidents to review searches currently underway, and a determination will be made in each case about continuing the search or not.

As I’ve indicated in previous emails on the topic of budget reductions, it will be important to keep communication lines open. Sue Blair will be scheduling information exchange sessions for managers and supervisors who in turn will be able to share information at the operating department level as information becomes available. While very little definitive information will be forthcoming until at least early spring, establishing clear avenues of communication while relying on existing decision-making processes will assist us in working through whatever issues may arise. Thank you for your helpful comments and responses to the information we have provided thus far.

Consistent with President Weber’s request that we keep the campus informed, this memo is the third in a series regarding California’s budget issues and their impact on the California State University system and San Diego State University.

The CSU has just been informed by Governor Davis that it must "pay back" one percent of the state appropriation previously allocated for the current fiscal year. The CSU has, in turn, directed each of its campuses to return one percent of its general fund budget. San Diego State University’s state appropriation is $193 million; for our campus, a one percent reduction represents $1.9 million.

This topic was initially discussed at the previously scheduled preliminary Cabinet Budget Committee meeting held on November 8. We anticipate a formal recommendation from the Cabinet Budget Committee following its meeting on November 15. That recommendation will be forwarded to President Weber by the following Monday, November 19. The Senate Academic Resources and Planning Committee (CARP) chair has also been briefed on this issue and it is expected that CARP will additionally provide a recommendation to the CBC and President. Following receipt of these recommendations, President Weber will make a decision regarding the implementation of the reduction. We will disseminate that recommendation and the president’s decision with regard to it broadly across campus.

As I mentioned in my Oct. 19 budget memo, we have reconvened the Campus Strategic Planning Committee that includes among its membership the cabinet, the deans, Senate leaders and individuals from Student Affairs, University Advancement and Business Affairs.

The committee met on Oct. 19 to review California’s budget process and problems and to begin a dialog on how SDSU can best prepare for a difficult budget year. Ideas formulated by the committee will be submitted through the divisions and the regular SDSU budgetary process. We do not know whether this one percent pay back will be all that is asked of us in the current fiscal year. We are mindful, however, about the potential for cuts in the 2002-03 fiscal year appropriation from the state. The president is confident that we can manage this issue by working together.

I hope you will take the opportunity to become familiar with our campus budget and that you will keep yourself informed as the budgetary process unfolds. The campus’ budget can be accessed at Budget & Finance

We have worked hard in recent years to develop an open, deliberative budget process, and we will continue that model through this budgetary cycle. It will still be several months before a clear picture of the state’s budget is known and what effect it will have on San Diego State University. While we must always remain prudent stewards of our resources, it is premature to consider ways to remedy an unknown budget scenario for next year. It is important, however, that we share information that we do know and understand the issues and forces that affect us, so that we are prepared to act in an informed way when the extent of the problems we face are known.

We will continue to keep you informed and continue to solicit input through established governance channels as we move into what promises to be a period of fiscal restraint.

President Weber has asked me to brief you on information currently available about the 2002-03 budget. Doubtless you have been seeing reports in the media that the State of California will be facing a difficult budget year next year. If those predictions prove correct, we can reasonably anticipate budgetary constraints on the California State University system and, in turn, on San Diego State University. This message, and additional messages to follow forward are intended to share information and solicit input as the budgetary process goes.

State revenues for the 2001-02 fiscal year are down by $1.1 billion as of September, and the governor has directed state agencies, and requested the CSU, to prepare for possible budget reductions of 3 percent, 5 percent, and 10 percent. The CSU Chancellor’s Office is preparing a system wide response, while remaining confident that education remains a high priority for the governor, the Legislature, and the people of California.

Some information about the state budget formation process and timetable may be helpful. In January 2002, the governor will submit to the Legislature the preliminary state budget for 2002-03, based on anticipated tax and other revenues. When tax receipts are collected, a revised estimate of available revenues is announced in May, and any adjustments the governor believes are necessary are publicized. (This is called the "May revise.") Budget negotiations between the governor and the Legislature begin in earnest at this point. While state law requires adoption of a budget by June 30 of each year, in difficult financial times it is possible the budget may be delayed as late as September. (Even when the budget is late, salary payments are still made.)

The CSU submits its budget proposal to the governor in November each year. The governor incorporates any changes he wishes to make and includes the CSU budget in the state budget he announces in January. Following the January announcement of the governor’s budget, and particularly following the May revise, the CSU works to secure legislative and gubernatorial support for its budget.

The SDSU budget formation process occurs while state budget deliberations are under way. In May of each year, the Cabinet Budget Committee (CBC), comprised of representatives from the Senate as well as member of the president’s Cabinet and the president of Associated Students, gives the president recommendations to allocate funds for the upcoming fiscal year. In years when there is little or no fiscal difficulty in the state, these recommendations concern known and highly reliable revenues (principally increases in state appropriations and student fee revenue).

Relatively minor adjustments are deferred until October, when all remaining appropriations have been made. CBC recommendations to the president are made based on budget requests presented to the CBC and discussed throughout the spring semester.

The requests come from the divisions headed by a member of the president’s Cabinet. Each division has its own methodology for collecting information leading to the development of its budget request.

The realities of academic year planning and appropriate notice to students require that SDSU admit students, and, in some years, enroll students, before the state budget is finally determined. Various political signals are available following the May revise, so every effort is made to recommend a budget in line with the best information available at the time. But, in a year when the budget may involve a reduction in revenues or require increased expenditures without a corresponding increase in revenue, it is difficult to recommend a budget in May. In such cases, a contingency plan is recommended, and efforts are made to defer expenditures.

Because there is a real prospect of a difficult budget for next year, we have begun early discussions now so that we are prepared to bring our best thinking to the process in the spring. President Weber has asked me to convene the large, inclusive group (including the cabinet, the deans, faculty leaders and individuals from Student Affairs, University Advancement and Business Affairs) that worked so effectively on revisions to the campus master plan to begin formulating ideas that will then be submitted through the divisions and the regular SDSU budgetary process.

I hope you will each become familiar with our campus budget (it is available on the web at Budget & Finance) and that you will keep yourself informed as the budgetary process unfolds.

There is a clear need for us to focus our best thinking on ways in which we might mitigate the potential consequences of budgetary fluctuations on our students, our employees and our community. We have worked hard in recent years to develop an open, deliberative budget process, and we will continue that model through this budgetary cycle. It will be several months before a clear picture of the state’s budget is known and what effect it will have on the CSU and San Diego State University. It is premature to consider ways to "remedy" an unknown budget scenario for our campus. However, it is important that we share information that we do know and understand the issues and forces that affect us, so that we are prepared to act in an informed way when the extent of the problems we face are known.