The Governor's Budget provides close to $11.7 billion from the General Fund alone for Higher Education in 2008-09. The proposed workload budget reflects total funding of $21.7 billion, including $15.1 billion General Fund and Proposition 98 sources for all major segments of Higher Education (excluding infrastructure and stem cell research), which reflects an increase of $1.6 billion ($1.3 billion General Fund and Proposition 98 sources) above the revised 2007-08 budget.  These amounts represent an 8 percent total funding increase, including a 9.2 percent increase in General Fund and Proposition 98 sources above the revised 2007-08 budget.  The major workload adjustments for 2008-09 include the following for each segment.

The proposed budget was constructed first by computing the workload budget funding level.  From the workload budget, adjustments are made to reflect specific policy adjustments and reductions, including budget-balancing reductions.

Proposed Workload Budget

University of California and California State University

For the UC and the CSU, the workload budget is based on the Higher Education Compact (Compact) that was initiated in 2004.  The Compact provides a six-year resource plan to address annual base budget increases including general support increases of up to 5 percent, enrollment growth of 2.5 percent, student fee increases that may not exceed 10 percent, and other key program elements through 2010-11.  In exchange for this fiscal stability, the UC and the CSU committed to preserving and improving student and institutional performance in numerous program areas including program efficiency, utilization of system wide resources and student-level outcomes.  The resources provided through the Compact enable the UC and the CSU to accomplish their missions outlined in the Master Plan for Higher Education.

University of California

• $123.8 million increase (4 percent) for basic budget support consistent with the Compact. This funding will enable UC to enroll an additional 5,000 state-supported students.
• $31 million increase (1 percent) for core instructional needs including library material replacements, deferred maintenance and instructional equipment consistent with the Compact. This funding will enable CSU to enroll an additional 8,355 state-supported students.
• $56.4 million increase (2.5 percent) for enrollment growth consistent with the Compact. This would fund an additional 5,000 state-supported students.
• $124.8 million increase in fee revenue associated with the Regent's planned 7.4 percent mandatory fee increase for undergraduates, graduates and professional school students. Fees for certain professional programs will increase between 7 percent and 19 percent. One-third of the revenue generated by the fee increases for undergraduate and professional programs and 45 percent of the revenue generated by the graduate fee increase would be set aside for financial aid.
• $10 million in one-time funds for costs associated with sustaining UC Merced operations for a total funding level of $20 million (reduced from the $24 million in 2007-08 due to an agreement to phase down one-time funds as enrollments at Merced increase).
• $975,000 increase for the next cohort of 65 students for the PRIME Program, which targets prospective medical doctors for underserved populations.
• $11 million increase for annuitant health benefits.
• $970,000 increase for lease purchase payments.

California State University

• $116.8 million increase (4 percent) for basic budget support consistent with the Compact.
• $29.2 million increase (1 percent) for core instructional needs including library material replacements, deferred maintenance and instructional equipment consistent with the Compact.
• $70.1 million increase (2.5 percent) for enrollment growth consistent with the Compact. This would fund an additional 8,572 state-supported students.
• $109.8 million increase in fee revenue associated with the Trustees planned 10 percent mandatory fee increase for undergraduate, graduate and teacher credential candidates. One-third of the revenue generated by the fee increases would be set aside for financial aid.
• $124,000 increase (4 percent) for the Capitol Fellows Program consistent with the Compact.
• $8.6 million reduction to continue the decrease in retirement costs in the current year.
• $4.9 million reduction in lease purchase payments.

California Community Colleges
The workload budget for CCC local assistance is based on a statutory COLA factor, currently estimated at 4.94 percent, and a statewide enrollment growth formula that considers a variety of factors including adult population changes, unemployment and other factors.  The workload budget assumes a 3 percent increase in instructional workload for 2008-09.

• $171.9 million increase (3 percent) for enrollment growth for Apportionments. This would fund more than 35,000 additional full time equivalent (FTE) students. This level exceeds the minimum 1.5 percent change in the adult population, equally weighted between the 19-to-24 and the 25-to-65 age groups, pursuant to the statutory index included in Chapter 631, Statutes of 2006.
• $291.7 million increase for a cost-of-living increase (4.94 percent COLA) for general-purpose Apportionments.
• $28.5 million increase for Categorical Program enrollment growth and COLA (3 percent and 4.94 percent, respectively), including Matriculation, Disabled Students Programs and Services, Campus Childcare Tax Bailout, Apprenticeship and Extended Opportunity Programs and Services.
• $8.7 million increase to reflect anticipated lease-purchase debt obligations.
• $6.2 million reduction to reflect increased fee revenue and other workload adjustments.
• $139.8 million reduction to Apportionments to reflected estimated growth in local property taxes.
• $374,000 net increase for the Chancellor's Office state operations for standard baseline adjustments and an increase of $200,000 and two positions for workload associated with nursing and career technical education program local assistance increases resulting from the 2007 budget actions.

California Student Aid Commission
The workload budget for CSAC local assistance is driven by growth in students qualifying for Cal Grant entitlements, renewal grants for prior recipients, fee levels authorized by the UC Regents and the CSU Trustees, and other financial aid payments that result from grant authorizations determined in prior budgets

• $26.7 million increase over the revised 2007-08 level for anticipated growth in the Cal Grant Program, reflecting anticipated undergraduate fee increases of 7.4 percent and 10 percent at UC and CSU, respectively.
• $80 million additional increase for Cal Grants as a placeholder amount in the event the UC and CSU raise fees beyond the segments' anticipated fee levels described above. This amount is subject to adjustment after the governing boards take final action in context of potential reductions to balance the budget.
• $281,000 net increase in loan assumption payments over the revised 2007-08 level for workload change in the Assumption Program of Loans for Education (APLE), National Guard APLE, State Nursing APLE and Nurses in State Facilities APLE programs.
• Authorization for a total of 8,000 new warrants for the APLE program, 100 new warrants for the State Nursing APLE program and 100 new warrants for the Nurses in State Facilities APLE program. No new warrants for the National Guard APLE program are proposed.
• A net increase of $436,000 for state operations including standard baseline and one-time cost adjustments. This amount also includes an increase of $2 million and up to 11 new positions to enable the Commission to replace shared services assuming the sale of EdFund, the Commission's auxiliary non-profit loan guaranty agency that implements the state's federal student loan guarantee function. This augmentation is offset by a reduction of 6 positions and approximately $1 million associated with CSAC's Federal Programs Division which would no longer be necessary under the sale. Both adjustments are subject to adjustment in the spring when more is known about the timing of a sale, the details and actual resource needs.
• $331,000 in anticipated federal funds is proposed to fund the Cash for College program pursuant to Chapter 741, Statues of 2007.

Addressing California's Teacher and Nursing Shortages

• The Governor's Budget proposes an ongoing $2.7 million for CSU and $1.1 million for UC for the Science and Math Teacher Initiative. This effort provides additional funding to the CSU and UC to address the shortage of high-quality math and science teachers in our public schools. The CSU has committed to doubling its annual production of science and math teacher candidates to a total of approximately 1,500 and the UC has committed to quadruple its production to a total of 1,000 by 2010-11.
• $22.2 million ongoing for CCC, $6.3 million for CSU and $1.7 million for UC for the Nursing Initiative. This initiative provides additional funding to expand enrollments at the CCC, CSU and UC in order to meet the state's clinical nursing shortages.

Improving Career Technical Education
The Governor's Budget continues funding for the Career Technical Education Initiative to fund partnerships between colleges and public school districts to reinvigorate and expand enrollments in high-quality career preparation programs that will better prepare all students for high-demand, high-paying technical careers while allowing them to smoothly transition to postsecondary education.

• $58 million in 2008-09 for this purpose--$20 million in CCC's base funding for SB 70 programs as well as $38 million in funding appropriated by Chapter 751, Statutes of 2006. The SB 70 funding is reduced to $17.8 million, resulting in $55.8 million that will remain available for this effort.

Boosting Community College Success
The Governor's Budget also continues funding of the Community College Student Success Initiative. This initiative provides additional resources to help at-risk Community College students persist and succeed in achieving successful outcomes such as career technical education certificates, transfer readiness and degrees.

• The budget continues the redirection of $33.1 million in ongoing funds for improving student outcomes that are allocated pursuant to a funding formula and subject to accountability provisions that are under development as specified in Chapter 489, Statutes of 2007.

Transportation Research Initiative
This project will be done in continued collaboration with the California Department of Transportation and the Air Resources Board (ARB).  Land use and transportation interface is a critical element of the state's efforts towards mitigating climate change and greenhouse gas emissions consistent with Chapter 488, Statutes of 2006 (AB 32).

• An increase of $5 million from the Public Transportation Account to augment UC's multi-campus Institute for Transportation Studies (ITS), for a total of almost $6 million. This increase will fund ITS' development of integrated land use and transportation models that can measure the impact of actions by local governments on greenhouse gas emissions.

Proposed Budget Balancing Reductions
Total budget-balancing reductions for the Higher Education segments amount to $1.1 billion in 2008-09.  Of this amount, $649.4 million is for General Fund programs and $483.5 million is for Community College Proposition 98 local assistance programs.

• $331.9 million for the University of California. Of this amount, $32.3 million is allocated to the Institutional Support program (which includes campus administration and the Office of the President) and the remainder is unallocated to allow the Regents the flexibility to meet the reduction in a way that minimizes impacts to core instructional programs. It is anticipated that the Regents will address this reduction through a combination of fee increases, limitations on enrollment levels, increased efficiency and reductions to other existing programs, including research, student services, academic support and public services programs.
• $312.9 million for the California State University. Of this amount, $43.2 million is allocated to the Institutional Support program (which includes campus administration and the Chancellor's Office) and the remainder is unallocated to allow the CSU Trustees the maximum flexibility to meet the reduction in a way that minimizes the adverse impacts to core instructional programs. It is anticipated that the Trustees will address this reduction through a combination of fee increases, limitations on enrollment levels, increased efficiency and reductions to other existing programs, including student services, academic support and public services.
• $2.2 million for the Student Aid Commission. Of this amount, $1.6 million is allocated to the state operations administrative support budget and $637,000 is allocated to the California Student Opportunity and Access Program local assistance budget. Also, the number of new APLE warrants is reduced by 10 percent, or 800 awards, for a revised total of 7,200 awards for 2008-09. Policy changes for Cal Grants are addressed in the Other Budget Reductions section below.
• $1 million for the Community College Chancellor's Office state operations administrative support budget. This reduction is anticipated to reduce discretionary technical assistance service levels to districts for various categorical programs.
• $483.5 million for Community College local assistance. Of this amount, $291.7 million reflects a reduction to apportionments by eliminating the 4.94 percent workload COLA and $111.8 million reflects a reduction to enrollment growth. The remaining $80 million reflects similar reductions to categorical programs. It is anticipated that colleges will respond to the reductions by limiting low-volume course offerings and reducing service levels in various categorically funded programs. It is further proposed that the statutory COLA factor be changed to reflect the Consumer Price Index (CPI-W), consistent with K-12 education. This measure would adjust the COLA to 3.65 percent and better accounts for the underlying cost pressures on school budgets which are primarily wages. This specific change is subsumed within the overall reduction amounts for both apportionments and categorical programs.
• $1.1 million for the Hastings College of Law. Of this amount, $252,000 is allocated to the Institutional Support program and the remainder is unallocated to allow the Hastings Board the maximum flexibility to meet the reduction in a way that minimizes adverse impacts to instructional programs. It is anticipated that the Hastings Board may address this reduction through a combination of reductions to public and professional services, student services and academic support in order to preserve instructional quality and enrollments at or near the current year levels.
• $223,000 for the California Postsecondary Education Commission. It is anticipated that the CPEC will meet the reductions through prioritization of discretionary studies. Reviews of proposed new instructional programs and facilities from segments would not be affected.

Special Session Issues
The Governor has called a Special Session of the Legislature to immediately address the budget and cash shortfall. Included in the Special Session are the following proposals:

• A $40 million one-time reduction to CCC apportionments. The Administration will work with the Chancellor, Superintendent and other parties to identify one-time savings to mitigate this reduction.
• Delay $200 million in payments scheduled for July 2008 to CCC for the 2007-08 deferral of apportionments until September of 2008. This delay of deferral payments will help reduce the state's cash flow borrowing costs in the budget year and, thus, help avert a temporary cash shortage.