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Frequently Asked Questions

Questions about overall budget process

1.     Where does CSUSM get its funding?

·         Sources of revenue

o    85% ~ Operating Fund – aka General Fund (“permanent” funds)

§  State of California Appropriation

§  State University Fees

o    1% ~ Lottery Fund (“fiscal”, one-time funds)

§  California Lottery sales

§  CSUSM has a process for awarding/allocating Lottery Funds

o    11% ~ Proprietary Funds (“fiscal”, one-time funds – designated for specific uses)

§  Student Fees

§  Self-support operation

§  Parking, Extended Learning, Clark Field House, etc.

o    3% ~ Cash Trust Projects  (“fiscal”, one-time funds – designated for specific uses)

§  Miscellaneous student fees

§  Student Newspaper, Associated Students, Inc., Instructionally Related Activities, Credential Evaluation Fee, Orientation, etc. 

·         Operating Fund/General Fund

o    This is the Chancellor’s Office allocation based on full-time equivalent student (FTES) targets set for each CSU campus, generally negotiated annually in the fall for the next academic year by the Chancellor and the Presidents based on a variety of factors, including the “Governor’s Higher Education Compact” (see below)

§  Incremental budget allocation (new/growth funds) is calculated on new/growth FTES. For FY 2007-08, the Marginal Cost General Fund Support Allocation for the incremental budget allocation was $9,967 per new/growth FTES; however, a deduction is applied by the Chancellor’s Office as an offset for the State University Fee collected by the campus. Hence, the growth funds allocated to the campus cannot be calculated simply by multiplying the growth FTES by the Marginal Cost.

·         “Governor’s Higher Education Compact” (aka, “Governor’s Compact”) is an agreement between Governor Schwarzenegger, the University of California, and the California State University, for the period of FY 2005-06 through FY 2010-11. Funding commitments in the third year and beyond reflect the belief at the time the contract was negotiated (during the last economic down-turn) that the State would return to a position of fiscal health based on moderate economic growth.  It provides

o    Basic Budget Support:  The State will provide a General Fund increase of 3% to the prior year's base in both 2005-06 and 2006-07.  Beginning in 2007-08 and through 2010-11, the State will provide a General Fund increase of 4% to the prior year's base for basic budget needs including salary increases, health benefits, maintenance, inflation, and other cost increases. 

o    Core Academic Support Needs:  In 2008-09, 2009-10 and 2010-11, the last three years of this Compact, the State will also provide an additional 1% increase to the prior year's base to address the annual budgetary shortfalls in State funding for other instruction and research support for core areas of the budget critical to maintaining the quality of the academic program—including instructional equipment, instructional technology and libraries—and for ongoing building maintenance.

o    Enrollment:  UC and CSU enrollment plans project enrollment increases of approximately 2.5% per year through the end of the decade.  This growth rate represents an increase of 5,000 students annually at UC and 8,000 students annually at CSU.  The State will provide funding for this enrollment growth at the agreed-upon marginal cost of instruction as adjusted annually. 

o    Student Fees:  Consistent with the Governor’s proposed student fee policy, UC and CSU may decide that fee increases of up to 10 percent are necessary to provide sufficient funding for programs and to preserve quality.

The Compact is available at the following url:  http://www.calstate.edu/BudgetCentral/110504compact.doc  

2.    Do the State appropriation and student fees cover CSUSM’s annual expenditures?

Unfortunately, no.  However, the campus receives fiscal (one-time) revenue from a variety of sources that enable us to meet our obligations each year (see various funding sources listed in #1 above).    

During the last budget down-turn of a few years ago, to avoid workforce management measures and to distribute the expenses related to the mandated implementation of the Common Management System (CMS/PeopleSoft) the campus made a decision to create a permanent fund budget gap, which would be (and has been) covered on an annual basis with fiscal funds – we’ve ended each year fiscally sound. The campus was on an aggressive FTES growth trajectory, and a multi-year budget model was developed to plan for closing the gap over a few years’ period of time. However, with the current State budget crisis, and the increasing costs of mandated expenditures (salary increases, benefits, utilities, etc.), the plan for closing the gap has been impacted significantly.

If we don’t receive enough from the State and fees, how do we cover expenditures?

By sound management of our financial resources at all levels of the campus community, from faculty and staff members to managers and executives, we are able to cover the annual expenditures that exceed our State and fee revenue by a variety of ways (we do not borrow funds to cover our operating expenses). Some of these methods include:

·         Positive fiscal (one-time) year-end balances carried forward from the prior year, either via the “University Sweep” process in prior years, or at the Division/Unit level for FY 2007/08 year-end balances (see explanation in #5 below)

·         Salary savings from vacant positions

·         Use of fiscal (one-time) funds to cover permanent needs on an annual basis 

4.    Can you explain the difference between fiscal/permanent?

·         “Permanent” funds ~ Operating/General Fund allocations from State appropriations that adjust the permanent base budget (increase or decrease). All permanent faculty and staff positions require “permanent” funds. Additionally, often “permanent” funds are allocated to support on-going operating expenses, such as telephone, travel, office supplies, adjunct lecturers, student assistants, subscriptions and dues, etc.

·         “Fiscal” funds ~ One-time funding that does not increase or decrease the permanent base budget. Fiscal funds may be used on an ongoing basis to fund ongoing operating expenses (telephone, travel, adjunct lecturers, student assistants, etc.). A couple examples of fiscal funds include

o    a one-time allocation for a designated project that will occur in a fiscal year (e.g., WASC accreditation visit, remodel of office or classroom space,

o    salary savings realized from a vacant position (unpaid salary that accrues when a position is vacant)

 I’ve heard of something called “sweeps”; can you tell me what they are?

This is the university-wide process of identifying all unexpended Operating Fund balances at the end of a fiscal year. 

In an effort to provide additional ways for Divisions and units to mitigate the FY 08/09 budget reductions, President Haynes has suspended the University Sweep of FY 2007/08 year-end balances to allow management of any remaining balances at the Division/Unit level.

In the past, these balances have been transferred to the University Fiscal Reserve and carried over into the next fiscal year to address future priorities, or used to fund specific university strategic initiatives.  This process was implemented to ensure that the overall position of the university's budget is sound.  Each division could request sweep exemptions for certain funds (typically funds legislated or mandated by CSU Executive Orders to be used only for specific purposes). 

6.    What are “campus-wide activities?”

“Campus-wide activities” allocations benefit most (if not all) of the campus. At the time the budget is initially allocated, funds provided for compensation increases, employee benefits, Common Management System (PeopleSoft Implementation), Student Financial Aid and the University Fiscal Reserve are placed in “campus-wide activities”. 

“Campus-wide activities” maintains two centralized employee compensation pools that provide funding for bargaining unit driven compensation increases and employee benefits. No actual expenditures are recorded in the pooled program accounts – rather, budget transfers are made appropriately throughout the fiscal year to fund actual bargaining unit driven compensation increases and benefit costs. By the end of each fiscal year, funds in the benefits pool and the compensation pool have been distributed to individual units (see explanation of each pool below in #7 and #8). The compensation pools are accounted for in “campus-wide activities” until they are allocated.  The President has financial oversight responsibilities for all campus- wide activities programs and assigns program administrative duties to appropriate divisions.  

7.    What is the “benefits pool?”

The “benefits pool” might be considered as a reservoir of permanent funds from which fiscal (one-time) allocations are made to individual units on a monthly basis to correspond with the monthly benefits expenses associated with the salaries paid from the unit account (health, dental and vision insurance premiums, employer’s state and federal tax contributions, employer’s retirement contribution, etc.). These transfers do not impact the unit’s base budget – it’s a net zero sum transaction for the unit. The benefit funds associated with a unit’s payroll are not available for discretionary use by the unit. Obviously, our benefits package is critically important to each one of us, and the pool must be maintained at an appropriate level to cover the related expenses. Based on historical data of the cost of employees’ benefits, we calculate that the “benefits pool” should be maintained at a level of funding equal to 37% of permanent employees’ annual wages.  The pool is monitored by the University Budget Office, and adjustments to the funding level are made annually to ensure adequate resources are available to cover expenditures. Generally, the Chancellor’s Office allocates funds to cover projected increases in benefits pools expenditures (increases in insurance premiums, etc.). However, in FY 2008-09, the campus must bear the cost of these mandated increases without any additional new funds, in fact, from current resources that are being reduced. 

8.    What is the “compensation pool?”

When collective bargaining units and the Chancellor’s Office have negotiated employee salary increases (either general salary increases, GSIs, or service salary increases, SSIs, etc.), the typical practice is for the Chancellor’s Office to allocate to each campus funds to cover the expense of the increases. This allocation is calculated based on the terms of the increases and on the prior year’s payroll. This lump sum is allocated to the “compensation pool”. Usually the allocation is inadequate to meet the need and the campus is responsible for covering the difference with existing funds since the sum of the salaries used for the calculation is  based on wages earned two years’ prior. For FY 2008/09, due to the State budget crisis, the Chancellor’s Office will not be allocating any new funds for compensation increases, and in fact, is reducing our permanent Operating Fund from the FY 2007-08 level. Therefore, the campus will be responsible for fully funding any collective bargaining unit negotiated salary increases using our current resources (after reduction).

From the compensation pool, regardless of the funding source (Chancellor’s Office or campus), the Budget Office processes permanent budget transfers to each unit to increase the salary lines for each filled permanent position per the appropriate collective bargaining agreement. Hence, by the end of each fiscal year, the funds in the compensation pool will have been completely and permanently distributed to individual units on campus.

Temporary positions receive the negotiated salary increases as well; however, the unit is responsible for funding the increase rather than the compensation pool.

I hear the campus has some reserves.  What are they, why do we have them, and how are they used?

The University Reserve is a contingency reserve of permanent and fiscal funds.   It is based on a target of one percent (1%) of the State Support portion of the Operating Fund, and is set aside for unforeseen needs during the fiscal year (for example, costs associated with managing the campus response to the 2007 October wildfires, etc.). The President oversees this reserve and determines which programs and items to fund. For consideration, requests for funds from the University Reserve must be submitted by the Provost or a Vice President.

In addition, the President, Provost, and Vice Presidents each maintain a very modest Division Reserve of permanent funds to meet unforeseen needs during the fiscal year.

For the most part, funding is allocated from a reserve on a fiscal year basis. All campus reserves are maintained at a very modest level, and there is a long-term goal to increase each to a level more in line with general budgeting practice 

10. What is the process for deciding budget allocations each year?

The overall process – from the Governor and State Legislature to the Chancellor’s Office to receipt of the campus allocation – is a quite lengthy, complex and political process that takes about 15 months. A timeline explaining the entire process is available on the University Budget Office website (see “Budget Tools, CSUSM Budget Cycle Calendar”):  http://www.csusm.edu/budgetoffice/index.htm

The decision-making process for campus allocations includes the following steps: 

·         (Fall) President’s Cabinet acts as a planning council and reviews planning benchmarks and  discusses and recommends to the President future directions and priorities for the campus

·         (Fall/early Spring) Each Division, under the leadership of the respective Provost/Vice President, prepares budget requests (or reductions, as is the case this year) linked to the University’s Strategic Plan

·         (Early Spring) Council of University Strategic Planning screens budget request to ensure all proposals are clearly tied to the strategic priorities of the campus

·         (Mid-Spring) University Budget Committee (UBC), an advisory body to the President, reviews, analyzes and prioritizes budget requests in support of campus strategic goals and objectives, and from a multi-year budgeting model perspective and prepares a recommendation that is submitted to the President and the President’s Executive Council

·         (Late Spring) President’s Executive Council reviews UBC’s recommendation and makes a recommendation to the President

·         (Late Spring/early Summer) President makes final decision regarding budget allocations

Questions about current budget situation

1.    What is driving our campus’s current budget reduction discussion?

California is facing a projected 2008-09 $14 billion budget deficit. This is driving our campus’ current budget reduction discussion. Governor Arnold Schwarzenegger has proposed a $312.9 million cut to the California State University budget approved by the CSU Board of Trustees for the 2008/09 fiscal year. The proposed budget fails to fund access for 10,000 students, as well as $36 million in mandatory costs including employee health benefits and compensation agreements for CSU faculty and staff.

In addition to the campus deficit caused by the state budget deficit, each division has structural deficits that may need to be taken into account as they plan for next year. 

2.    What method(s) are we using for deciding how reductions will be made?

The President has given the following charge to the University Budget Committee (UBC):

Based on the Divisions budget reduction scenarios presented to UBC, prepare and submit recommendations to the President and Executive Council that support student success.

Each of the five divisions (President’s Office, Academic Affairs, Student Affairs, University Advancement, and Finance and Administrative Services) has been asked to take an 8.15% reduction from their FY 07-08 permanent revenue. Academic Affairs units based their reduction plan on a 7.5% target and the balance will be handled at the division level. For each of the reductions, the Division described the impact on student success.

The budget reduction plan for each Division, and the units within the Division, were developed during conversations with members of the units to determine best approaches to this campus-wide issue.

 Are there any principles guiding our budget reductions?

The budget discussions are guided by focusing on student success. Budget decisions are measured by the impact on student success relative to:

·         Providing courses and support necessary to achieve our learning goals.

·         Graduating students in a timely manner.

·         Retaining enrolled students through graduation.

  What is the timeline for deciding about budget reductions?

After the UBC makes its recommendations to the President and Executive Council, deliberations will take place throughout March. Some decisions, such as those relative to tenure line faculty search efforts, may be made sooner than other decisions that are not so time sensitive.

The State budget situation is very fluid at this time.  Decisions will be made and announced as the revenue picture becomes clearer. The Governor’s May revise will be an important point in the process, as well be the legislature’s adoption of the budget scheduled for July 1. Keep in mind that the legislature has consistently failed to deliver a budget on the statuary date, so it may be as late as early fall before a final budget is known.

 What impacts do we anticipate from budget reductions?

The anticipated impacts will be published once the reductions are decided.

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