Â鶹´«Ã½ÉçÇøÈë¿Ú

Â鶹´«Ã½ÉçÇøÈë¿Ú’s leadership team worked very hard to minimize the need for reducing administrators/staff by eliminating vacant positions, executing a “hiring chill,” decreasing the deficit through the utilization of Division balances, launching the Utility Conservation Program, completing extensive operational cuts, and offering a Voluntary Separation Incentive Program (VSIP). Unfortunately, even with these efforts, the university continues to have a significant budget deficit that can only be closed with personnel reductions through the elimination of positions, including some positions currently filled by our colleagues.

The university has experienced a nearly 26% decline in enrollment since our peak enrollment in 2016, which was never fully addressed in previous fiscal years through budget adjustments. 

In the fiscal year 2023-24, the university faced additional circumstances that added to the structural deficit, such as enrollment that fell below our target from the Chancellor’s Office, increased operational expenses such as increased health insurance, utilities, and other mandatory costs as well as salary increases that lacked centralized or state-funded allocations to fully support them.

In 2024-2025, we are projecting additional increases in insurance, utilities, benefits, and other mandatory costs. Right now, we are projecting by 2025-2026, the possibility of approximately a $20 million deficit in our permanent base operating budget.

This permanent base operating deficit has already had a big impact on our reserves. On June 30, 2023, we began with $67 million in reserves. At the close of this fiscal year, we are projecting our operating reserves decreasing to roughly $59 million. If we continue on this trajectory, we could be as low as $29 million by the end of 2025-2026. 

For fiscal year 2024-2025, with the increase in compensation and benefits alone, our salaries and benefits could increase from 75% of our total budget to upwards of 83%. That is followed by financial aid at about 10%, utilities, supplies and services and other operating expenses.

The operating budget refers to funding for our annual operations to cover expenses like salaries, benefits, utilities, and so forth. These are ongoing annual expenses. Funding is a combination of state allocation (through the System office) and student tuition.

During good budget times, we are able to place unused funds into a reserve that functions like your savings account. During the COVID-19 pandemic, travel, entertainment, and other expenses were lower, generating savings. If a position is unfilled for a period of time, that generates salary and benefit savings. In addition, the federal government allocated emergency funding to colleges and universities during the pandemic, so some of our current reserves resulted from that.

A reserve is the university’s savings account. Once the money is spent, it is gone. There is no recurring source of replacement for these dollars. Holding funds in reserves is essential as it will allow the university to respond to emergencies that arise, like the power outage we experienced in February 2024. Thus, reserves should only be used as one-time funding and not for ongoing, operational costs such as utilities or salaries or other costs that will reoccur yearly.

The following achievements reflect our progress and ongoing commitment to improving the financial stability of Â鶹´«Ã½ÉçÇøÈë¿Ú.

• Reduced current budget deficit with the elimination of vacant/open positions.
• Continued a hiring “chill,” meaning we only fill critical vacancies.
• Further decreased budget shortfall with surplus balances from the Divisions.
• Eliminated a sports team.
• Scaled our course sections to measurable student enrollment and demand.
• Reviewed low-degree conferring programs, as directed by the CSU system, with plans to discontinue a number of programs.
• Advocated for a reduction in the CSU reallocation plan from 5% to 3% for one year. (It will return to 5% in the next AY.) 
• Created administrative “hubs.”
• Implemented strategic budget reductions in FY 2023-24 based on enrollments and the cost of instruction.
• Implemented a Utility Conservation Program to reduce energy consumption and utility costs.
• Implemented a Voluntary Separation Incentive Program (VSIP) with back-fill of critical positions only.

• Continue enrollment management strategies.
• Reactivate the University Budget and Planning Committee.
• Develop a campus-wide reorganizational plan.
• Plan for further reductions in 2024-2025 to stabilize reserves.
• Explore revenue-generating opportunities.

For the next two years, our budget will be influenced by several factors, including enrollment in future years, state allocations, the systemwide Enrollment Target Budget Reallocation Plan, and the Governor’s Compact. Based on assumptions around each of these factors, it is highly likely that if we were to maintain the same level of spending during the Academic Year 2024-25 as we had in the Academic Year 2023-24, we would continue to have a growing structural budget deficit.

The university leadership team is finalizing the 2024-2025 budget plan so that we can scale our academic and administrative operations to our resources and maintain a stable, balanced budget that allows us to fulfill our university mission and our goals.

On July 1, 2024, Governor Newsom signed the 2024 Budget Act, bringing mixed news for the CSU system.

A 5% increase in ongoing state funding for 2024-25 (about $240 million) is appreciated despite the state's budget deficit. However, there is a one-time $75 million cut, resulting in a net increase of $165 million for 24-25 rather than $240 million. For example, with $240 million in the system, Â鶹´«Ã½ÉçÇøÈë¿Ú would have received 3% or approximately $7.2 million in new state funding. Instead, with the $165 million net increase, Â鶹´«Ã½ÉçÇøÈë¿Ú will receive around $5 million in new state funding. This will not fully cover mandatory expenses like increases in salaries and benefits. Still, we need to recognize and appreciate that we are receiving an increase when other state agencies will receive an up to 7.95% cut in 24-25 (this fiscal year).

Our new state general fund and tuition revenue cannot fully support our many operating costs in 24-25. As a result, the CSU faces a projected $218 million budget gap for the year.

Also, the state signaled their intent for further reductions in future budget years.

• The final budget includes a 7.95% reduction ($397 million) to the CSU’s baseline budget in 2025-2026.
• The compact will be deferred in 2025-26 and 2026-27. Whereas the 2-party legislative agreement included a compact deferral for 2025-26 to 2026-27, the final budget includes an additional deferral of compact funds for 2026-27 to 2027-28.

The $75 million one-time reduction and significant CSU operational costs will result in an estimated $218 million funding gap systemwide for 2024-25, likely requiring cost reductions and the use of one-time designated balances and reserves this fiscal year.

We cannot fully foresee future deficits as California’s budget fluctuates, contract negotiations and enrollment are unpredictable, and inflation pressures continue to grow.

Â鶹´«Ã½ÉçÇøÈë¿Ú's primary sources of revenue are State appropriation, higher education fees, and other sources of revenue. Only 30% of the university’s operating budget is funded by tuition, and of that, approximately 30% of those tuition dollars directly fund financial aid. So, while tuition increases are necessary to support a balanced budget, they are not enough to fill the university's structural deficit.

During this difficult time, we will use all our university values of compassion and community and a focus on our mission to ensure that we take care of each other and serve our students. We ask that each member of our community remember that less is less, and we will need to provide grace and practice patience with our colleagues as we move through the summer and early fall while we continue reorganization and restructuring. With fewer students and fewer employees, we can fulfill our mission even with a smaller organization. We continue to use data to support decisions and to ensure existing students are served.

The College of Health reorganization initiative is designed to reorganize existing departments into a new entity. The president convened two inclusive task forces to study this concept, and both recommended moving forward with the initiative. Please see the Fifth College Feasibility Task Force Report, June 2022,  and the College of Health Implementation Task Force Report, May, 2023. We are committed to completing this reorganization in a budget-neutral manner. The healthcare employment sector continues to grow and evolve, and it makes sense that Â鶹´«Ã½ÉçÇøÈë¿Ú organizes to better serve our students’ career objectives and to serve community needs.

University buildings are planned over many years, even decades, to replace obsolete facilities and to add space to accommodate new programs and teaching methods. Funding for new facilities does not come from our operating budget, but from a separate pool of state funds specifically dedicated to new construction only. We also rely on donor funds for portions of new constructions. In fact, the Braddock Center for Science and Innovation (formerly the Applied Sciences Center) was constructed using $33 million in donor funding. We recognize the CORE (fully state-funded) has reinvigorated Â鶹´«Ã½ÉçÇøÈë¿Ú in many ways. We expect the Braddock Center will do the same for all our students who complete science and mathematics courses. In addition, new buildings are more energy efficient. The CORE achieved LEED gold status, and we expect the Braddock Center to achieve that level as well.

We will continue to finalize organizational changes throughout the summer and fall and will provide updated organizational charts as they are available. For employees who are represented by collective bargaining units, we will follow all contract provisions, working closely with CSU System labor relations professionals. We also commit to working closely with our Academic Senate and other university groups and to provide frequent communication and transparency.