The deepening pandemic depression is going to have a profound impact on the University of California budget. Unprecedented unemployment, lagging state revenue, and massive campus losses associated with remote learning make it clear that we are looking at a replay of the 2008 crisis, at least. To stay up to date on the growing crisis, Continue reading “Austerity looms. What next?”
Category: State Budget
Report: Affordable Public Higher Education is Possible Today
A report this week from Reclaim California Higher Education (a coalition of faculty and student groups) makes the case that affordable (even free) higher education is within reach for California.
The privatization experiment has failed. The harm to a generation of hard-working, high-aiming young people is proven. It’s time to return to what works: the proven Master Plan for higher education in California. California, with its own resources, can afford to restore top-quality, accessible, affordable college and university opportunity to every qualified student. In fact, Californians can afford nothing less.
You can read a summary and download the entire report at the Reclaim website.
Jerry Brown Suggests Master Plan is Dated
Our previous post covered the Jan. 22 meeting of the Regents’ Committee on Educational Policy. As noted, there was discussion of the 1960 Master Plan for Higher Education, considered a major accomplishment of Brown’s father when he was governor.
Below is a link to Brown’s comments in which he suggested the Plan was now dated.
[youtube http://www.youtube.com/watch?v=3RmjI4gVync?feature=player_detailpage]
Tradition!
The Legislative Analyst’s Office (LAO) has issued a report on UC and CSU funding. LAO is usually viewed as a neutral agency. But it is a component of the legislature. So it tends to favor approaches that add to legislative control as opposed to, say, gubernatorial control. This report is no exception.
LAO seems to want to return to what it terms the “traditional” approach to funding, but with bells and whistles added to monitor legislative goals. The traditional approach seems to be one focused on undergraduate enrollment. But in fact the tradition – such as it is – has been to forget about tradition and cut the budget during state budget crises, in the knowledge that UC and CSU can raise tuition. Indeed, as the chart above indicates, these traditional deviations from tradition dominate tuition decisions.
The LAO is uncomfortable with the habit of the governor of just proposing dollar increases not linked to enrollment and then extracting some promises from the university to do this or that, e.g., to spend $10 million on online education.
It might be noted that since LAO chose to lump UC and CSU together, it might have discussed a sore point namely the fact that CSU, as a part of CalPERS, gets its pension costs taken care of by the state whereas the state likes to stand aloof from the UC pension and its costs.
You can read the report at http://lao.ca.gov/reports/2014/education/higher-ed-budgetary-practices/budgetary-practices-021114.pdf
In any case, there is much nostalgia for tradition, albeit with some uncertainty as to what that is. Sounds familiar!
[youtube http://www.youtube.com/watch?v=gRdfX7ut8gw?feature=player_detailpage]
7 Wasn’t So Lucky
The cash statement from the California state controller for the first seven months of fiscal year 2013-14 is out. Revenues are up about 1% from last year at this time. That gain is not very good. However, it may be largely due to an aberration last fiscal year when there was a surge of personal income tax revenue in January 2013. The surge seemed to have something to do with antics back then in Washington over fiscal cliffs, etc., which might have resulted in some tax changes (but didn’t). The current DC crisis de jour is the debt ceiling, but there are assurances from Republicans that it will be fixed in time. So there is no surge for January 2014 in evidence.
You can find the latest controller’s report at: http://sco.ca.gov/Files-EO/fy1314_february.pdf
The Resurrection?
[More in our Regents coverage. See earlier posts.] The Regents spent some time on the old Master Plan for Higher Ed. There was discussion, according to news reports, among representatives of UC, CSU, and the community colleges on better coordination.
…“This report shines an important light on the need to have a central body whose sole focus is guiding the Legislature, governor and our three higher education segments as we plan and build for the future,” (Assembly speaker John Pérez) said.
Full story at http://www.latimes.com/local/lanow/la-me-ln-college-reports-20140123,0,5215408.story
Um, does no one remember CPEC, which still exists in ghostly form as a website (see screenshot above), after the legislature cut its budget to zero? It was supposed to be the coordinator. So will it be revived?
It’s really not so hard to recall such things!
[youtube http://www.youtube.com/watch?v=H2iIUcUL71s?feature=player_detailpage]
She Sure Didn’t Bumble Her Meeting with the Bee
UC prez Napolitano had a meeting with the editorial board of the Sacramento Bee recently and, evidently, said the right things:
Editorial: Janet Napolitano is showing a clear-eyed view of UC mission
Published: Thursday, Jan. 16, 2014
UC President Janet Napolitano has her priorities for the university system in correct alignment; the question will be in the execution. In a visit to The Sacramento Bee’s editorial board on Wednesday, Napolitano showed she is a quick study…
Importantly, Napolitano was clear-eyed on the basic point that UC was “designed to build California,” and that its role in educating the children of California “has to be one of our primary missions.”
“We teach for California,” she said. “We research for the world.” …
Full eidtorial at: http://www.sacbee.com/2014/01/16/6075778/editorial-janet-napolitano-is.html
And, also from the Bee, there is this article which pretty much echoes the official UC approach of saying nice things about the governor but asking for more:
Janet Napolitano on Wednesday called Gov. Jerry Brown’s recent budget outline a “good starting point” for higher education funding in California. Meeting with The Sacramento Bee’s editorial board, Napolitano did not explicitly call for more funds, but said: “We’ll have a discussion about what else can the university do and what other needs that we have.”…
We couldn’t bug the room where she met the Bee’s editors but it sounds like a total lovefest:
Is there a Changing State Attitude Regarding the UC Pension? Reading Between the Lines
As blog readers will know, UC has had difficulties in getting the state to recognize that its pension liabilities were ultimately those of the state, just as CalPERS and CalSTRS liabilities are liabilities of the state. Thanks to the two-decade hiatus of contributions, the state seemed to forget about UC’s pension. However, there is beginning to be recognition that although you can say the pension is a liability of the Regents, in the end the Regents have no sources other than the state and tuition to deal with it.
We noted recently that in his budget document describing his proposal for 2014-15, the governor listed the UC pension and retiree health obligations along with those of other state plans. The Legislative Analyst’s Office (LAO), which at one time was adamant about the liability not belonging to the state, has not been repeating that position of late. Indeed, the LAO has just released its summary of the governor’s budget plan. It notes that the governor is trying to move to what can be seen as a block grant approach to UC (and CSU) funding, rather than one based on enrollments or particular programs. LAO complains that such an approach reduces control by the legislature. In citing examples of an alternative approach, the LAO says [page 30]:
For example, the state could allocate new funding for specific purposes such as a COLA, maintenance projects, or pension obligations.
You have to read between the lines to take this as a shift in attitude towards the UC pension. But LAO could have picked other examples.
The LAO document is at: http://lao.ca.gov/reports/2014/budget/overview/budget-overview-2014.pdf
And While We Await the Governor
The state controller has issued a cash report that more revenue to the tune of about $2.5 billion arrived in the first six months of 2013-14 than was projected in the budget last June. Blog readers will recall that the governor insisted on conservative projections of revenue.
Note that the really big revenues will arrive around (income) tax time in April. If you looked at the reserve in the general fund at the moment, as seen by the controller, it is negative $18.3 billion, covered by internal and external borrowing. As many have noted, California is heavily dependent on the incomes of those at the top end of the income scale and, therefore, financial market developments.
You can find the controller’s report at:
http://sco.ca.gov/Files-ARD/CASH/fy1314_january.pdf
UPDATE: Yours truly did await the governor. But the calchannel feed failed to operate properly for roughly the first 15 minutes of the media conference, by which time much of what the governor had to say was over. Yet another online education lesson. Eventually, calchannel will post the archive of the conference.
Budget Leaks Turn into a Flood of Biblical Proportions
We noted in prior posts that there were some leaks of the governor’s proposed budget for 2014-15, which was supposed to be unveiled on Friday. The leaks turned into a flood of Biblical proportions when first the Sacramento Bee published some summary information about the budget yesterday, said to come from the actual budget that the Bee had obtained somehow. Then what appeared to be the budget “summary” – actually a document of 271 pages – appeared online. And then it was announced that the official unveiling would be today at 9 AM instead of tomorrow, confirming that what was online was the real thing.
At the moment, the unofficial/official budget is at:
Presumably, the official documentation will soon be on the Dept. of Finance website. The governor and his finance director generally are the presenters at the media event in which the budget is unveiled. (An advance leak/flood of this type and then a resulting hurried-up media event occurred once under Schwarzenegger.)
First, let’s start – based on what’s currently posted – with the UC news. Two versions of general fund payments to UC appear in the summary document. My guess is that the version with somewhat higher payments to UC included the debt service deal made with the state. (UC has a better credit rating than the state and can borrow at lower interest rates. UC assumed state debt for some past facility obligations and the refinancing saves the state some money.) Version 1 (page 35) shows a 5.7% increase over the current fiscal year; version 2 (page 37) shows a 5.5% increase. There is a lot of language about higher ed needing to be more efficient and innovative – a previous gubernatorial theme. The budget proposes a $50 million innovation fund for all three segments of higher ed to be controlled by a committee involving all three segments plus the Dept. of Finance. Alert #1: Some folks might get nervous about that type of curriculum intervention.
Alert #2: As prior leaks have indicated, there is a lot in the budget document about paying down debt. At one point, there is a chart (page 4) which includes the UC pension and retiree health care unfunded liabilities as part of state debt. This is a BIG DEAL since the Legislative Analyst keeps insisting that the UC retirement unfunded liability is not something for which the state should be considered liable. If the governor and the Dept. of Finance now say that it is a state liability in an official document, that assertion should close the issue. (It won’t, of course, but progress has been made.)
As for the budget itself, it continues the general miasma of state accounting. Yours truly will await the governor’s media conference. But for the moment, let’s focus on the reserve in the General Fund. At the end of last year (June 30, 2013), the state controller put the reserve on a cash basis at MINUS $2.5 billion. The governor, on an accrual basis, put it at PLUS $872 million and now says it was actually PLUS $2.5 billion. No reconciliation between cash and accrual is provided. There is no doubt that with Proposition 30 and the improvement in the state economy, the budget situation has improved. But absent a reconciliation, the suspicion has to be that for cosmetic reasons, the governor wanted a final positive number in the reserve at the end of 2012-13 in his version of the budget – and he got one.
There is much focus in the new budget proposal on creation of a rainy day fund. Of course, the reserve is a rainy day fund (when it is positive) but both Brown and – before him – Schwarzenegger have liked the idea of carving out a kind of additional reserve and labeling that one the rainy day fund. That’s fine, but a reserve is a reserve is a reserve.
If we use the governor’s accrual version of a reserve, he expects to end this year with $4.2 billion in the reserve (June 30, 2014). A year later (June 30, 2015), he proposes in his budget that the reserve plus rainy day fund will total $1.9 billion + $1.6 billion = $3.5 billion. (Page 14) Note that $3.5 billion is less than $4.2 billion, so if the total reserve (including the rainy day fund) is declining, expenditures have to be exceeding revenues, something that ordinary folks would call a deficit. I doubt the word “deficit” will be uttered by either the governor or the finance director. And the governor would say he is paying down past debts that have accumulated to the tune of $11.8 billion in the proposed budget, both to Wall Street (the Schwarzenegger Economic Recovery Bonds) and internally, e.g., debt to K-14 under Prop 98. (Page 9) There is, however, ordinary debt service and discretionary debt service. The Economic Recovery Bonds have to be paid off unless the state were to default. Some of the other internal debts are more “adjustable.”
Stay tuned for more after the media conference.
And finally note that the mishaps in getting out the budget – where a few modest leaks earlier in the week have now become an online sea – may be a bit of online education for the governor. An interesting ride in the last 24 hours, thanks to the governor, in any case:
[youtube http://www.youtube.com/watch?v=i5tIHtbctFQ?feature=player_detailpage]