Senate Budget and Fiscal Review Subcommittee No. 1 on Education

I'll call the Senate Budget Subcommitee one to order. We don't quite have a quorum. When a quorum arrives, we will call the roll, and we welcome again in public, in person, and via the teleconference service participation. We now have moved so that we do in person presentations by the major witnesses presenting, and then if we go to the public for statements in general, at the end of the hearing, we will do whoever is in the room that wishes to speak and then go to the teleconference service. Today is the first Subcommitee hearing on higher education for 2023. We had our overview on Prop 98 and K through 12 last week, and we'll cover the California State University system.

We are joined by CSU's chancellor, Jolene Kester, and representatives from the CSU, the Department of Finance, since I'm on a war against acronyms, the California State University system, subsequently referred to as CSU, also hear from representatives of the Department of Finance and the Legislative Analyst Office. And we have divided today's hearing into three issues. But we've divided the first issue into three. And when we get to the public comment, which will be after issue three, that is when we would take participant testimony.

And I will just announce now. The participant number is 877-226-8216 the access code is 621-7161 and the other thing is that we have a unique membership here where three people catch flights at the end and somebody drives 2 hours and 20 minutes if there's no traffic. And so we will, at the very outside, go to 01:00 today and attempt to end a little earlier to accommodate members trying to do that.

So I will, when we get to the public testimony, just decide whether we have time for detailed public testimony or whether it's just name an organization and a brief statement about what you support. So we will figure that out. So with no further ado, we will move to issue one a, which is the state of CSU. It's the core operations. We have Jolene Koester, the interim chancellor of California State University.

And we also will have Jennifer Louis, the Department of Finance, Lisa King from the legislative analysts. And available for questions as well will be the beardless Ryan Storm from the California State University system. So let me welcome the interim chancellor, and the floor is yours. And I think we will hold questions until everybody has spoken. And I see that a quorum has arrived. So just before we recognize the chancellor, let's call the roll.

[Roll Call]

We have a quorum. Thank you very much. Then we'll proceed with the interim chancellor. Welcome to the Committee.

Thank you. Is this on?

It will come on in a minute if it's not on, so just let her rip.

Chair Laird, members of this subcommitee, thank you for the opportunity to speak with you today, and frankly, it's a Delight to be with you in person, so we appreciate that as well. My name is Jolene Kester, and I have the privilege of serving as the interim chancellor of the California State University system. Since this is my first opportunity to appear before this body and to meet some of you, allow me to begin with a few introductory comments.

It's been my honor to serve as the chancellor for less than one year. The California State University system, however, has been my professional home for more than 40 years. I served at two of the CSU's universities, Sacramento State and California State University Northridge. I served in a variety of academic and administrative leadership positions, including finally serving as 12 years, almost 12 years, as the President at Cal State Northridge.

Since I retired from CSUN in December 2011, I've maintained my engagement in public higher education by serving as a coach, executive coach, to literally hundreds of University presidents across the country. And I've had the privilege of working with a large number of California State University presidents. With that perspective and professional history, I agreed to return to the CSU as interim chancellor for one simple but pretty profound reason. I believe in the California State University.

I believe in its unique and transformative power. In the State of California, the California State University system transforms lives, transforms communities, and ultimately, it drives California's economic, but also very, very important to mark California's social prosperity. The CSU is an open escalator to opportunity. It is the nation's most powerful driver of social mobility. The universities in this system regularly appear at the top of national rankings for graduating economically disadvantaged students into well paying jobs.

The result is that, in many cases, a CSU education breaks generational cycles of poverty. And as for powering California's prosperity, we know that this state's highly educated workforce is the driver of what is projected to become the world's fourth largest economy. That workforce is California's business community's competitive advantage. As the nation's largest four year public University, the CSU fuels that workforce, fuels that competitive advantage at an unmatched scale. And we do so with a dynamic, incredible diversity.

One out of every 10 California employees is a California State University graduate. Now, through the pandemic. And yes, let me acknowledge, through significant times of transition in executive leadership, the California State University has continued to deliver on its mission to this state. We awarded 130,000 high quality, high value degrees in 2022, with graduation rates at an all time or near all time high in most of our universities and for most of our student groups.

So as an interim chancellor, my primary work has been to build and construct a policy structural, organizational glide path for the CSU's next regularly appointed chancellor. We want he she they to be positioned to accelerate the CSU's positive momentum in key priority areas. First and foremost, we're focused on advancing student success and educational equity. Secondly, we need to create safe and supportive environments for learning and discovery. Third, we have to reimagine our approaches to enrollment management and resource allocation.

And finally, we're looking at how do we continue to recruit, retain, and fairly compensate the excellent, diverse, world class team of faculty and staff that our students deserve to have. Before I move on to the 23-24 budget, a few other issues are top of my mind and I suspect top of mind for many of you as well. You have certainly heard news of enrollment challenges that face the nation's higher education institutions as well as those in this state.

System wide, the CSU projects that in this academic year, we will be 21,000 full time equivalent students. Let me translate to a percentage 6% below our funded 22-23 resident target. This is a system level issue. We are meeting it with a collective and coordinated system response. Let me say that that collective and coordinated system response has lowered that percentage number from our earlier projections in the fall of 2022, where we projected to be 7% under to the current number of 6% under.

So, as evidence of our collective resolve on this front, we've focused on not only enrolling new students and helping them retain optimal unit loads, but we have also redoubled our efforts to retain our continuing students. We've done that by providing additional academic program and support services as they are needed, and we are also strategically working to re enroll CSU students who left during the pandemic.

We have also launched an enrollment target and budget reallocation plan, which is an important part of what it is we are going to do to manage enrollment system wide. With the system reallocating resources over time from some of our universities to others, we intend to align resources with the reality of student demand, population demographics, and adjustments linked to enrollment trends that have existed at several of our universities for many years.

Another issue, top of mind for us is that the CSU strives to have greater long term fiscal predictability and sustainability. And you know and are aware that we have a multi year state budget compact with the Governor. The CSU's long term fiscal stability, however, must also include addressing tuition, fees and alternative revenue sources.

We established last summer a sustainable financial model workgroup whose charge is to explore with depth and creativity two aspects of our operations financially one, the cost of our operations and of student attendance on one side as well as on the other, all potential revenue options.

This group is going to issue recommendations that will allow the next chancellor to be better equipped to engage stakeholders and take quick action to adopt what we hope will be innovative long term solutions on the revenue and cost sides. With regard to mitigating the rising costs of attendance, a shared goal that we have with you and others in service to the State of California is to look at housing costs.

This is an increasingly formidable barrier for our students, particularly our lower income students, and especially true in the most expensive regions of our state. Although almost every region of our state is now becoming an expensive region. The CSU continues to meet our student housing needs by constructing student housing projects in the most fiscally responsible manner so that we can minimize the room and board costs. We are very appreciative that in recent years, the legislature has supported this goal through affordable student housing grants.

To date, the Higher Education Student Housing grant program has helped the CSU advance projects at nine of our universities, building a total of 3100 beds, with 2800 of those beds anticipated to be priced specifically for low income students. We currently have sufficient grant funding to support three additional affordable student housing projects, one here at Sacramento State, another at San Jose State, and the final one at the Stanislaus University. Need is quite acute as well at each of those institutions.

While we understand that the state faces significant financial challenges, we do want to note that if funding for these projects is deferred, we know that construction costs will rise, and as they continue to rise, the number of beds ultimately included will likely be reduced and in turn, we limit our ability to meet student housing needs. Deferral of the implementation of the student housing revolving loan program could have a similar negative impact on our students. We are appreciative of the governor's recent budget proposal.

January budget proposal. He honored his commitment in the multi year compact despite the state's recent financial challenges. This demonstrates the administration's firm commitment to higher education, and we see it as his unwavering support of the mission of the CSU, and we are deeply appreciative of that. The compaq's budget augmentation will allow us to advance many of the priorities I outlined a little while ago. But of course, and as always, the CSU stands ready to do more for our current and future students and for our employees, importantly, and for the communities we serve.

There are three areas of critical need. First, there is a need to provide competitive salaries and benefits so that we can recruit and retain faculty and staff who continue to support, inspire, and uplift the diverse and talented students that we have. We are committed to making progress in this area, but we must do so prudently and within the resources made available by this year's final state budget. We do not want to compromise. We cannot compromise our academic mission.

Our second priority would allow us to expand the work of Graduation Initiative 2025, which supports our broader mission to advance educational equity so that all students have the opportunity to earn the lifelong, life transforming benefits of a CSU degree. And third, we want to ensure safe, modern, sustainable facilities where our students can learn from that world class faculty and staff in a manner that allows modern approaches to teaching and learning to be celebrated in safe buildings.

Many of the buildings on the CSU campuses, more than half of them, frankly, are over 40 years of age, and they are in dire need of significant improvement. Chair Laird, other members of the Committee, on behalf of my Cal State University colleagues, we've brought several here so that we would be able to answer any questions you may have. Thanks for the opportunity to address you this morning.

Thank you for your service to the California State University as you serve in elected positions across the state, we welcome questions you might have. Please understand that today or at any time in the future, any of us from the California State University stand ready to answer questions, to engage in animated discussion, and to help continue to support this transformative University system that is California's University and continues to support California's economic and social prosperity.

Thank you very much. We really appreciate your statement. We know you're staying for two more panels, and hopefully the discussion won't be as animated as you suggest. And we'll take questions after we hear from our other two panelists. So we'll move to Jennifer Louie from the Department of Finance. Welcome to the Committee.

Good morning, Mr. Chair and members. Jennifer Louie with the Department of Finance. The 2023-24 Governor's Budget is first and foremost a student focused budget and continues to build upon the historic investments and maintains the multiyear compact agreement reflected in the 2022 Budget act. As part of the second year of the multiyear compact agreement, the 23-24 Governor's Budget provides a 5% base increase of 227.3 million ongoing General Fund to support University operations at the California State University.

Consistent with the commitments outlined in the compact agreement, the 5% base increase augmentation reflects the administrations and California State universities continual commitment to expand student access, equity and affordability, and creating career pathways in high demand industries and opportunities. The budget also proposes a shift of 404.8 million onetime general fund, which we shall discuss later in the hearing.

Appropriated for the upfront support of various capital projects on CSU campuses to being supported by CSU issued bonds, as well as the accompanying adjustment of the 27 million ongoing general fund to support the associated debt service for those bonds specific to those campus projects. With that, I'm happy to answer any questions you may have about the Governor's Budget proposals for the California State University. Thank you.

Thank you very much. And then we'll move to Lisa King from the Legislative Analyst Office. Welcome to the Committee. It's just nice to see everybody in person after two years of zooms. So glad you're here.

Thank you. I'm glad to be here. Good morning Chair and members Lisa King with Legislative Analyst Office. Our comments in the governor's proposal for CSU's base increase appear in your agenda beginning at the bottom of page 11. As you've heard us say in previous years, we think that the approach of providing unrestricted base increases to the universities does not lend for transparency or accountability.

This is because the governor's proposed funding is not designated for any particular purposes and there's no language ensuring that CSU would use the funds in accordance with its initial plans. We also think the amount of the augmentation, the proposed 5% could be revisited. Since the Governor and CSU reached their agreement, their compact last year, new information has become available both on CSU's operating costs and on the state fiscal condition, and the legislature may wish to incorporate that in its budget decisions for CSU this year.

Based on that information, the 5% base increase would cover, as the chancellor noted, many, but not all, of CSU's identified operating cost increases. In fact, if you turn to page four of your agenda, you can see what operating cost increases CSU would plan to cover within that 5%, as well as what additional costs it would not be able to cover.

To provide an example, the 5% would allow it to cover a portion of its proposed request for compensation pool increases, as well as some expected increases in employee benefits. However, it would not provide funding for covering inflation on nonpersonel costs, for providing funding for capital renewal projects and various other purposes. Based on our multiyear projections, this is likely to be the case throughout the duration of the compact. That is, the 5% increases are likely to fall short of fully covering CSU's operating cost increases.

If the Legislature wishes to expand CSU's budget capacity, one option it could consider in future years is supporting tuition increases. In the meantime, for 2023-24 we recommend the Legislature decide which of CSU's operating cost increases it wishes to prioritize. And then, rather than providing an unrestricted base increase, it could provide funding designated for those particular priorities. The total amount of funding could be more or less than the governor's proposed 5% based on the legislature's priorities and the state budget capacity. Thank you. I'd be happy to take any questions.

Thank you very much. I appreciate that. I want to lead off with some questions, but I know we have at least one new member, and I thought I would make a comment up front, because on page three of our agenda is the total expenditures. And I know when I first started, I wondered what the California State University Trust Fund was, that it basically washes through all the expenses for tuition, housing, parking, continuing education, and things that are more enterprise in nature.

And that the thing that really matters to us, that we're talking about today is the General Fund part there, because that's where we can do it. And I think I want to drill down a little bit first on something that just came up. And the CSU has the 5%. It has been talked about as unrestricted in these discussions, but the CSU has actually laid out where they want to spend that 5%.

And it seems to me the real question is whether or not we should be rather specific in agreeing to what the 5% is that CSU has laid out. And it would address the concern of the LAO if, in fact, we were doing that. And I don't know, procedurally, I think the nuance is that CSU could decide to change that if it's not incorporated in what we do in the budget.

And so the question is, do either of you have any advice on what we should do to maybe try to lock down what the 5% goes for? And does the CSU feel that you would want flexibility within that in case things change? Because it seems to me that the issue of the transparency, the 5%, could be addressed by ever, however we do that. And maybe I'll start with CSU and then go to the LAO. And if finance has a burning comment, of course we will recognize you.

Well, the CSU always commits itself to the value of transparency, both in our intended planning and in the actual details that demonstrate what it is we chose to do operationally. So let me say from the beginning that is the principle underlying what it is we will do. We would also, of course, like flexibility. The likelihood of us changing our priorities in terms of where we would spend the compact dollars are pretty small.

We have set as a priority and we have some absolute mandatory increases that we have to cover, health care premium increases, increases in required operational costs. Those have to be paid for. I would also say that we have made it a priority to fund enrollment increases and we need to next year be able to put dollars, which we hope will come from the compact to the universities in the state where we know we have the enrollment pressures. I'd be glad to explain the reallocation and realignment program that we're going to put in place.

I'm more concerned about the process rather than the specifics in the sense that you laid out how you want to divide the 5% and are you in essence willing to stick to that in some way or have us stick it with you, or is there something in there that is really a moving target, where you would argue for some measure of flexibility?

There's nothing that's a moving target. We would still argue for flexibility because life in the world changes frequently at the last moment. So we would appreciate faith and trust in the transparency with which we have pledged to act, not only next year, but with which we have acted in the past.

Let me ask the LAO, what do you think about the fact that they have laid out the 5% and you initially said lack of transparency, but they are trying to be transparent about the five. What would give you comfort in how we should act on dealing with the specifics they've laid out for the five?

Percent.

So in the budget, the language associated with the governor's proposed 5%, there isn't much specificity as to how CSU would use the funds. And that is primarily what prompted our comment that there isn't much transparency with this approach. By identifying how it would use the funds, CSU does add some transparency to that conversation. The Legislature can consider how these funds would likely be spent.

However, because there is no statutory language directing CSU to stick to that plan, there is still less accountability under this approach than if it were specified in Budget Bill Language what the priorities are to be supported.

Thank you. And the finance person is reaching for a microphone. I'm gathering that means you have a comment.

Thank you, Mr. Chair. Jennifer Louie with the Department of Finance. As I mentioned earlier about the multi year compact agreement intersegmentally with the California State University and the Administration, as part of the condition of the multi year compact, there were core principles as part of the agreement with the Administration and the California State University, as well as those principles align broadly with many of the Legislature's priorities for the segment, as well as recognizing the Legislature's role in evaluating the Administration's Governor's Budget proposal.

And with that in mind, the principles that are laid out as part of the multi year compact includes increasing access, improving student success and advancing equity increasing the affordability of a California State University education, increasing intersegmental collaboration for the benefit of California State University students, supporting workforce preparedness and high demand career pipeline opportunities, as well as providing access to online course offerings for the diverse California State University students.

And so, as part of those core principles, each year, we shall be evaluating through the multi year compact and through the duration of the compact for every subsequent increase as we moving forward through the duration of the compact.

And let me try to stitch together three very divergent comments here, because I appreciate that you'll be evaluated, but I sort of think the CSU could choose to do almost any of a number of things with its 5% and still meet what you just said. And I think the LAO is really calling for transparency. You are really trying to meet the transparency with the 5%. The question is whether or not we should give some flexibility in that.

So the real issue is also, I'm doing this for everybody, but we do have a new person, speaking about our process. What happens is that we will have weekly hearings until the first, at least through the last Thursday in April, and the Governor has put out his January 10 budget.

But what this process does is air it out completely and actually try to occasionally provide some guidance that we will hope he takes into, may revise when he locks it down.

And then we have to decide whether he took the advice totally the way we liked or whether we have to fiddle with it between May 15 and locking down the budget in June. And so I think that this just sets out a task that either in Trailer Bill Language or negotiations with the Governor, we have to address. Because I would think that we generally appreciate the transparency of CSU. The question is, what do we want to have in the Budget Bill Language?

And if there is flexibility, what flexibility do we want that doesn't take away from the transparency? And I think Mr. Storm is anxious to speak.

Of course I am, Senator, thank you for the opportunity to speak. I'm Ryan Storm, the Assistant Vice Chancellor for Budget work for Chancellor Koester. Of course, a couple of other things to keep in mind for the 23-24 year which we are discussing today. We have nearly every one of our employee groups, their union contracts are open for consideration and negotiation right now.

So obviously, when it comes to the final budget that you would be voting on later on this summer, we have to be able to address and balance our collective bargaining discussions and contracts with the amount of funding that you'd have available to you. So that's one of the things that, just as an example, one of those.

Well, you are walking into what my next question is going to be, and I think the answer to that next question may influence the outcome. And it's one of the things that I think is of concern to all of us, because in the next tranche of money that you say you wish you had to address different issues, there's $168 million to deal with the compensation issues in negotiations. And the interesting thing is the 5% is 227 million and then an additional 168 million.

And as good as I am in math, I would say that's probably somewhere above 3% and short of 4% of what the compact amount is. And you see, if it turns out that you're going to need all of that, and that is your first priority, and it displaces other things that are in your transparency of the 227 million that lays out how you want to spend the 5%. That's exactly the reason we want to see if there's a way to lock in the transparency.

But understand what might happen if there is flexibility. You're walking right into the LAO's arguments. If we direct where we think you have said you want to do the 227 million and you flip it because of labor agreements that happen. And that's not the total transparency that's being called for.

And I think that's the conundrum I am trying to outline in trying to figure out before we do Budget Trailer Bill Language and lock it down, because I think other people will speak, but I think we will really want the transparency. We won't want the unrestricted 5% so that we have a sense of what we are genuinely addressing if we appropriate that.

And I think just to speak to the Legislative Analyst and taking into account other things, the budget could get a little worse in revenues before May 15 or June 30, but it's clear that the 5% that's in the compacts does not address the full needs of the CSU in terms of just basic inflationary and costs.

And the thing that this is our one hearing before we come back and maybe do quick ones, because I think we're trying to understand priorities and if the worst comes to worse and we can't even keep the 5%, what's important there. And if you do the compensation package, it's going to be hard to do the enrollment if those are mutually exclusive and a binary choice.

And so that just sort of, without us talking too much about it, gets to the difficulty and what our overall issue will be in this. So let me just ask that question that I was going to get to and has partially been answered now, but you have 168 million that you project is the cost you will need to sort of deal with some of these compensation issues.

If you weren't going to get the 168 million, and it's not a near 5% transparency for the compact ask, what are you going to do? How are you going to handle that? Admittedly, if you don't want to reveal negotiating strategy, I understand that. But still, that's a big question for us in the budget.

Understand, the 168 million number that was used yesterday in some of the conversations that we had with you in your office is not a number that necessarily even meets all of our employee compensation needs. It's a number that we have identified as helping to meet those potential employee needs. What we have is a commitment that within the dollars of the compact, we have about 92.5 million that we have set aside for compensation.

That does not address all of our compensation needs, but it is money that we would direct toward those compensation needs. We have also pledged within the compact to direct the money identified for enrollment, to support enrollment. And we have to pay the additional costs of health premium costs, maintenance of new facilities, liabilities. So there's some elements of what it is we've pledged here within the compact that we're just restricted.

If we have to go beyond, in order to settle contracts, those numbers will have to come from current base University budgets.

Okay, I could go on. I have lots of things to ask, but I have other Committee Members here. I wanted to ask about the equity part of the graduation program and some other things, but I will let other people do questions. But I should say for the record, this is the reason last year, the Legislature wanted to go past the 5% and the compacts to try to deal exactly with this and not face this situation that we are facing now.

So let me allow for questions from my colleagues. Does anybody have any questions? Senator Ochoa.

I just wanted clarification on the housing component on there. You said you have three potential projects that needed to be.

We do have a housing item coming up.

We do. Okay, then I will wait.

But that'll give you a few minutes to think about how you're going to answer that question. Did you have any other questions?

No, I'm good.

Senator Smallwood-Cuevas

Thank you so much, Mr. Chair. And thank you for allowing the freshman learning curve. I appreciate that. And for the rich information shared to all of the presenters on the core operations, I was hearing this question about transparency and trying to make sure that we are covering all of the core costs and particularly the personnel.

As a graduate of the CSU system, as a person who has worked in higher ed, as a person who's worked with labor and community partnerships, I know how important the faculty and classified staff is to making sure that our universities operate without them. We have no institutions of higher learning.

And I feel we're going to have more conversations about the point that you were raising in terms of how do we ensure that we are creating a budget that doesn't result in us addressing the needs of those workers, and particularly in this time of incredible inflation, incredible economic uncertainty, and certainly a time where, in some ways, we're on the right path in terms of the graduation rates and what we're trying to accomplish.

We don't want to interfere with the progress that we're making by not having the personnel to help us meet our goals. I was looking in some of the sort of background information about 2022, and that there was a recommendation for $288 million to cover salary increases, but that recommendation was not fully adopted. And so I'm curious, the result, it looks like that there was some one time increases that were provided.

And I think you mentioned too Senator Laird that we're talking about a 3% sort of increase in wages. And I just want to say, given that I just spent $7.99 on a dozen eggs.

And just for the record, that it is between 3-4% for just dealing with their compensation increases across. It doesn't necessarily specify that it'll be a 3% increase in wages.

In wages.

I'm just saving them a lot of grief.

Got it. But there were, I know, with the California Faculty Association, for example, a tentative agreement was reached on compensation, and it includes some one time payments, but raises that included a 2.6% increase.

And I'm saying that 2.6, given the cost of living and given the fact that what I heard you say, the Chancellor say, that there's a question about whether we'll be able to have sufficient resources to ensure that the faculty will have the increases and the funding to cover all of those costs.

So I just want to stress how important the transparency is and how important it is that we ensure that whatever is being allocated, that we are providing the appropriate resources to have relevant raises that ensure our staff and faculty can weather the financial storms that we are in. So that's more of a comment than a direct question on that. But I do want to ask, how, then, are you all thinking about ways to ensure sufficient increases?

And particularly because there isn't still a clear step system that exists within the CSU. I'm curious about how you're creating the vehicle for addressing salaries. How are we coming in terms of developing our step system so that we can have a structure that is respectful of the workforce at our CSU campuses.

And then my third question is about equity, which I know you were getting to, and that reflecting back on a study that was done that looked at women and black and Latino workers, particularly non faculty workers. The union had done a study that showed that there was significant disparities when you looked at wages of non white workers compared to their white counterparts on the campus.

I think white women make up 5% less than white men in terms of the wage disparities, and non white men make up 3% less than white men and non white women nearly at 7% less. So my question is.

We say we don't have enough money to cover basic compensation. We don't have a step structure and a vehicle, when we do have that resources to ensure the faculty and classified non faculty staff is paid, and we have very deep racial disparity in the system.

So for me, transparency is important because those three points raises a lot of questions about what are the resources we need, how do we get there, and how do we ensure we're addressing some of these issues.

Let's start with the Chancellor and see if anybody else wishes to comment.

Yes, thank you very much, Senator. Let me try to group my comments directed toward the staff salary study, which you began your comments by noting that produced a result, a need of $287 million on the staff side to bring our staff salaries in alignment with comparison organizations. That staff study also, I think, includes some of the comments that you made in the closing aspects of your remarks related to equity issues.

And then let me address the references to CFA, and then let me close my comments by talking generally about the overall circumstances for employees. The staff salary study was jointly funded, proposed by the Legislature and the California State University system, and the Governor assigned that proposal. That happened before I became Chancellor.

So actually, at the first meeting that I served as interim Chancellor, that first board meeting, that report was presented, and I think Senator Laird referred to a link between that number and the Senate's ideal budget for the 22-23 year that included additional dollars for the California State University system. That money did not appear in the final budget, and clearly that lack of appearing in the final budget was a disappointment.

That's probably less of not a strong enough term for the CSU Administration and certainly for our employees. We are now in bargaining with CSUEU and with the Teamsters union, so I want to be very careful that I carefully speak about what is taking place at the bargaining table. The CSU has presented a salary step structure at that table, as has CSUEU teamsters as well.

There are varying opinions within those units around what that all means in the current state and what it might mean for us being able to come to an agreement for each of those unions and the other staff unions as well. But we are bargaining. We're bargaining in good faith. And as you have noted, we do not have enough resources, either in the current budget or the proposed budget, to meet that large number of the $287 million.

Nevertheless, we are trying to, with our labor union partners, come to some kind of an approach that honors the interests of the Legislature, the interests of our employees, and the imperatives presented in that staff salary study to create a step salary system. Ironically, for me, I was an Administrator in the California State University when we declared victory, when we eliminated the step salary structure.

So this has been a novel experience for me to come back in and understand the deleterious description of the consequences of that choice. I think it was about 30 years ago. So nevertheless, the commitment is to address over time if necessary, and through collective bargaining.

It's very, very important that we do this through collective bargaining with the faculty salary situation, CFA. In fact, in two subsequent years, let me make sure that I get this right.

In 21-22 and then in 22-23 faculty received 4% in the first year increase, 3% in the second year. The 2.6% that you referenced was for service salary increases, which again, through negotiation, went to some of those faculty members. So there was more increases than you were able to verbally identify for the faculty.

We have a faculty salary study that the CSU also commissioned subsequent to the staff salary study, and we will be presenting the results of that faculty salary study at our March board of trustees meeting. It will look at comparison institutions.

We've had a work group that had administrative folks on it, trustees and several representatives from the California Faculty Association. You are correct that there is not enough money in our current budget. I have said this once, I'll say it again.

Nor in the proposed 5% for us to fully fund the staff salary study. And we shall see what we learn from the faculty salary.

Will the negotiations continue through, I guess, further once the study is done?

Yes. Actually, we don't go to openers with CFA until May.

Okay, thanks for clarifying that. I want to just speak to the disparity piece in terms of the non faculty staff and what is being done around. I know some institutions use equity increases to address that. How are you all going to address that?

I'm unclear whether or not what you read to us is from the salary study itself or from some other analysis that was done by a smaller group. So I am loathe to respond directly until I'm certain that I know what I am responding to. So perhaps we could take that offline and I could have a chance, or my staff could have a chance to look at that and respond to you. I don't want to say something that is inaccurate.

Well, I'm happy to get the information back, but I think this is part of a reporting from the University and also some analysis that was done independently about the pay disparity between black, Latino and women workers within the CSU.

So I'm happy to get that information from you by those groups and to look at how those wage disparities are happening and what are some of the recommendations that you all have for addressing them.

Yeah, I am familiar with that alternative group that did the analysis. I haven't had an opportunity to carefully assess the rigor of the research, and that is why I would like the opportunity to have staff look at that before I respond. I would say the CSU values equity for not only our students, but for our faculty and staff.

And we will, at the bargaining table with our labor union employees, address those and agree on the steps that together we come to in a collective bargaining framework in order to address inequities.

Great. Well, I'll be happy to receive that data and to hear your responses to those.

And just before you move on, just for the record, provide the data to the Committee and we will provide it to every member.

Absolutely.

That's the way we usually operate. But I know who the first member will be that gets it.

Appreciate that, Mr. Chair. Appreciate that. So my next question that I have has to do with the enrollment prioritization, and I'm glad to hear that the enrollment is part of the proposed uses of the funding that you have and is being prioritized.

And I was just looking a little bit at the enrollment data and looking across the system in terms of demographics, and one of the things that struck me is how there is growth happening in just about every population in the state.

But when I look at black student enrollment, and particularly black male student enrollment, the numbers have just taken a serious drop off coming out of COVID into 2022. And I know that that's a common narrative across a number of our campuses.

But I think at CSU is the starkest because you have been doing the best in some ways with blackmail student enrollment. So my question is, it goes to the equity question, right?

There are certainly investments that are going to be focused on enrollment, but what are the ways in which we can address the fact that we've lost over 2500 black students in our system, and how do we bring that very hard to reach and also definitely historically hard to bring into the higher education system? What are the ways that you all are going to be addressing that deep decrease?

We have seen the numbers just as you have, and we have already begun pretty systematic efforts at a system level to increase and ensure black students' success. Let me describe briefly for you an effort underway after the CSU sponsored a pretty successful, a wonderful Juneteenth event last June.

For all of the CSU system. We have established a group, led a task force led by President Thomas Param at CSU Dominguez Hills and President Saul Jimenez Sandoval at Cal State Fresno on black student success.

They have a large group of individuals from across the CSU who have been tasked to look at the ways in which the CSU can become better a national leader in black student achievement and success.

They have been tasked with and asked to provide to me by the beginning of May a set of recommendations that can then be presented to various stakeholder groups within the CSU to advance student support through a variety of means across the CSU campuses.

I would also say, Senator, that each of our universities within the GI 2025 effort is tasked with essentially eliminating the equity gap within groups of students on our campus. So many efforts on individual campuses directed at the success of black students on those campuses will also be impacted through those efforts. Thank you for that question.

And one last question, and that's just on the ADT system, and proud to say that in my part of the state, CSU Dominguez Hills is one of the strongest in making sure that we have successful transfer system that helps to feed into the graduation rates. I do also want to note that there is, when we look at the graduation rates, there's a lot of disparity in terms of who is graduating at higher rates.

And again, looking at students of color, and particularly black men, who we have a long way to go in that effort. So I just wanted to ask a question about the Graduation Initiative and what are the ways that, again, on an equity framework, though we see it ADT working well, what are the ways that we can strengthen the graduation rates and particularly improving the graduation rates for black and brown students?

Let me just say I'm going to ask one of my colleagues from academic affairs, the Associate Vice Chancellor for Academic and Student Affairs, Nathan Evans, to join me and allow him to describe in more detail some of the efforts under the GI 2025, the Graduation Initiative, and the black student success effort, because he's tasked with leading those efforts on my behalf.

Thank you, Chancellor, and thank you, Senator, for that question. Maybe to rewind just a bit to the last part of your question regarding some of the very specific strategies in the agenda for today was a description of five equity priorities that the CSU system adopted a little over a year ago.

We found, as we worked through the years with the graduation initiative, if we look at our student demographics as they're changing to reflect California's population, if we solely focused on graduation rates, we would often lose sight of achieving a major part of the Graduation Initiative, which was the elimination of equity gaps.

But if we did the inverse, if we started from working through a lens of equity and targeted our approaches, we will ultimately be successful. The entire system, as our demographics have shifted.

So, for example, one of the first strategy is a reengagement and re-enrollment campaign, and that has been specifically focused on African American, Latinx, and Native American students that left the University during the pandemic. And so the priority was engaging those students.

Each of the 23 campuses we ensured had clear list of students that would fit that description. That was their priority, and they began working collectively as campus communities to reengage first and foremost those students.

And really what we found, maybe unsurprising, is students departed for a myriad of reasons. Rarely was it solely one. It was also less likely academic. It was other aspects of life that got, that interrupted their educational journey. So that meant that there really had to be a holistic approach to reengaging students, addressing financial issues, working closely with financial aid and other financial support.

It might be tutoring, it might be connecting them with other support services on campus, like childcare, transportation. And so just as one example, it has been a very targeted effort in reengaging first and foremost those students, particularly, as I said, Latinx, African American, Native American students, as the top priority in reengagement.

No, I appreciate that. And so that gives a little bit of some clarity on the enrollment question and the steps that you're taking. And I'm assuming that includes retention.

Yes.

Part of that effort is retaining the students.

Absolutely. I believe one of our subsequent panels will dive a little more deeply into enrollment. But when we examine sort of the changes that have occurred and has been mentioned, enrollment declines are a nationwide phenomenon in higher education at this moment in time.

But within our CSU context, our continuing students and changes in student behavior, again, for a variety of reasons, contribute to the largest share of our decline.

So modest declines in retention, but changes in student behavior in terms of the number of courses that they're enrolling in. And then better understanding the why, if it's economic constraints, in terms of a need to work, as you described.

For example, with inflation, all those types of things are factoring into sort of adjusting strategy to think about. First and foremost, retention, because that is the largest contributor to our enrollment shift over the past couple of years.

That's my last question, and I know we're going to talk about enrollment later, but if funding is based on enrollment and enrollment is reduced because of retention issues and the loss of, particularly the Latinx and black students, it just seems that that priority is so critically important. And just wondering, how do you maintain funding when you see your enrollment moving in that direction?

Thank you very much. Senator Ochoa Bogh has the very onerous task of having to leave to accept an award. So I'm going to let her ask her housing question out of order.

That's embarrassing.

No, getting an award is not embarrassing.

No, just saying it out loud is just embarrassing for me. First of all, I have to tell you I'm so excited to see you all in person, and I've always admired your voice and your demeanor in Zoom and you're exactly the same way in person. So it is a pleasure to meet you all. I cannot tell you I'm a little starstruck. I'm super excited to see you all in person.

I want to ask my question and when the time comes, you're more than welcome to answer it. But because I have to leave, I want to make sure that it's on the record. Just my first comments when it comes to housing and the concerns that I have with the deferred funding, just in general for the Department of Finance, as well as to let you know, I sit on housing. I'm the Vice Chair in housing.

I understand how housing is an incredibly important component of a student's experience in school, in higher learning and the concern that I have with the deferred funding when it comes to housing and how that will impact not just the students and the ability to enroll students because you have a requirement to increase your enrollment, but we don't have the housing then.

One, it impacts their ability to attend the University, and number two, it also has a direct impact on the cost of housing for the local communities. So that's a great concern because it has a ripple effect.

So I just want for the record, first to emphasize the importance, to make sure that we have the funding available and not delayed, but really focus on having that funding in order to build the housing necessary to accommodate those students at the University, especially when the state is requiring a certain level of enrollment for each University.

So for the record, I just want to express the importance, and we cannot afford to delay or to defer that component because the ripple effect on our students, their enrollment, their ability to afford college, their ability to stay in school, as well as the impact that it has on the local communities, on perhaps even homelessness. I mean, it is huge. So I just want to make sure that the Department of Finance understands.

For me personally, I think I'm not going to speak for my counterparts, but I truly believe that that would have a detrimental effect and impact on our students in the local communities and our housing in general and our ability to retain those students.

Was that as much a comment then.

Yes, more a comment.

And even though you're not speaking for your colleagues, I'm really in sympathy with a lot of it.

And then the other thing. Well, it was going to be a question, but I was reading while we folks were speaking and where my colleague was speaking, so I answered a lot of my questions, but I wanted to.

Make sure that you got this on the record.

Okay. Thank you very much. And I know Senator Min had what he characterized as a brief question, which generally means there'll be a long answer.

Yes, please.

I have a brief comment and a brief question. I used to be a Professor in the University of California system, but I've always felt that the CSUs are really critical for our education higher ed plan and that, unfortunately, you all get too overlooked in our budget too often.

And I think that was true of the last couple of years where I know this particular Subcommittee did try to push for much more funding than you all received. And so I was disappointed to see the final results.

And I guess my question, just building on the comments of my colleagues here that are still left here, given that you're facing this 5% increase, that a lot of that might be eaten up, whether it's inflation or your agreements with CFA and others, what do you see as the potential impacts on professor retention and recruitment?

I know that that's something we're seeing right now across higher ED is challenges around retaining professors, around recruiting professors. So just any comments you might have on that.

I would feel more comfortable in responding to your question if I had actual data to give to you with respect to the recruitment and retention of faculty within the CSU right now, and I don't have those at my fingertip right now. The sense or the concern that many of us have, of course, is that without higher salaries, we will lose more of these highly talented, wonderful faculty who are part of the magic that higher education in the California State University brings.

But let me provide for you more data subsequent to this conversation so that we both have a clear sense of the reality of it. We're always a couple of years behind in the data as well, so we may not be able to understand in real time what the impact of the current inflationary situation and opportunity, other professional opportunities that may or may not be available.

Spoken like a true academic. Are we seeing signs that we may be seeing a Professor exodus at this point?

I asked the question actually a couple of weeks ago, Senator, and I got different answers. So let me go back and get the data for you. I would feel better about it. And I am an academic at heart.

I know. I can tell. Any comments?

And hopefully the academic that made that comment was not doing it in a pejorative way.

No. Any comments from the Department of Finance? No. Okay. I'm sorry. Go ahead.

No comment from the Department of Finance.

Thank you.

And then we'll just add that to the list of information being supplied to.

Thank you very much for that. And I guess I will give my pejorative comment because I'm no longer an academic. I'm a political hack that I think that I am concerned about the future of education in our CSUs if we don't get more funding for the basic things we require, classrooms and teachers. Thank you.

Great. Thank you very much. And you are a very thoughtful, substance based member, rather than what you just called yourself. Then I will thank everybody. And believe it or not, as long as this was, I think a lot of us held back some of our questions, but when we move to at least enrollment and housing, we have already dipped our toe there, so maybe it won't be as long.

And so I'm going to move to issue 1B, which is resident enrollment, and once again, it'll be the interim Chancellor and Jennifer Louis and Lisa King, and wondered if each of you had any opening comments on this subject.

I think my opening comments already introduced the imperative for the CSU of focusing on enrollment, and I alluded to briefly some of the steps that we've already taken. First, that for the California State University, the Chancellor's office must assume a different kind of role with respect to enrollment than it has historically.

Number two, that we have demonstrated already this year, as we have taken up that mentor of different kind of responsibility, worked pretty assiduously across our 23 universities to have an immediate impact on the enrollment circumstances.

The reduction from the projected 7% to 6% in terms of our enrollment. We also have promulgated and are working with our universities to begin to reallocate resources from seven for certain, potentially a couple more universities that have had a historically low underperforming.

They have not achieved the enrollment that they have been funded for. Let me use my words carefully over the last several years, and it is our intention, starting in the 24-25 year, to move resources from those universities to the parts of the state, the parts of the CSU system where there is enrollment demand. This is something the CSU has never done.

We're doing it carefully, moderately, with clarity, with time given to our universities to plan, because there is an impact on the various universities that are involved in this. But in order to meet the needs of the state, of the people of California, we will move those dollars. We have additional efforts underway, but those are more in the informative developmental stage. So I will just stop right there.

Thank you. Jennifer Louis from the Department of Finance.

Thank you, Mr. Chair. Jennifer Lewis with Department of Finance. I would like to reiterate the California State University's multi year compact with the Administration as part of the 227.3 million ongoing journal Fund as proposed this year. I would like to remind the Committee about the enrollment expectations as part of the principles of the multiyear compact, which includes a 1% per year through the duration of the compact through 26-27.

As the multi year compact provides substantial year over year increases to the California State University's operational base, providing funding predictability to meet the expectations of the provisions of the multi year compact. And with that, in addition, I would like to follow up with that.

The expectation also includes a minimum share of transport emissions that at least is consistent with existing transfer practices. And so with that, I shall close and happy to answer any questions.

Thank you very much. Lisa Qing from the Legislative Analyst Office.

Thank you. Our comments on this item appear in your agenda beginning at the top of page 20. I'll begin by speaking to current year enrollment trends and funding and then turn to the budget year. You may recall that last year in the budget, the state provided CSU with 81 million ongoing General Fund to add approximately 9400 students in 2022-23.

The budget, the language associated with that funding directed the Administration to reduce that enrollment growth funding in proportion to any shortfall should CSU not meet its growth target. The Governor's Budget does not reduce this funding although CSU is not adding students this year.

Given the state budget condition, the Legislature could consider removing these funds as a budget solution. This would reflect that because campuses generally are not adding students this year, they are not expected to incur dissociated costs such as hiring additional faculty and staff.

If the state were to take this approach, then in future years, as CSU enrollment recovers and it once again exceeds its previously funded enrollment level, the state could begin providing enrollment growth funding once again, essentially aligning the timing of that additional funding with the arrival of the additional students.

Now looking ahead into those future years, there are several factors that could continue to impact CSU enrollment. Some of the factors suggest that enrollment growth could still be challenging in the near term, potentially in 2023-24.

For example, the number of high school graduates is expected to be roughly flat based on application data for next fall. There are some increases among first time freshmen, but offset by continued decreases among transfer students. And as you've heard from CSU, there are various factors that could impact enrollment among continuing students.

At the same time as you have heard from CSU, they are also taking several actions that could counter these headwinds, including the new enrollment reallocation plan that the Chancellor described.

So these are various factors the Legislature could consider in deciding on its enrollment expectations for CSU for 2023-24. In setting those expectations, it could use CSU's planned enrollment growth under the compact as a starting point. Believe those numbers appear in your agenda on page 19, but it could also choose to adopt enrollment expectation that's higher or lower than that level.

In any event, we recommend the Legislature specify the total number of students that expect CSU to enroll in Budget Bill Language for clarity and accountability around that goal. We also recommend that the Legislature specify in this year's Budget Act if it intends to support additional enrollment growth in 2024-25.

This is because, given the timing of the admissions cycle, campuses generally make their admissions decisions for any given year before the budget is enacted, meaning that the Legislature actually has more opportunity to influence enrollment in budget year plus one, in this case 2024-25. In addition, setting enrollment targets one year in advance provides campuses with additional time to plan for that kind of growth. Thank you.

Thank you. We'll now move to questions, and let me just begin with two quick ones and then see if other members have any. And the first question is for the Department of Finance because the interim Chancellor was very articulate about what they're doing to try to address enrollment and bring it back.

And yet the compacts are very specific about a growth of enrollment. It seems like they're making good faith. But what if they don't meet the 1% that you have as a condition of the compact? What happens?

Jennifer Louis with the Department of Finance. The Administration recognizes the declining enrollment and the challenges facing California students and with the added supports as part of the overall compact agreement for the year over year Ongoing Journal Fund of the multi year compact through the success of Graduation Initiative 2025. The Administration views this decline as momentary, as college affordability and equity and expanding access remain priorities of the Administration.

And as the CSU and the Administration continues to move forward on meeting those challenges, the Administration believes that this is just a momentary challenge.

But even though you say momentary challenge, it doesn't sound like you're prepared to penalize them for the momentary challenge.

The multi year compact is reflective of the entire duration of the compact through 26-27. So it'll be evaluative on a year over year basis through Governor's Budget development with consideration of the entire.

So if I'm still Chair of the Budget Sub in 26-27 that's when the rubber will meet the road, is that what you're saying?

The Administration continues to affirm the original provisions of the multi year compact, and it will be reflected through the entire duration of the compact.

Very good. Okay, thank you. And then the other question I was going to ask that I mentioned in our meeting yesterday is when you looked at the enrollment of all the campuses, the one that had suffered the most was Humboldt State before it was Cal Poly Humboldt. And I did get a report that said in our packet, it shows that that's the biggest loss of enrollment of any of the campuses.

And yet I did get a report that showed that they had the biggest increase of applications year over year this fall, which isn't included in that report. So do I glean that that is starting to be turned around at Humboldt?

In simple terms? We hope so. Their enrollment this year, the 22-23 year compared to 21-22 is level. It's actually up just the tiniest bit. And they have had a major increase in applications for enrollment in the 23-24 year. They have also had a lot of pressures on their housing, local housing. They've had to refurbish some local buildings, hotels in order to handle all of the requests for housing and their anticipated housing needs.

They have created multiple new academic programs in line with the Cal Poly Humboldt designation. So, yes, we are hopeful that this reinvigorated mission will help turn that key institution around.

And it might come up a little in the housing discussion, too, just given what some of the news stories have been. So we're so excited about getting more people that might not have housing in the arcade area. So we'll have to just maybe have you comment on that when we get to it. Let me ask if my colleagues have any questions. Senator Smallwood, questions?

A couple of brief questions. One, I'm also really glad to see that 85% of CSU students are resident undergraduates. That is so important coming out of the UC system. There's this challenge of really bringing local residents into higher ed, and so I was glad to see some of that history. And also, as I mentioned, Cal State Dominguez, in terms of enrollment, I just want to say had an increase of 8.3%.

In that I wonder, how do you apply lessons learned, very different campus, different population, all of those things. But certainly there are things to glean. Are there ways that you look at other campuses and sort of see what are the things that they're doing that could be applied in a place where the enrollment is dipping and slipping? That's one question that I have.

And how do you share that with the Legislature, too, in terms of what are some of those best practices that are helping us get to the goals? But my main question is just, and I heard you, Madam Chancellor, mention this idea of shifting funds to support campuses that are delivering on enrollment.

But how do you see the colleges improving their retention and enrollment rates if the campuses that are failing to meet the goals have their funding reduced? I'm just trying to figure out how do we do good with some bad behind it.

First of all, I think it's 95% of it.

It's 95 California residents. Well, that's even.

Essentially, you have two questions that you would like us to answer. The first is, how do we leverage the creativity and innovation that might occur on one campus within the CSU so that the other campuses and universities can benefit from them?

And the second is, how does this work when we start removing dollars with respect to the impact of that removing of dollars from that University's ability to achieve its enrollment and retention

If they're Low performing already? Yes.

One of the joys and one of the challenges in being in a 23 University system is that we do have a lot of innovation and we do have a lot of creativity, and we're a big system, and every one of the 23 universities is different. And unique in some of its own ways.

So essentially we use a variety of ways to promulgate effective practices from one University to another. We have system wide meetings in which those best practices are shared.

We have system wide initiatives that help gather intelligence about those practices from within the 23 universities and then distributed to others. And we have opportunities for applications for additional resources.

Particularly, we've done this with the dollars that have come to us through GI 2025, so that there's best practices that get rewarded through some additional money that then become known and understood by the other 23 universities. Is it perfect? No. Is it very consequential and transformative of what it is we do within the 23 universities? Yes.

The second question around the impact of removing dollars from those universities that have the lower enrollment is first, I want to just make very clear that many of these universities have been funded at a higher enrollment target than they have achieved for a significant number of years. Two is that we noticed these universities informally in August of 2022, that for the 25 year we would begin to readjust their base budgets.

So essentially, Senator, we have given them a two year lead time to begin planning with their stakeholders in order to maintain stability on the universities and figure out what it is they were going to do to reallocate those dollars. And three, let me also say that the reallocation amount, while significant, is also modest, so that we will move money over the course of three years.

But the likelihood is that even at the end of those three years, most of those universities will still be receiving dollars linked to a higher enrollment target than they currently achieve. So, measured, careful, anticipatory, allowing for widespread planning and collaborative approach to achieving goals, while still reducing the budgets on these universities.

Thank you. And I hope when we have the 27 analysis of this process, we can see some of those best practices and how they've worked and how they've been systematized and institutionalized across the system.

I'm going to ask Nathan Evans to briefly describe for you the ways in which we have already, on an annual basis, show case some of the best practices that have been developed through GI 2025.

Thank you, Chancellor, and thank you again, Senator, for that question. And I'll share a few examples and ways that information and some of those best practices are being shared even as we speak. There are some meetings going on today in which that is happening.

It is part of what the California State University Chancellor's office has to take on in order to understand where we need to be as a system. We've got to do something we've never done before, which is the system has to be an enrollment manager. The universities need to be enrollment managers for their areas, their populations, and they need to be accountable for it.

You reference CSU Dominguez Hills, and they have been an exemplar in our re-enrollment and re-engagement. You may have seen their marketing regarding once a toro, always a toro.

And so the strategies that that campus is employing to directly re-engage with students and bring them back to the community is something that's been, for which they've received funding in terms of specialized funding, to again be able to scale that in a way that could be then shared with other campuses. Each of our 23 universities now has a designated enrollment liaison in the chancellor's office.

You heard the interim chancellor reference earlier that the system needs to take and is taking a more direct role in system wide enrollment in achieving that overall goal. And so that's been one of the steps in having a small group of individuals that are serving as liaisons to each University and are able to bring that back.

And again, as was referenced, when there are needs or requests for one time dollars to potentially scale those programs, those projects, they are filtering through there, and we're able to be very responsive to campuses.

And then lastly, there had really just been a variety of different situations to do knowledge sharing and identify promising and proven practices. One of those actually occurred earlier this week.

18 of our 23 universities use the same platform for an early alert system so that faculty, staff, other students have ways to reach out and connect current students with resources that they may need just in time. And so CSU Fullerton hosted a forum for our EAB platform. It's the educational advisory board. It's called the student navigation platform.

And that was just a wonderful opportunity for all the different universities that are using that to knowledge share, as well as bring in speakers from across the country that are using those same platforms. So enrollment is now a topic of every meeting in many ways, in every setting.

And so I think just those routine opportunities to bring folks together, as well as those very targeted venues in which these very proven experiences are being shared are ways that it's just continually being promulgated across the system. Thank you.

Thank you very much. Senator Min.

I just wanted to follow up on that. Do you guys have data on the number? So I appreciate the resident versus non resident, but when I think of some of the CSUs, I assume that a certain percentage of the campus enrollment is from the direct region surrounding that. Do you have data on what percentage are very local versus from other parts of the state?

Thank you for that question, Senator. I don't have it at my fingertips. We'd be happy to share that. We do track in terms of each University has a designated local admission area, and so they are tracking that ratio. So be happy to share that with the chair, to share with everyone.

And I guess that gets to my second.

That's item three on the report back.

But I was just wondering, to what degree do you see some of the disparities in enrollment growth being around population in the region, high school graduates in the region, demographics, and then to what degree?

As the third part of my one question, can you extrapolate long term enrollment trends and should that also inform your long term strategy around funding the different campuses?

Definitely. We see an association between the demographic trends of the state and the impact in the here and now in terms of the enrollment at our universities. And yes, we have to include those longer term projections. It's not just high school, it's where the populations are moving. And there are some pretty interesting analyses that are available to us.

But we have a regional, interlocking, interacting set of factors as well, and the system has to be able to help manage those regional consequences. So some of the universities are definitely affected by the presence of other California State universities in their regions in ways that in the past we haven't essentially adjudicated between the institutions. But you're right on in terms of the issues.

Well, thank you, Chancellor. I'm glad you're looking into it.

Thank you very much. Then that is going to complete our discussion on item 1B, and we're going to move to item 1C1, which is the student housing updates, and we're going to change out Chris Ferguson for the Department of Finance.

And we're going to have otherwise. Chancellor Koester, Chris Ferguson from the Department of Finance, Lisa Qing from the Legislative Analyst. And I know we also have Vaisan Juan available for backup questions, as well as Ryan Storm.

So let me welcome you back and give you a chance to make a comment about student housing. And then we'll go to the Department of Finance and the Legislative Analyst.

For the California State University system and for the 23 universities within it, housing continues for our students, continues to be a major challenge and a major imperative. It varies from University to University, the extent, the depth and the specific nature of those challenges.

But we have been grateful for what the Legislature has approved and initiated, and we look forward to additional efforts in the future, sustaining the current efforts, and we'd be glad to answer specific questions.

Great. Then we'll go to the Department of Finance. This is the first time we've had Chris Ferguson in person. So welcome to the Committee.

Thank you for having me. Chris Ferguson with the Department of Finance. I'll keep my remarks brief. So the Governor's Budget recognizes the priority around student housing, but we also recognize that there was a roughly $22.5 billion overall budget solution package that we needed to look toward that included delays. It included reductions and included fund shifts, with that as a backdrop for the student housing grant program that was first put forward a couple of years ago.

The Governor's Budget does propose 500 million in the budget year to support student housing projects. That said, it does delay a planned investment of another 250 million from the budget year to 24-25.

In addition to that, it delays the start of a planned student housing Revolving Loan Fund program through the California School Finance Authority from starting in the budget year to starting in 24-25 and also changes the allocation from a split of 900 million and 900 million in 23-24 and 24-25 to instead be 650 million in 2024-25 and 1.15 billion in 2025-26.

So effectively, we're trying to maintain the commitments, but we recognize, given the budget situation this year, that that requires a few delays on the fiscal side of the house. We recognize the importance of affordable student housing.

We recognize the importance of the housing impacts to communities that have campuses in them, and we remain committed to it. But just given the overall architecture of the budget and the situation that we see ourselves in, that is why we proposed what we proposed.

Thank you. And then we'll move to Lisa Qing of the Legislative Analyst Office.

Thank you. So this morning, our office released our analysis of the governor's proposals relating to student housing, and in that analysis, we provide several options for the Legislature to consider in light of the state budget condition that the Department of Finance has described.

The options apply across all three segments, but I'll introduce them here as part of our discussion on CSU. First, adding up all the amounts to the Department of Finance described.

The Governor's Budget includes a total of 2.6 billion in funds for student housing grants and loans over the next three years. Given the state's projected operating deficits, one option the Legislature could consider is removing some or all of these funds.

We raised this option as unattractive as it may be, because should the Legislature need to identify additional budget solutions later in the spring, this may be among the less disruptive ways to do that.

It would not have a near term impact on students as the projects proposed for funding are still in early planning phases. And moreover, campuses may have options to move forward with these projects on a self supporting basis if state funds are not available.

Having said that, and recognizing that supporting student housing is a high priority for the Legislature, we also, in our analysis, provide some options to move forward with funding student housing under the current fiscal constraints.

One option involves prioritizing between the Revolving Loan program and the grant program. There are a few reasons that we think the Revolving Loan program could have greater benefits over time.

For example, the Revolving Loan Fund would be replenished over time as campuses repay their loans, allowing the state to potentially support the construction of additional affordable beds over the years. Another option is to consider prioritizing by segment.

Specifically, if the Legislature wishes to move forward with the student housing grant funds in 2023-24 it could prioritize the applications it has received from CSU and UC.

These two segments submitted their grant applications by the statutory deadline, and relative to the community colleges, they have more experience successfully developing, constructing and operating student housing. They also enroll a greater share of students who live away from home.

In our report, we identify a few projects that score particularly high on the prioritization criteria established in statute for these grants and at CSU. The two projects that we include in that list are based at the Sacramento and San Jose campuses. Thank you. I'd be happy to take questions.

I think I'm going to start with a question of Mr. Ferguson and this whole situation is a little confusing, so I'm going to try to do some clarity so we understand it because basically in the first year, I think it was 21-22 we allocated $2 billion for higher education housing that was split between the three systems. Then last year we did a billion and a half on top of it because it was oversubscribed. Yet it is spread out over multiple years.

So I'm trying to understand, with us having appropriated three and a half billion, how much has been spent, how much is in the budget, how much is in the future and being rolled in the future? That just wasn't totally clear from what you said.

Certainly I can help clarify that. So between 21-22 through the multi year window that we presented in this year's budget, there's a total of 4.2 billion for affordable student housing projects.

That's separated between roughly 2.2 billion for the student housing grant program that was established in 2021-22 and 1.8 billion for a Revolving Loan Fund program through the California School Finance Authority. That initial 2 billion in 2122 was spread over three years.

Last year's budget represented 1.5 billion of that 2 billion, but it also added another 200 to 250 million on top of that. So in total, that's how you get to that 2.2 billion figure. So last year's budget allocated the vast majority of the initial tranche, but also expanded it slightly.

This year's budget is saying in total, over 21-22, 22-23 and 23-24 that we would have a total of $2 billion spent on affordable student housing. And then over the next two out years, we would spend another 2 billion to support affordable student housing options.

And then in the proposal to delay. How does the proposal to delay fit into what you just said?

So what the original schedule would have been is roughly through 23-24, 2.2 billion for the initial program would have been fully expended, another 900 million for the new program. The Revolving Loan program would have been proposed in the budget year and then another 900 million in 24-25.

So effectively, what we're doing is we're shifting 250 million from the original program out one year, and then we're shifting the 900 million out a year as well. But we're also saying instead of 900 million, we would reduce that to 650 the first year and 1.15 billion the second year.

Which means it's all still there, but a certain amount is delayed a year.

That's correct.

And then for those following at home, they think we moved to a Revolving Loan Fund last year prospectively for the funds. So part of the proposal is to postpone when the Revolving Fund goes into effect as well, is that correct?

That's correct. It delays it by a year and it changes the schedule from an even split of 900 million over two years to 650 million and 1.15 billion.

And then I guess the follow up question there is why? Because if a Revolving Loan Fund allows us money that replenishes, why not start that as soon as possible with what we have available in the budget year to start the ability to replenish that fund.

So from our perspective, the state had planned to seed that program with that 1.8 billion so that it could begin to issue the loans and then have future repayments come back in, so that they could then be returned out again to support few other projects.

Just given the fiscal condition of the state, we've proposed delaying those seed investments and fulfilling in total in a different multi year package, but still fulfilling the commitments on both the existing program and the proposed Revolving Loan program.

And I think channeling Senator Ochoa Bogh, who's made the initial comment out of order, I agree there's a sense of urgency to housing at all the local levels. And I noticed in our staff report it refers to my alma mater at UC Santa Cruz, because two UC campuses have actually agreed not to move to their enrollment increases unless they can provide the housing because of the impact on the surrounding communities as well.

And so there is an urgency that all of us feel when we're out there. And you can see it's clearly bipartisan. So however we work between now and the may revise, I would just express that urgency, and then I would go to CSU, and there was a list of projects that were either funded or applied for. And you're going to defer the question, and that's fine.

I am going to.

But the question is, if we adopted what the finance recommendation is, what happens to the schedule of projects specifically at CSU?

Is this the housing projects or it's the other housing?

Because that's what we're talking.

All right, go ahead. Let me ask Assistant Vice Chancellor Vicen Juan to answer.

Thank you.

Thank you, Senator Laird and members. Elvyra San Juan Assistant Vice Chancellor for Capital Planning.

Aand nice to see you in person.

Thank you very much. Nice to see you as well. So in the staff write up of the agenda, page 25 in table two, the final column to the far right shows the remainder of the $750 million. And if I am following Department of Finance's proposal, Governor's proposal, 250 million of that 750 would be deferred. And while CSU has slight differences from the remainder, that's noted the 157, there's two options.

One, there's more than two, but one that reflects what the Legislative Analyst says is proposing or suggest is you could apply the whole 250 million to the community college, 545 million, that's noted. That would allow the CSU projects that are down below in table three at Sacramento, San Jose and Stanislas to go forward. If you took that approach.

And you can only suggest that because the community colleges aren't in the room right now.

That's right. And they're still in the planning phase, and they will take longer to get through their planning grants and design. But I recognize that's a bit.

Well, it is difficult because they're already penalized by the fact that of the 107 campuses, there's 15 that do housing. And it's only because they have some students that live an hour or two away from the campus in remote areas, and it's almost like a dorm to allow the faraway students to stay at campus and do it. So they have no experience, and so they're struggling with what already is a new and lengthy process.

And to throw another wrench in it, I will not want to talk about at the community college leave when I keynote it.

That's fair.

But the question was, really, if you go with the deferral, what do we specifically not see in terms of applications being funded at CSU?

So if a second approach was taken, Senator, where you were to reduce each segment in a pro rata manner, that 157 would be reduced down to about 108 million. And what CSU would propose is we would ask the Legislature to fully fund the Sacramento project at the 41.3 million shown in table three, and the Stanislaus project at the 18.8. And we would fund.

We're asking for an increase, a block grant increase, for contingency for the phase one projects, which we're having some difficulty funding, but also let San Jose State project. So that's the second project in row two to proceed with design and some construction.

It's a little confusing to me because we don't necessarily do it specifically. It's a competitive process that I think goes through the Department of Finance or somebody else. But let me ask the Department of Finance, because the thing I'm trying to understand, as I just said, we accept your recommendation. And if we did, what does that mean in terms of less projects? I think you administer the process, don't you?

We did in the initial round, but last year it was transitioned to each one of the segments. But to paraphrase what Vice Chancellor San Juan is saying, she's basically saying that one of the three projects would be delayed by a year.

Okay, but that would not be our decision or your decision. That would be more internal to them, wouldn't it be?

Yeah. And that would be under a pro rata approach. If the Legislature and the Administration determined that they wanted to take a different approach among the segments and say, fund community colleges later, then.

But the point is that however we do it, they'll have a number and they'll decide the priorities for themselves.

They will decide the priorities in terms of alerting the Legislature, and the Legislature would actually appropriate the specific projects.

Okay. But based on their recommendation.

That's correct.

Which is, you're right, I did not track because I was still stuck on the fact that all the applications went to finance. So that is good to know as a change, and then I'll recognize other questions. But I would just make the comment that this is something we are really committed to. This is something that we hear an urgency and people screaming about. And actually, Senator Ochoa Bogh was really articulate about.

Well, the whole thing was articulate, but highlighting one thing, which is this really affects the housing market in municipalities that surround. And if, if the campuses house more.

And it's so awful in my hometown that I used to be mayor of, that the Silicon Valley people are coming over and paying millions in cash for housing and students are six or sevening up to do a thing. And if you are a middle class or working class person, there is just such limited options.

And there's a reason that there's a struggle for service workers. And the President of the University of California said, you keep asking us to do things and I have 5000 vacant positions because we can't pay enough to hire them. And part of the reason we can't pay enough is the housing market in the areas that surround the universities. So this is a domino key and it's going to affect lots of other things.

And we haven't even talked about whether at some point there should be housing for faculty or staff to try to deal with those issues in these communities. So I get that we have a problem, but we're going to really want it to be addressed in a way that tries to move this along. Let me ask my colleagues before we move on, if there's Dave's good. Senator Smallwood.

Two questions along those lines and want to echo the impact and need for housing and also the need for projects to start sooner than later. One of the benefits of having this system is that each campus is an economic engine for that community.

And I'm curious about how the CSU, regardless of the schedule, in terms of what projects move forward, how do you make the building of student housing a community benefit?

In other words, do you have a system wide project labor agreement and local hire agreements in place so that when these projects start, they are benefiting not just the students, not just those construction firms, but also those community members who may not be accessing the University, but certainly would benefit from accessing a good career building housing on the campus?

I will ask Assistant Vice Chancellor to answer that, please.

Thank you, Senator. So we do not have system wide project labor agreements. At this point, we try to keep as much competition from union and non union contractors and subcontractors, and given the prices that we are seeing, that the system will benefit from more competition. But we also have our own apprenticeship program.

We've reached out to labor on participating with them on the apprenticeship programs, which are very important not only for their skilled trades, but the skilled trades of our campuses as well, with the number of retirees in the system.

So I do think we are an economic engine to the community with the number of jobs the construction projects create. And these projects, we continue to do so for each of the campus areas.

So when you say that you have apprenticeship, I'm confused. Are they local residents who come in from the community? And these are training apprenticeship programs that the contractors have, and these may or may not be regulated apprenticeship programs. I'm just confused about how you don't have labor unions, but you do have apprenticeships. But then local residents aren't necessarily in the formula.

For the CSU apprenticeship program. It is one jointly run between our Teamsters and the California State University. So if a campus has available funding for an apprenticeship position, then local community members can apply in order to increase their skilled trades and move up to a card carrying member in a program recognized by the Department of Industrial Relations.

Okay, so that's one union. And Teamsters don't typically do building construction, so that must be in a different sector. And I was referring more to the development of the projects that are listed here in Sacramento, San Jose and Stanislav.

Teamsters are one of the unions, skilled trades unions for the California State University.

Sure, but they're not the construction and building union. So I'm speaking particularly around the development of housing in particular. And so I guess that's my question. When there's an opportunity to make these very precious investments, we have to see a ripple effect. And we talked about the ripple effect when we don't do it.

But there is a ripple effect when we do in terms of ensuring that there are quality jobs that local residents who otherwise might not have access to, can actually participate in the building of the University and also winning good jobs in the process.

And I encourage. It sounds like there isn't necessarily a system wide program that is built around the development and construction of housing that is about helping to bring local residents into an apprenticeship opportunity to learn those skills and to lean into a career.

And the difference between what I've seen and I understand the competition and I understand there are different constraints, but what I have seen, when there's regulated apprenticeship, there's an opportunity for that individual to move from not just that project, but to another project and another project through the membership of the union. So that's why I was curious about whether you have the project labor agreements.

But I just want to conclude by saying how important it is that CSU, in this moment, think of, and I appreciate the Chancellor saying how the system has to own the enrollment.

How do the system really owns the job creation that comes from these projects and build a systemic way that can bring not just the students and the faculty and staff, but the community into the benefit of these construction dollars. And would love to see the plan for a system wide approach to creating community benefit out of these projects.

And then my last question, because I think you did answer that question about whether or not there are construction apprenticeship, regulated construction apprenticeships available.

My last question is just about affordable housing. We hear a lot in our office about students who are paying about $1,400 to live a month to live on campus. In terms of the cost, students who are struggling to afford that rate, many working 2 and 3 jobs while going to school.

As you know, your campuses provide that great access for working students, but working too hard to afford the campus housing. How are you dealing with very low income students who may not qualify for the aid that allows them to actually afford the housing that's being developed.

So for the affordable housing program, there is a limit on what we can charge of students, 30% of 50% of area median income. So these projects will meet that, and some will be slightly below to make that affordable. There are campuses out of emergency programs for rapid rehousing should there be some issues.

But the student housing projects in front of you have specific limits on the funding of the rates we can charge the students to keep it affordable.

And what is the percentage for those units that will be below the percentage of units for? You said that some will be at affordable and some will be made even below that to accommodate.

I think two of them are right at that level, and San Jose is the one campus that has a greater delta because of their local rates. But I can get you that specific number.

That would be great to see. We just have a rising challenge with homeless students in our district, so we just want to make sure that students can afford the housing that we're building.

Thank you. And I know that's a challenge in most districts, so we appreciate your questions. That completes our section on housing, and it also completes the panels on which the interim Chancellor has been sitting on. So just thank you for spending so much time with us today, and we look forward to working with you as we work this through to the final budget in June.

Thank you for the opportunity.

We're going to move to issue two, which is the shift in capital support funding, and we have Jennifer Louis from the Department of Finance, Lisa Qing from the Legislative Analyst Office, and I have both Rhinestone and San Juan listed from the CSU system. So we will start with Jennifer Louie.

Hello. Jennifer Louie with Department of Finance. The 23-24 Governor's Budget proposes to shift 404.8 million one time General Fund appropriated through the upfront support of various capital projects for CSU campuses from the 2022 budget act to being supported by CSU issued bonds.

Encompassing this adjustment is 27 million ongoing journal fund to support the associated debt service for those bonds specific to those campus projects. With that, I'm available to answer any questions. Thank you.

Thank you. We'll move to Lisa Qing from the Legislative Analyst Office.

Thank you. Generally speaking, we think that shifting projects from cash to debt financing can be a reasonable budget solution. Facilities are typically used over the course of many years, and debt financing is a way that the state can spread the costs over its useful life. It also allows the state to move forward with high priority projects at a time when there might not be as much upfront cash available.

That said, debt financing does come with additional costs as CSU, and in this case, the state would be responsible for paying interest on the borrowed amount. While the exact increase in the costs will depend on interest rates and repayment periods, it could be roughly twice the cost that was originally budgeted for these projects last year after accounting for these interest costs.

With that in mind and recognizing that the projects funded last year are largely in early stages, primarily planning stages, we recommend the Legislature revisit whether it wishes to move forward with each of these projects.

In your agenda on the top of page 29, we bullet out a couple of questions, a few questions that the Legislature could consider in revisiting each project, for example, the first question is whether the project is among the most pressing of CSU's needs.

That could include projects that address critical life safety issues and projects that minimize the risk of disruption to current campus operations. If the Legislature finds that a given project meets the listed criteria, it could approve the governor's proposal to debt finance that project and continue moving forward.

On the other hand, if the Legislature finds that a given project is not warranted under the new circumstances, it could consider withdrawing state support for it at this time and potentially revisiting it in a future year. Thank you.

And then whoever wishes to speak for CSU.

Thank you, Chair Laird. So the projects, as far as the status, are in their early planning phase and in anticipation, if the Legislature approves the Governor's Budget, we have started working on our due diligence documents that would be required for a bond sale should it move to CSU bond financing.

So campuses are providing us cash flow. We would try to make this as seamless as possible in the change of the funding and the amount of the increase in costs that the Legislative Analyst has identified.

The 800 million is the same number we've come up with as well. So our plan would be, if the Legislature approves the change, to go to the board of trustees for approval in, say, July, once the budget is approved, and a potential bond sale in August or September of this fall. Thank you.

Thank you. We good? Then let me ask a question of the Department of Finance. You said that you were recommending in this shift, actually funding the General Fund costs of the debt that's outside the 5% and outside the regular streams to CSU.

Jennifer Louie with Department of Finance. That's correct.

Okay. And I would just make a comment, which is, we had all this pressure last year not to put money in ongoing costs and to do one time things.

And in particular, for me, the investment of 75 million for agricultural facilities to upgrade them for not having been upgraded and really make relevant CSU agricultural facilities, and the rebuilding of the Swanton campus, which was destroyed by the CCU fire, and the fact that the amount was in the budget was what was not covered by disaster assistance or insurance. And those were meant to be the one time things to do, one time money that we were pressured to do instead of ongoing expenses.

So it is a little disappointing to find that now we would go into debt financing when we thought we were using the one time money last year to do that. I don't want to downplay the others before somebody from Brawley calls me and says, you didn't call out our campus. But there were similar things that really applied to all the other ones that were on that list.

And if the miraculous event happens that the budget gets a little better rather than worse between now and June, this would be a logical candidate because when I was a cabinet secretary, I actually proposed that we stop doing resources bonds because we could budget 60% of the cost in the budget and not have the debt financing and we could control it more ourselves. We actually tried to shift away from bond financing because of all the additional cost.

I get that the standard is if you have debt in the budget that's between five or 6%, that's the acceptable amount. And as Senator Smallwood Cuevas was saying, that in a time of economic trouble, you want the jobs and you want the economic development that comes from it. And if the choice is not having that or having that this way, then of course we would want it this way.

But just offer those comments to think about as you get to the May revise and the final budget. Any other questions or comments from all our remaining members?

I know the conversation, and then there were two. But I appreciate what you just said, Senator Laird, and I just wanted to just follow up on my last line of questioning around the system wide local hire regulated apprenticeship conversation.

Especially I see coming from worker center work, community and labor partnerships. I've seen folks go from sleeping in their cars to buying homes, all on local higher regulated apprenticeship.

So if we're going to prioritize projects that are going to incur debt, how do we really prioritize, based on evaluating the ways in which a project is going to have a ripple economic effect for those surrounding communities that every community around these universities are hurting and need access to quality jobs and careers.

So that's the one point that I would raise, is how do you really look system wide, especially long term, with this revolving loan opportunity as well, to really create a system by which everyone gets to benefit in the investment in improving and building and growing our capital assets on our campuses.

That's part of the Legislature, we have to begin to consider what are those projects to prioritize, and how do those projects help to recession proof our communities? So I just wanted to add that point to your comment.

Senator, thank you very much. We appreciate them seeing no additional comments from the other members. I will thank you for participating in this panel, and we will move to the last item of the day, which is issue three, a status update on previous budget act invest.

I have two people listed, Dilsey Perez and Vice San Juan, both from the California State University system. Let me welcome Ms. Perez, and I would recognize you to begin the presentation on this panel.

Thank you so much for the opportunity to speak today. My name is Dilcie Perez and I am the Associate Vice Chancellor of Student Affairs, Equity and Belonging for the California State University Chancellor's office. I have served in higher education for over 22 years and have served in the CSU for 17 and recently served with the California Community Colleges for five years. And in a previous role, I had the opportunity to colead the opening of California's first housing for students who were experiencing homelessness.

Today, I would like to be responsive to the subcommittee's desire for an update on foster youth and basic needs funding. In July 2022, the chancellor's office distributed the 12 million foster youth funds to campuses using a base allocation for all universities, which was to hire designated directors and coordinators, plus a prorated amount on the campuses based on the 21-22 resident student enrollment, and we are happy to share that. To date, 15 programs have identified a permanent coordinator and seven are in the recruitment selection process.

Each of the campuses have an interim coordinator in place, and there will be one campus that will have that finalized by fall 2023, if not sooner. 21 programs have designated space and two programs are in development and will be fully operational in fall 2023. Based on our 2021-22 program inquiries, the CSU estimates that there are over 2700 current and former foster youth who have selfidentified.

However, in an effort to capture the data, we have developed a new data element for the enrollment reporting system and will start collecting enrollment data in fall 2023. The Budget Act of 2022 included $10 million for ongoing support of basic needs. The CSU understands the challenges our students are facing with long term affordable housing options, as we have heard earlier during the hearing. And as a result, each University was asked to utilize at least 50% of this year's allocation to provide direct support to students to live on campus and off campus as appropriate, and these funds also included the cost of meal plans if needed. Last week, the chancellor's office completed the basic needs and mental health legislative report and I am happy to share that 100% of our universities have food pantries.

The numbers indicator the data indicates that we served over 20,000 unique, unduplicated students last year through our food pantries. 96% offer fresh produce or a farmers market, 100% offer Calfresh application assistance, 100% offer emergency grants, 96% offer programs to serve broadband and technology needs. And as we know, mental health continues to be a concern for all of our communities and often challenges occur after hours and 96% of our universities offer access to after hours mental health support.

One of the most significant challenges the CSU continues to face regarding our supportive basic needs is housing affordability in California. As we look to the future, we will continue to partner with community based agencies and our residential facilities to address this critical need for our students. Thank you again for the opportunity to address you today, and I look forward to answering any questions you might have.

Thank you very much. Did you have anything you wish to add?

Not regarding basic needs or foster youth, only on the deferred maintenance overview, if you'd like.

Then if you would do that, because that's the third item that we're doing oversight on this item about.

Thank you, Senator Laird. The 125,000,000 that the CSU received in 2022-23, 100 million has been allocated to the campuses to proceed with projects which range from roof replacements to elevator replacements, HVAC, energy efficiency, and to highlight a couple of items, the 25 million that hasn't been allocated, the system is holding. 2 million of that is going towards seismic assessments across the system. To date, we have completed three campus updates on seismic safety, and three campuses are in progress.

The second area, we are holding about 11 million to implement energy efficiency projects. And given the budget constraints at Cal State, East Bay and Sonoma State, we are hiring a regional sustainability person to help look at energy projects for those campuses to help reduce ongoing operational costs and implement projects that will address deferred maintenance. And the third area is water conservation. As much as it has been raining significantly, we're still looking at how we can reduce our water consumption consistent with state goals in water reduction.

So it's been positive for us to hold system wide funds, and we're going to try to leverage those dollars to co fund grant funds available for climate change and resiliency. The CSU is at a disadvantage as far as the number of folks we have working on grants. So that's a challenge for us and appreciate any dollars you want to give to us directly to implement projects. It makes it a lot easier, and we're happy to implement conservation projects in support of climate. So thank you.

Thank you. And hopefully you have rain capture systems at CSU Monterey and Cal Poly for the next 48 hours. It will help you greatly. I appreciate the presentations, maybe with Ms. Perez, you talked about quantifying the 2700 former foster kids or foster kids that are in the system. What services actually get provided to them from this, in addition to quantifying them, then what services get provided?

Thank you. Our approach is a holistic, comprehensive approach. Typically, many of the program coordinators are licensed clinical social workers. And so the importance of one providing holistic support via outreach and recruitment to space on campus, to serving as a resource to students, with connecting to campus resources, helping with housing, helping with direct support and funding to students. And then obviously whatever needs are unable to be met on campus, connecting them to community agencies who also do this work. So typically most of our universities offer what we would say is a comprehensive, holistic support based on the students needs.

And it's interesting because we led last year here. There is a community college foster care program next up. And there was a cap on campuses and last year we blew the cap off because it was limited to 10 of the campuses and then quadrupled the money. And I visited with a foster kid in Salinas a week ago who became a foster kid at 12. I think he's done two years at Hartnell College and he's transferring to CSU Monterey Bay.

And so the interesting thing to me was how you coordinate maybe with programs that have been covering students that then they transfer where they have already been getting services in the other tiers. And I don't know if you do that, but this guy was an amazing success story. Grew up in a farm worker household and became a foster kid at 12. And I can see why they had him meet me, but he's going to be at CSUMB, so hopefully he can receive those services in it.

And we as a committee really emphasized them last year and expanded them. And so that's just very important. It would be good maybe at some point to have a formal report back on how you've used the money and how many people have been helped and in what way or different campuses. And a similar thing on the basic needs, because we got a little criticism last year that this was a drop in the bucket compared to the basic needs.

And we tried to address the housing through the previous item that now may get delayed in some way because that is one of the basic needs as well as food and books that then we tried to address in the student aid system and making sure it wasn't limited in what it has gone for. So I think that if we are going to, and I can only presume what I think my colleague thinks, we're going to know the success of it and what the unmet need is.

And if we have statistics on what it's done and what unmet as we try to close out this year budget, it will really help us in what is adequate or not adequate for the campuses. And the same thing would be true about the energy efficiency is just knowing exactly what it's done. And we have had some trouble because we haven't heard the University of California budget yet, but last year we provided money for UC Berkeley to completely green its energy system.

And I think the proposal is now to hold back half of that. And I think we're really going to want to see what the practical results are. And one of the hardest things as somebody that's worked on the energy efficiency issues for a long time is that if you are in an accounting department, you weigh the cost versus the benefit, but the cost is over 20 years or more, and the benefit will be over 20 years.

And yet a lot of times it's weighed against the cost of the year you put it in the budget as opposed to the benefit that is realized over the multiple years. So having some sort of report back that is really specific on what the projects have done, what the benefits have been, would really help us in sort of moving forward. And so maybe if we could have something in all three of those you get to the committee, it would be really helpful. Now that I've pretty much hogged the entire questions and the entire subjects, is there anything that, Senator Smallwood-Cuevas?

Very small. Following along the lines of your question. One, you mentioned that you're filling the vacancies for your coordinators across the system. And have you got a sense of what is the goal for foster student, foster youth, emancipated foster youth enrollment. So what are we working toward there and how are you measuring the success? 2700 is.

We know how hard it is to get one person who is just in the perfect storm of disparity and barriers into a campus of higher learning is quite a feat and accomplishment. But just curious about what your goal is there. And then my other question on the deferred maintenance and energy efficiency. You mentioned 11 million for energy efficiency. You talked about water reduction and conservation. What is the dollar amount that's being invested in that?

And my final question is going back to my earlier question about in what ways are we building pathways into these energy efficiency jobs? I'll share. When I taught a course at UCLA, there was a student who was dynamic student, and this is a cross listed class. I'm giving a plug for a CSU, UC and community college course taught together during the pandemic. And one student had to drop out of the course because he had to take a job and take a job as a valet.

And the course that we were teaching was about social engineering careers and opportunity. And because he was so pressed for a job, he couldn't hang in for the fellowship. He had to step out of the whole class and the fellowship opportunity of that class to take this job.

And I say that students who are in CSU are also looking for opportunities to build career, to be able to apply what they're learning and to do it in a way that they can earn a fair wage and stay in school. And so again, how are we building win-win, environmental sustainability, economic opportunity and building the infrastructure that we need for our campuses? How is the system thinking about those things, especially around the green job sector? So I have two questions, one for Ms. Perez and one for Ms. San Juan.

Thank you. I'll go first. So thank you, Senator. From the 25 million that the CSU held system wide, it was also about another 11 million for water conservation. And there are additional funds in the 100 million that we allocated to campuses that have water reduction components. And mainly those will be replacing fixtures, say in restrooms, to reduce to low flow, for example, and aged equipment.

So there's benefit across the system just depending on the project and which campus they had as a priority. In the workforce development, when we are able to use, whether it's deferred maintenance funds or our infrastructure funding from a capital appropriation, for example, we have tried to engage not only with students, but the faculty in supporting campuses of living lab. So in certain cases, we've been able to say, faculty, we're going to do this project.

Is that something you can incorporate into your course material, modify your curriculum? And we had backed off on funding for that because some have already started to do that on the natural, but that was really very successful. And we've supported the green campus students over time, one of which used to go to University of California, now works in our office as a energy procurement person.

So we have hosted the students at our conference related to facilities and still have a number of students working on campuses that we try to grow from within when we can, depending on the available funds. So I think that has been successful. And we've tried to support campuses with some of those programs for those that have the ability to do that. So I think found the whole very positive. And then on our own building, we had a renovation. It's coming back to the workforce.

And we had a custodian who wanted to become an electrician. So we used our project within our building, and he learned how to become an electrician, helped us with lighting controls, which are very little difficult. It's a new skill for a number of our own skilled trades. But he's now a full card carrying electrician and has gone to Dominguez Hills to help them as well. So it is a mix of students bringing up faculty from grounds or custodial positions into skilled trades.

And then I believe there is a requirement for apprentices, even for the state building trades as part of the Construction Dollars. I don't think we have some of the higher percentage requirements that I believe other entities have, but I would have to get back to you, but I believe there is a requirement for a certain amount of apprentices on a program project.

I would love to see that data, and particularly around the green sector programs as well. Thank you for that.

Thank you very much.

Ms. Perez, I think, has one question for her, and then we're sure, yes.

I can answer this briefly. I think that at this point, there are not specific enrollment goals for the foster youth population, with the exception that access is the goal, as many students as possible from the community to have the opportunity to achieve their educational goals. And I would say that we are constantly cultivating relationships with high schools and community colleges to provide high touch support to students as they transition into higher education and ensure that the support that's offered to students is embedded throughout our universities.

And I think, as you know, the goal is to also mitigate the myriad of personal challenges that foster youth might experience as they make those transitions, especially since many of them are the first generation and first to go to college and their families. And so I would say to you that the goal, while not a specific number, right, is the same that we have for all of our students, that they will graduate in a timely fashion.

And so what we want to do is to create early, I call them their early alert, but I prefer to use early support, is that we want to get support to students as early as possible to ensure that they're not hindered from achieving those goals. So I think the first year of the funding was really to build the infrastructure and to get the staffing in place, to get the spaces in place, and then to continue to identify who the students are and what their needs are and continue, I think, to meet their individual and collective needs.

Thank you for that.

Great. Well, I appreciate the discussion, and that completes our series of panels. And I know we have a list of things to come back, but I think this has been really helpful, and thank you for participating today. We're going to go to public comment in a moment.

I'm going to start with the people in the room, and we have a participant number 877-226-8216 the access code is 621-7161 and I think we don't have time for extensive comments today, so it would just be good to have name, organization, and a brief thought about what you think is good or bad about the proposed budget. So I would ask if there's anybody in the room that would like to make a public comment. There's lots of people standing up and you don't appear to be leaving. Great. Thank you. Welcome.

Thank you, Mr. Chair and members. Now that we're down to. My name is Catherine Hutchinson, and I'm the President of California State University Employees Union. We represent nearly 16,000 non faculty staff at the CSU, and I'm also speaking on SEIU's behalf today as well. We'd like to thank the Senate and the Legislature for their leadership in addressing the systemic wage issues that CSU non faculty staff have been facing for over three decades.

I'd also like to thank both of you for your comments today towards the CSU. We would like to share, and you heard earlier that CSUEU and CSU are at the table, and both entities have put forth step proposals. There are a lot of outstanding questions, but it's positive that both proposals include steps, even if they're miles apart. We want to work with the Subcommitee to ensure that there's a robust review of CSU spending proposals as we look to achieve implementation of salary steps. We will need to ensure that the system can be funded to truly support a living wage for employees. We look forward to working with the CSU and legislature to ensure that students, faculty, and staff at the CSU are able to thrive. Thank you.

Thank you very much. We appreciate your comments.

Good afternoon, chair Laird and Senator Smallwood-Cuevas. My name is Kevin Weir, and I'm a Professor in Sacramento State's Department of Sociology and the Vice President of the California Faculty Association. We're urging you to please consider directing the CSU to devote an increase in allocation to the costs of direct instruction. And if I might just share a brief story that a member of ours shared with me just last week that will speak directly to some of your questions, your line of questioning, and your concerns today.

This is a tenured Professor on the San Marcos campus. Her spouse is on a temporary contract at that same campus. She wrote to me, quote, we both love teaching first generation college students and students from immigrant families, as we both come from a working class background. I am the first one to go to college on one side of my family, and on the other side, I am the first one born in America.

So I'm deeply committed to the mission of the CSU and making education an affordable reality. We love CSU San Marcos and our students, and we want to stay here. But housing prices in San Diego County have skyrocketed to the point where we worry every year how we will afford to pay rent next year as the rent increases are doubled while our pay barely keeps up with inflation, we fear that we will have to leave the CSU and find work elsewhere where we can afford to live.

If the CSU truly supports the mission of making college education accessible to all California students, then they must invest in the people who make that education possible and pay all faculty a living wage so they can afford to live in the county where they teach. Thank you. Good afternoon.

Thank you very much. Appreciate your comments.

Good afternoon, Chair Laird, Senator Smallwood-Cuevas, my name is Megan O'Donnell, and I'm a lecturer of constitutional and political history at CSU Monterey Bay. Thank you for all your leadership and support for public higher education. As has been said by many, I too believe that the learning faculty provide in the CSU transforms the lives of our students, and it's why I have dedicated the last 11 years of my life to this work, despite, I will say, a lack of investment from the CSU and faculty specifically like me, lecturers on temporary contracts.

Despite my many years of dedicated service to CSUMB, in which I've won countless honors and awards for my contributions to the University and the broader community, the CSU pays me a degrading $52,000 a year. And this is after the raises referenced by the chancellor over the last two years. I'm not keeping up with inflation. I am so far in a hole that even future raises are not going to get me where I need to be to have a sustainable financial support for my family.

My story is replicated across thousands by the CSU and represents a decade of disinvestment by the CSU in direct instruction. My students need more from me than they did 10 years ago, and yet investment in this urgent work continues to decline. And I have to say I am emotionally and physically exhausted. Countless faculty like me are abandoning this work, and I myself struggle not to feel shame for staying in a job that risks the financial health and security of my own family.

I stay because I guess, I was raised by a mom who was also an underpaid teacher to see service as the highest calling. And I see no greater service than what we give our students. My students become teachers, healthcare workers, environmental scientists, nurses, public servants who stay in our tricounty area. They stay and invest in the community that invested in them and they become the leaders and professionals that we need to lift up our communities.

But it's faculty who make that possible and we are being left behind by the CSU. We are not getting the investment that we need to thrive and to also stay in these communities that we are fostering through our students. Thank you.

Thank you very much. Your statement was very heartfelt and I'm trying to limit people, but I certainly wasn't going to interrupt.

Hopefully you can hear me because I'm kind of short. My name is Vicky McLeod and I'm the chair of the statewide legislative Committee for CSU Employees union. I'm not only a staff, but an alumni of Cal State Fullerton and I've been an employee of the CSU for over 35 years and I'm very proud of the work that I and other CSU employees union members do to serve our students and institutions. Thank you both today for your comments.

At this hearing, I'd like to echo President Hutchinson's comments regarding the importance of transparency in the CSU's proposed budget and the implementation of salary steps. The CSU's success relies upon the talents and work of its employees, but attracting and retaining staff are extremely difficult. Employees at the CSU are faced with food and housing insecurities and stagnant wages, while the same jobs elsewhere offer competitive wages.

We believe that robust oversight of the CSU's proposed expenditures will not only provide clarity on a path forward for salary staff implementation, but will also pave the way to success for CSU students and the dedicated faculty and staff who serve them. Thank you.

Thank you very much.

Good afternoon, chair Laird and Senator Smallwood-Cuevas, Melissa Bardo with the Education Trust West we're happy to support the proposed base increase for CSU as it will help the system navigate post pandemic challenges. However, to incentivize campuses to truly make strides towards equity for their students, we continue to emphasize the importance of accountability, oversight, and setting race conscious goals and metrics. Despite significantly improving graduation rates via the graduation initiative, stark equity gaps remain among black, Latinx and native students.

The CSU's compact report points to 2021 equity priorities, including reengaging underserved students and providing access to a digital degree planner. While these are important strategies to improve graduation rates overall, it is not clear how these strategies will close specific racial equity gaps. We respectfully request that the legislature establish more explicit goals in closing racial equity gaps to ensure CSU makes annual progress towards compact goals. Thank you.

Thank you very much. Welcome.

Good morning, Senators. My name is Molly Maguire. I'm the state and federal policy Director with the Campaign for College Opportunity. We'd like to express our support for honoring last year's commitment, and we respectfully ask the Legislature to uphold this commitment to the compact and the 5% base funding increases in the final budget agreement.

The compact goals and base funding increases are a timely strategy that work in tandem with the 2025 graduation initiative to ensure that stable and predictable funding increases to the CSU benefit students and close persistent racial equity gaps. Equally important is ensuring that the compact's accountability measures act as intended as reliable metrics for evaluating the progress of the segments and meeting these goals. Later this year, we will be releasing a report that examines CSU's enrollment numbers in the light of the CSU Graduation initiative 2025.

We look forward to sharing this with you and working with the Legislature and the Administration on the 23-24 budget process and stand ready to lend our time and expertise as a resource for any interested Members of the legislature and their staff. Thank you.

Thank you very much.

Good morning, chair Laird, and good morning, Senator Smallwood-Cuevas. And thank you. Actually, your staff for Jasmine let me borrow a charger so I'm able to read my speech.

She's a full service operation.

My name is Michael Lee-Chang. I'm a Pell Grant first year political science undergrad student at SAC State from Redondo Beach, California. To graduate in four years. I'm balancing, or at least trying to, five classes, three jobs to support my family and housing costs and tuition, extracurriculars, relationships, sleep, and, of course, just three meals a day. I've been spread so thin that I actually ended up losing 10 pounds just last semester. Yet my college experience has been enriching and eye opening.

I learn new things on a daily basis, as I should. And since I've been at SAC State, I've spent hours having conversations with my professors. I've had the opportunity to work with some of them on my campus service work activism, and much more. I'm getting used to it. But I even have their cell phone numbers, and we text regularly. And so the reason I graduate from SAC state will not be just because of me and what I do.

It will be because of the people in my life, my fellow students, my mentors, my counselors, my professors, my family for the next four years. What we need now are not sacrifices to our education and well being. What we need now are investments to better the minds and skills of our future selves, our children our Californians. To put it bluntly, the CSU will guarantee the success of California.

All the issues we face as an estate starts at our schools, what we teach our youth, our future workforce, and how we treat our faculty, our current workforce, what higher education truly means. So I urge this Committee to continue investing accordingly. Thank you.

Thank you very much. Next speaker. Welcome.

Good morning, chair Laird, Senator Smallwood Cuevas. I'm going to follow your advice and turn my two pages into one paragraph. Interim Chancellor Koester asserts that recruiting and retaining the best faculty and staff is an overarching goal for the CSU. There's an old saw that you can tell what people's priorities are by looking at their budget.

The chancellor's proposed allocation for richly deserved and long overdue compensation increases for faculty and staff is 1.77%, rather than, at minimum, a rateable portion of that 5% base increase. This suggests implementation of a very different set of priorities than her words relate. I ask that this committee and the Legislature in General seek to provide some guidance to the CSU and how they reallocate the scarce resources that they have. Thank you very much.

Thank you. And let me just let you know I always say it at the end of the hearing, we take full comments online at the Budget Committee site. So if you want to send us the full unredacted statement, we will be happy to receive it. Thank you very much. Next speaker.

Good afternoon, Chairman Laird, Senator Smallwood Cuevas. My name is Ron Rapp. I'm the Legislative Director for the California Faculty Association. We did submit our letter, our response to the governor's January proposal. It should be in your packet. I have extra copies if you need them. We believe that in order to attract students to the CSU, that we must attract and retain high quality faculty to the CSU as well. In order to do that, we have to pay them adequately.

And so our two recommendations, to be very brief, our two recommendations in the response to the governor's January proposal is, one, increase the amount of the allocation to the CSU above the amount proposed for the compaq specifically, and secondly, reexamine the practice of providing unrestricted funds to the CSU and instead designate some of those funds, at least some of those funds, to direct instruction, which will help to provide adequate salaries for our best and brightest faculty, attract new faculty, high quality faculty, and retain them so that they can provide the services that our students deserve. Thank you, sir.

Thank you very much for your comments. Anyone else in the room seeing no one? We will go to the moderator. Finally, after you waiting for so long, we are ready to take comments from the participant system, and at some point early on, if you would advise me how many people are in the queue.

Thank you, Mr. Chairman. At this time we are going to the telephone lines for questions or comments. If you would like to register, please press one, then zero on your telephone keypad.

You'll hear an indication you've been placed into queue and an AT&T specialist will provide you with your line number, which we will identify you by. If you're using a speakerphone, please pick up your handset and make sure your phone is unmuted before pressing any buttons. We do have a question queued up. One moment, please, while we provide them their line number.

Yes, and we really hope it's a comment and not a question.

We will go to line nine. Go ahead, please, with your comment.

Mr. Chair and member, Charles Wright, on behalf of the City of Palm Desert and priority one Coachella Valley, in last year's budget, the CSU San Bernardino Palm Desert campus secured $79 million for a campus student success center. Because we acknowledge the state's budget condition has dramatically shifted since last year. We support the governor's proposal shifting the funds for this project using CSU issued bonds as well as $27 million to support the underlying debt service on those bonds. Thank you, Mr. Chairman.

Thank you very much. Appreciate your comments. Next Caller if there is one.

We have no further lines in queue at this time, sir.

That's just a miracle. But I think that we had very heartfelt and dedicated comments in the room. So let me thank you, moderator for waiting around all that time to handle one call. But we appreciate it. And let me thank everyone for participating in the public testimony today and reiterate what I said a minute ago, that if you weren't able to testify, you can submit your comments or suggestions in writing to the budget and fiscal review committee, or visit the website of the committee and submit the comments. They're important to us. We appreciate the participation. This was actually a rather meaty hearing. I appreciate everybody for sticking it out to the end that did. We've concluded the agenda, and so the Senate budget Subcommitee one on Education will stand adjourned.