Senate Budget and Fiscal Review Subcommittee No. 1 on Education

Senate Budget Subcommitee No. 1 on Education will come to order. This is our third hearing of the of 2024 as the Budget Subcommitee. We have done one on student aid and done one on the overall financing of Proposition 98 and K through 14 education. And today, this will be our second hearing then on higher education issues. There's five discussion items on the agenda, and they cover the major budget items for the University of California and the California State University system.

It's an informational hearing and we will not be taking votes today. However, whenever Senator Min arrives and whoever is speaking at the time stops, I will call the roll to formally establish a quorum. Anyway, we're going to begin with issue number one with updates from UC President Michael Drake and CSU Chancellor Mildred García. Representatives from the Department of Finance and the Legislative Analyst Office will also participate in this panel. The Senate Budget Subcommitee Chair, Senator Wiener, we welcome to the hearing.

He will join the Subcommitee from the dais on the question period on campus climate following the presentations. Issues two through four will consider student housing and enrollment updates at UC and CSU. Issue five will consider the Governor's proposals. There's some individual ones for the University of California. And with that, I would welcome our first panel to the table here, and we'll hear testimony from the panelists and then move to questions. It is our practice to take public comment after we do every issue.

But if there is unique discussion out of the questions of Senator Wiener, I'm going to take a show of hands to see if people wish to testify at that point and allow limited testimony if there are people that want to do it. So you don't have to wait until the end of all five items to do testimony.

With that, the first panel, we have President Michael Drake of the University of California, Chancellor Mildred García of the California State University system, Chris Ferguson from the Department of Finance, Jennifer Pacella from the Legislative Analyst Office. And we also have Seija Virtanen from the University of California and Ryan Storm from the California State University system who are available--my scripts has additional questions or details--but they're really available for details. So we welcome all six of you here.

We're going to go in the order that I mentioned in opening comments. And I would welcome first President Michael Drake from the University of California.

Good morning and thank you very much, Senator Laird, nice to see you. I appreciate the opportunity to be here with my colleague from the California State University system to talk about the latest opportunities and challenges for public higher education and for the University of California in particular. Let me begin by expressing my deep appreciation for the long standing partnership the University has with the Legislature and with Governor Newsom.

Over the past several years, the University of California has been laser focused on ensuring that we are serving the people of California in all that we do, from educating growing numbers of California undergraduates, to enhancing the pipeline of teachers and healthcare workers, to expanding our health enterprise so that it can continue to provide world class health care and to reach our underserved communities. The support we've received from the Legislature and the Governor has been key to our success in these areas.

We recognize, of course, that this is not a typical budget year. The state is facing a growing deficit and continued fiscal uncertainty, and that means that all of you and the Governor are in the unenviable position of having to make tough choices about next year's budget. We're tremendously grateful that in his January budget introduction, Governor Newsom deferred, rather than eliminated altogether the 5% funding increase that he has pledged in the multiyear funding compact with the University.

We stand ready to work with all of you, our partners in the Legislature, to preserve that funding so that we can continue to expand access, improve our offerings, and serve the State of California well. As an example, the increases in funding that you have provided over the last few years have translated into very positive enrollment numbers. Fall 2023 represented the University's largest undergraduate student population, including a record number of California residents.

We enrolled the smallest number of non-resident students since fall of 2017, with a three year decline, now standing at 16.6%, thanks to state support. For the second year in a row, we also reduced non-resident enrollment and increased California resident enrollment at UC Berkeley, UCLA and UC San Diego. Undergraduate enrollment of underrepresented groups also increased compared to last year as we continue to enroll more community college students than any University of our caliber in the nation.

This is very reflective of our strong partnership with the community college system and one that we are very proud of. There's reason to be hopeful about future enrollment as well. Just a few days ago, the University published data about undergraduate applications for fall of 2024, and overall those application numbers increased by 1.5% compared to last year.

1.5% is about 4000 additional student applications compared to last year, largely driven by a rise in applications from California residents, community college transfer students, and students from historically underrepresented groups in higher education. So I want to thank the State Legislature and the Governor for making these accomplishments possible. We will continue to increase our enrollment for the coming academic year. Beyond enrollment growth, we are making progress on other compact commitments, I'll share a few highlights.

First, the compact calls on us to improve the affordability of the University by continuing to expand debt free pathways for undergraduate students and by reducing nontuition expenses such as textbooks, housing, food and transportation. I'm proud that we've been funding our own debt free program for two years now with expanded UC financial aid and the state's Middle Class Scholarship program. And it's working. Our graduating class in 2022 had the lowest proportion of students with debt in the past 10 years.

More than half of California students graduate entirely debt free. In the area of student-- and those who graduate with debt actually graduate with debt that is lower than the national average substantially. In the area of student housing, specifically, our campus has continued to build more of the infrastructure we need for our students. As you know, our campuses reside in some of the state's most competitive housing markets, so adding student housing is a critical priority.

Since the launch of our student housing initiative in 2015, the University has added more than 28,000 beds across the system, and right now we are building or ready to construct more than 15,000 new student beds. Of these, 6,700 beds will be ready by the fall of 2025. Second, the compact calls for the University to fully participate in the implementation of the cradle-to-career data system. The University took the lead in drafting initial data specifications to support cradle-to-career and other segments.

We also served on the Cradle-to-Career Information Security Task Force to help build out effective information security practices and policies, along with testing and a validation plan. As of last fall, we are also sharing student data with the cradle-to-career system.

This year, the University is also requesting $3.5 million in ongoing funds to establish and support enrollment for two new health sciences programs modeled after our prime or UC programs in medical education started about 20 years ago, which have dramatically increased the number of physicians serving underserved populations in California, something we're very proud of. These new programs would expand an innovative training curriculum focused on addressing healthcare workforce shortages and meeting the needs of California's underserved populations more broadly.

And Seija will be talking a little bit about those later on, so we appreciate that support as well. I will close by reiterating how much we appreciate the strong partnership we have with the State Legislature. We know that managing so many budget requests is challenging, and we're grateful for your recognition of the importance of public higher education to the future of our state. I'm happy to be here and look forward to questions later on today.

Thank you very much. And just before we move to Chancellor Garcia, I'm going to ask that we call the roll.

[Roll call]

We have a quorum. Thank you very much. Then I'm going to welcome the Chancellor of the California State University system, Mildred García.

Chair Laird and Senators, thank you for the opportunity to speak to you today. Since this is my first time appearing before the Committee, I'd like to begin with a few introductory remarks. I began my tenure as Chancellor on October 1 of last year, serving as the CSU's 11th Chancellor. The first Latina in this role is one of my greatest life honors. In so many respects, the CSU story mirrors my own. I see myself in the students we serve.

I am a first generation college student, the daughter of humble and proud parents who migrated to Brooklyn from Puerto Rico with five of their seven children. I was one of those oops babies. I grew up in a poor and beautifully diverse neighborhood near the factories where my parents worked. But while my neighbors were diverse, their dreams were the same to create a better life for future generations.

Thanks to my parents' vision, selfless sacrifice, and their belief in the transformative power of public higher education, I have lived that dream, and that's the reason I chose to return to the CSU. It is because of the work we do and the students we serve. America's new majority, the first generation students, students of color, low income students, and adults looking for new and brighter opportunities.

As Chancellor, I now have the profound honor to lead the nation's largest and most diverse four year university system, its greatest driver of social mobility and an engine of economic vitality for the State of California. While my tenure is only nearing the end of its fifth month, that short time has demonstrated to me that the CSU is on a steeply upward trajectory in building positive momentum. The CSU stands alone among other systems in its size and scope.

We are one system, but our 23 universities are as diverse as our great state and its citizens. In their regions, our universities serve as anchor institutions, leveraging their human, intellectual, and fiscal resources to enhance the social, cultural, and economic prosperity of the communities that they serve. Many of our students are place-bound, or, more accurately, place-committed and reside near the campuses they attend. After graduation, 80% of our students continue to live and work within a 50 miles radius of their alma mater.

They are the teachers, the engineers, the caregivers, the business leaders, civic leaders, and legislators. The investment we make US legislators funding the CSU, and we the University, through academic program and holistic student support, is a direct investment back into not only our students but the communities across California they proudly call home and go on to serve. Like Michael Drake and my friend, I know these are difficult times, fiscal times, for the state. You are faced with many competing needs and an equal number of difficult choices.

But allow me to underscore why the state's ongoing investment in the CSU is so vitally important. First, the fiscal reality is that CSU is heavily dependent on state funding. Unlike other educational institutions and systems, we essentially rely on only two, and only two revenue sources, the state's general funds and student tuition and fees.

We are facing increased costs from recent collective bargaining agreements, rising health insurance premiums and costs associated with our steadfast commitment to strengthen our Title IX and other antidiscrimination programs, and to achieve full and timely compliance with NAGPRA and Cal NAGPRA. Combined, these additional costs total more than $300 million. We plan for these additional expenses in reliance on sustained state investment.

Without the funding identified in the Governor's January budget proposal, the only source of added revenue we can count on for operating costs is $98 million from our new tuition plan. The balance of our new tuition revenue, 49 million, is rightfully committed to financial aid so that our most vulnerable students will continue to have the full cost of their tuition covered. The importance of sustained state funding is not just about dollars and cents.

It is also predictability and our ability to appropriately plan to meet the needs of our diverse students. Considering both the governor's multiyear compact and the five year tuition plan we adopted last September, our revenue projects enabled us to reach multiyear contracts with our labor unions. As you know, these agreements will reach after very difficult negotiations, but we believe they are reasonable and that they provide fair and competitive compensation to our world class faculty and staff who are so foundational to the success of our students.

These contracts also include increased parental leave and a return to salary steps, both of which are a priority of the Legislature. I am committed to the long term financial sustainability of the University. We must bring our costs in line with revenues. The Chancellor's office and each one of our universities have already begun the challenging and often painful process of finding ways to cover our additional costs, using reserves if required and appropriate, but more often by making the hard decisions that will translate into ongoing savings.

Please hear me when I say we are stretching. We are doing our part. In addition to deploying difficult cost containment strategies at both the University and system level, we are also introduced key efficiency strategies, including an enrollment target and budget reallocation plan that will better align funding resources with the realities of shifting demographics and student demand, and we are identifying additional collaboration opportunities among our universities to further reduce costs. But without sustained state funding, this work becomes exceedingly difficult.

Our progress in mission critical areas will be slowed to the detriment of our diverse and deserving students. When students enroll at the CSU, they expect they will receive the quality academic programming and student support they need to graduate in a timely manner. These cannot be turned on one year and off the next due to volatility in our ability to pay for them. Predictability is as important a currency as money itself.

Despite the foregoing, I am proud to report the CSU has emerged from a period of challenge and transition and is now on a steep upward trajectory. The CSU's flagship student success effort, Graduation Initiative 2025, has led to an all time high in graduation rates and for students from all backgrounds. Our four year graduation rate has nearly doubled since 2015, resulting from 19% to 35%. In fact, the CSU has produced a cumulative total of more than 150,000 additional degree holders since this initiative was launched.

And although equity gaps have proven stubborn, the CSU is addressing them head on by implementing an equity action plan across all 23 universities. Improved graduation rates also mean improved access for future students. We are also closing the gap towards the state's enrollment targets. Contrary to recent media reports, enrollment for the current year is up 2%, more than 7500 students over 22-23. This was achieved through intentional work to retain and support continuing students. Additionally, we enrolled the largest freshman class in the CSU's history.

More than 64,000 Californians and undergraduate applications for 2025 are up over the prior year, signaling continued momentum upward. The CSU is a model for serving America's new majority, 21 of our 23 campuses are Hispanic serving institutions and the majority are Asian American and Native American Pacific Islander serving institutions. We recently completed a systemwide inventory of existing efforts across all 23 universities to support black student success.

The resulting report assesses the many programs in place, highlights current areas of strength that can be scaled across the system, and sets forth University action items that align with the recommendations of the CSU's black student success report, action items that will be implemented over the next 18 months. We are committed to and making great strides in turning weaknesses into strengths, including bolstering our University's Title IX and other antidiscrimination, harassment, and retaliation programs.

Guided by authentic consultation with Native American tribes, we are prioritizing the timely and respectful repatriation of Native American ancestors and cultural items held on our campus far too long. We continue to collaborate with community service providers and across higher ed segments to identify and scale high impact practices. These examples and many more underscore an undeniable positive momentum for the CSU, a momentum that has me optimistic about the CSU's future. However, I must emphasize that sustaining this critical momentum requires the necessary ongoing resources.

The CSU asks for your support in two key areas. First, because of the reasons I outlined earlier, we ask for your support in continuing to honor the funding set forth into multi-year compact, either as originally structured or as modified in Governor Newsom's January budget proposal. And second, we ask your support for an education facilities bond that includes higher education so that we can bring our buildings, more than half of which are over 50 years old, to modern academic standards and to address safety and accessibility issues.

I leave you with a commitment. I commit to you that the CSU will continue to demonstrate that resources entrusted to us are not an expenditure but an investment, an investment with dividends measured in social mobility and more vital communities, and empowering California's future diverse and educated workforce. Our business community's greatest competitive advantages is all of that, all at a scale only the CSU can provide.

An affordable, high quality Cal State degree is a private good, and it is a public good and worthy and a necessary investment in both strong and very challenging economic times. Chair Laird and Senators, thank you for the opportunity to speak with you today and for listening to me. Thank you.

Thank you. An auspicious maiden appearance. Thank you. And we're going to move to the Department of Finance.

Chair Chris Ferguson with the California Department of Finance. I'll keep my remarks rather brief. The Governor's Budget proposes two deferrals. The deferrals represent a deferment of the planned investments of 5% in the CSU and UC pursuant to the compacts. That reflects roughly 228 million for the University of California and roughly 240 million for the California State University. We remain committed to the overall goals of the compacts.

We remain committed to the enrollment targets in the compacts and to the extent the segments may have been under-committed to getting back to those targets over the course of the compact as well. So with that, I'll conclude my remarks.

Thank you very much. We'll move to the Legislative Analyst.

Jennifer Pacella, Leg Analyst Office. So, as described, the governor's main proposals for UC and CSU this year are the deferrals. As you've heard, what the deferrals do is it effectively delays the third year compact payments and then come 25-26 provides a one time back payment as well as doubling up year three and year four ongoing funding in 25-26. So while UC and CSU wouldn't receive general fund augmentation in 24-25 they'd be expected to spend at a higher level.

Though neither segment has finalized their plans, both have indicated that they would likely respond by drawing down their uncommitted reserves. As you know, we recommend rejecting the deferral proposals and holding funding and spending flat in 24-25 for both segments. Come 2526 if the state budget condition has improved, if the deficits have been addressed, the Legislature at that time could decide what General Fund augmentations to provide. We have several concerns with the deferrals.

One concern is that just paying bills late is generally considered bad fiscal practice. Another concern is that until the state pays the Bill, UC and CSU are supporting this higher funding with their own resources. As I indicated, both are likely to use uncommitted reserves as of the close of last fiscal year. So June of 23, UC was reporting that it had total core reserves of 1.4 billion, of which 238,000,000 were uncommitted reserves. Those uncommitted reserves equate to 9 days of operating expenses at CSU.

CSU reports over that same time period that it has two and a half billion in total core reserves, of which 766,000,000 are uncommitted. In CSU terms, that equates to 1.1 month of operating expenditures. So both UC and CSU right now have operating expenditures that are below a minimum of two months, which is what the government finance officers recommends as a minimum Reserve level.

In addition, if the segments borrow, then they're going to be accruing interest costs rather than actually using resources for instruction and other operating costs. Deferrals also put both the segments and the state at risk. So come 24-25 the state would have this price tag of one and a half billion between the two segments, between the back payments and the doubling up of ongoing resources.

So it places the state at risk of not being able either to provide the payment and having to delay it even longer, or cutting other state programs to find room for that one and a half billion.

The segments then could potentially be facing cuts in 25-26 if the state can't come up with resources to provide that one and a half billion, and they'll be doing so having just propped up their funding in 24-25 and entering with fewer reserves because they will have used reserves in the budget year even without a General Fund. Augmentation. In 24-25. Both segments will have some additional revenue to cover some spending priorities. So they've mentioned that both segments are raising tuition. For UC.

This will generate 117,000,000 in additional tuition dollars. UC will generate about 99 million in additional tuition dollars. UC has also identified some alternative Fund sources that they're using, like investment earnings. Those total 105,000,000. So with those additional resources, both segments can do again some spending increases, but just not everything that they're desiring to do. UC and CSU are in a more advantageous fiscal position than some of the other state agencies you'll hear from that rely solely on General Fund.

They do have some non state resources to turn to. Beyond the deferral, the Governor's Budget doesn't have many budget solutions that involve UC or CSU. To try to help the Legislature balance the budget, we worked with the segments over the last few months to try to identify if there were other budget solution opportunities. We focused primarily on funds that hadn't been encumbered or spent from recent initiatives. Over the past three years, the state provided UC with 1.31 billion one time General Fund for about 50 initiatives.

About two thirds of those initiatives have some remaining funding. In total, about 325,000,000 as of January of this year. At CSU, the state provided 1.11 billion one time General Fund over the last three years for 50 initiatives. Very little of that money remains available, but some still does. So 26 million from programmatic CSU initiatives 145,000,000 from capital projects that were cash funded. So we do recommend reverting these one time funds. In total, again is 325,000,000 for UC, 171,000,000 for CSU.

Reverting the one time funds would likely be less disruptive than cutting ongoing programs. It also allows the state to retain more of its reserves for next year. Thank you.

Thank you very much. Appreciate all your presentations. And in a little bit we will get to the questions on the substance of the budget. For now, I am going to recognize the chair of the Budget Committee, Senator Wiener, for questions.

Thank you very much, Mr. Chairman. I appreciate the courtesy. I'm here not in my capacity to chair budget, but as a Senator who represents several campuses. Frankly, the best UC and the best CSU.

Yeah, we'll be putting that to vote. And you are outvoted.

So, first of all, I just want to thank you for the presentation today and thank you for your work. I am a huge fan of both the CSU and UC systems. I think these two systems are. They're the crown jewels of not just the California higher education system, both public and private, but frankly, nationally and internationally. We pioneered public higher education as a pathway to the middle class. And I'm just so grateful for both systems. I'm also a big fan of both of you personally.

I think you're doing incredible work, and I'm just very grateful for everything that you do. So one of the greatest strengths of both systems is that this is a place where students of diverse backgrounds can be together on campus and classrooms and activities and agree, disagree, have different experiences, overlapping experiences, and still be part of a campus community and say things that make other people uncomfortable at times and just have that kind of free speech and collaboration. And it's incredibly important.

As I've talked to both of you about and as you've heard from very many people, I assume, I and others have a lot of concerns about what's happening not on all of the campuses, but on some of the campuses now, and what that means for not only Jewish students, but definitely for Jewish students in terms of whether they feel safe on campus and many do not, whether they feel like they can express who they are, and there are students who do not feel comfortable wearing a Star of David or kippah on campus, whether they can gather safely without being harassed, intimidated, assaulted, evacuated with security, whether they can just be who they are, whether they can invite speakers to campus without those speakers being harassed and intimidated and threatened.

I want to be clear that when I meet with students who say I don't feel safe wearing a kippah or a Star of David on campus, that absolutely breaks my heart. It would also breaks my heart if a Muslim student told me I don't feel safe wearing a hijab on campus, or when a trans student tells me I don't feel safe expressing my gender identity on campus. It is absolutely heartbreaking.

But I have increasingly been hearing from Jewish students that they do not feel safe on campus, and that's unacceptable. And I know that you agree that that is unacceptable. We cannot allow toxic environments on campus to stew. And I'm grateful that the Office of the President and Chancellor have been proactive on this. This did not start on October 7. It existed before, but October 7 poured, and the resulting war in Gaza have poured lighter fluid on this.

The antisemitism that we're seeing on our campuses, and not only one campus, but on our campuses, is something I never thought I would see in our lifetime. And many Jews would tell you the same. People cannot believe it's happening. Again, I want to be very clear. I'm not talking about protests against the war. I'm not talking about the behavior of the Israeli government or the Netanyahu Administration. I respect people's First Amendment rights to protest against the war.

It is, I think, warranted to protest against the level of death and destruction that is happening in Gaza, just as it is warranted to protest against the death and destruction that happened on October 7 and against the hostages that remain in Gaza today. This is a humanitarian catastrophe on so many levels for both Israelis and Palestinians. I've been very vocal about that, and I repeat that today. That's not what this is about.

When I call out antisemitism on our antisemitism on our campuses, I'm talking about when protests cross a line, when people are targeted because they are Jewish or associated with a Jewish organization, and when harassment, intimidation, and even violence occurs. And I want to be clear, we have seen violence. We know that recently at UC Berkeley, two Jewish students were forced to seek medical attention after an event that featured an Israeli speaker was absolutely, violently targeted by protesters.

One of the Jewish students was choked by a protester. The other one, I believe, had their hand or wrist injured. The protesters broke into the theater, breaking the glass. Jewish students were spat at, were called Nazis and dirty Jews, and campus security was overwhelmed. And ultimately, these Jewish students at UC Berkeley had to be evacuated via a tunnel. I just want to stew on that for a moment. Jewish students had to be evacuated via a tunnel at UC Berkeley in 2024.

At UC Davis, shortly after October 7, an assistant Professor tweeted about basically killing, murdering zionist journalists, quote-unquote, and talked about knowing their addresses and where their kids go to school. At UCSF, a Doctor by the name of Rupa Maria has been posting vile anti-Jewish conspiracy theories about quote-unquote, Zionist doctors, read Jewish doctors, shouldn't be treating patients of color.

She also effectively justified October 7 in another tweet and talked about said the following quote, may Jewish people do their healing so they can stop oppressing, so Jews as oppressors. And then a number of other tweets like that. And this is a faculty member at UCSF who also treats patients on behalf of UCSF, saying those things about Jews who could be her residents, who could be her patients. And that's what we are seeing.

At CSU San Bernardino, a Professor posted an image of Netanyahu covered in blood, eating children, with the word kosher emblazoned above the image of him eating children. Again, I'm no fan of Netanyahu, but to link this to Judaism in that way was horrifying. The UC Ethnic Studies Faculty Council put out a statement barely a week after October 7 that essentially justified October 7 as a legitimate form of freedom struggle, the mass murder and mass rape of Jews, and taking of hostages.

At Cal Poly San Luis Obispo on October 8, while Hamas terrorists were still in Israel, in Israeli communities, we saw two Jewish students had death to Israel screamed at them. We've also seen, because antisemitism constantly morphs, the use of the word Zionist and Zionism as a substitute for Jew. Zionist means someone who believes in Israel's existence as a Jewish homeland. That's what it means. It describes 90% of Jews. And so when people use the word Zionist, you have to ask, what does that mean?

We know that before October 7, there were a group of organizations at Berkeley law that banned quote-unquote zionist speakers from speaking to their groups. We know that we've seen more recently at UC Santa Barbara, a student dorm that had a mezuzah affixed to it, which of course is a Jewish cultural and religious object. I have a mezuzah affixed to both my home and to my office door and the message Zionists not welcome with an arrow pointing to the mezuzah. Sometimes people tell on themselves.

This came shortly after the UC Santa Barbara Multicultural Center was plastered with posters saying that quote-unquote Zionists were not welcome, and even specifically targeting a Jewish student, naming her and saying, you can run, but you can't hide. At UC Berkeley, a prominent environmentalist, a member of the Oakland City Council who actually supported a ceasefire resolution, was disinvited from speaking to a class because he was a quote-unquote Zionist because he believes that Israel should exist. This dynamic is not unique to guests of universities.

Jewish professors have also become frequent targets. At UCLA, a letter was submitted decrying faculty and staff who penned a letter in opposition to the October 7 attack. They were attacked for criticizing October 7. At San Jose State, a guest Professor from CSU Long Beach was heavily protested for giving a talk about the idea of a two-state solution. So he advocating for an independent Palestine.

But he was labeled Zionist and therefore was heavily protested. This Long Beach professor is now, just as of a few days ago, being harassed with flyers labeling him as a genocide denier, colonizer, Zionist, and white supremacist. Again, demonization of Jews on campus. So we also, when these incidents happen, the campuses issue statements. We know some of these statements have fallen short. Those recent UC Berkeley and UC Santa Barbara incidents that I described, the campus statements that came out immediately afterwards did not use the word, Jew.

It was basically an all-lives matter statement without referencing that it was actually Jews who were being targeted. Both campuses did revise their statements, and I'm very appreciative of that. I also just want to acknowledge that the recent incident at CSU Long Beach, the President put out an excellent statement immediately condemning it for what it was, antisemitism. And I'm very grateful for that. I'm going to stop there because I could go on for hours about listing incidents. I'm obviously not going to do that.

That was just the tip of the iceberg that I listed. And so, again, I want to thank you for the work that you're doing, because I know that both of you are engaged, and I'm super appreciative of that. I just want to ask if you could talk about what UC and CSU are doing to ensure a safe campus climate, to make sure that some of these incidents don't happen again, and to protect free speech.

Of course, free speech for protesters, but making sure that free speech does not cross a line and end up preventing others from having speech on campus. So if you could just talk about steps that are being taken.

Thank you. Senator Wiener. Let me begin by saying, first and foremost, hate, bigotry, antisemitism, and all of these horrific things have no place in the CSU. I think you know that about me. From the very start, and I started on October 1. This happened on October 7. And from the very beginning, I've instructed the presidents to prioritize that our campuses are welcoming for students of Jewish faith and all students to make sure that they are welcoming environments.

We've provided resources and support to help these presidents and their teams. We also have regular meetings, not only with the presidents, with the vice presidents, directors or directors of diversity, equity, inclusion, student affairs, to ensure that they are monitoring and ensuring and getting out the word that we are there for all students, especially those that are being targeted at this point, the Jewish students. So we're doing that as well.

One of the things that I'm really proud of is that we had four presidents give examples on how they are managing this in front of all 23 university presidents, learning from each other about interfaith councils, working with Hellel, teach-ins, et cetera, bringing in outside experts to speak to students as an educational environment, to have exactly what you're talking about, which is how do we live and work together, learning from each other and understanding that this hatred has no place. This bigotry has no place.

And last month, we had an in-person and in-depth meeting with all our presidents, thoroughly reviewing federal nondiscrimination practices, making sure that presidents have this toolkit that is being delivered to all vice presidents and all directors that have a point to talk to the students. So this toolkit will help. Of course, we have our campus police monitoring. We're much more present.

We're ensuring that our people are out there outside watching what's going on on our campuses, and we're having counseling and mental health for anybody that needs it. And our doors are always open for students who feel unsafe. I'm just hoping that they will tell us so we can make sure that we can address it. I hope that answers your question.

President Drake.

Yes. Well, thank you. I appreciate your comments, Senator Wiener. We've had a chance to speak about these issues, and I echo your comments from beginning to end and also those of my colleague, Chancellor Garcia. Our campuses need to be safe places for people to live and to work. You mentioned students who feel harassed and threatened, particularly Jewish students, in these last five months.

This also is Jewish staff and Jewish faculty as well, who sometimes feel unsafe on campus, particularly in the presence of demonstrations, which can be outrageous and have crossed the line to anti-Semitism on multiple occasions on multiple campuses in the University of California and other places that we've seen around the country. We do several things. First, again, as the CSU, we bring our chancellors together on a regular basis, our regular meetings, and we've had actually special meetings on these particular topics over the last several months.

I have issued statements that you, in fact, referenced. You mentioned rebound statements from faculty criticizing the position that the University has taken. Those are my positions that they were criticizing. And we've stated that antisemitism has no place on our campuses, and we'll do everything we can to prevent it and to root it out and to call it out when we see it, to call it out as such.

Actually, regents adopted a policy several years ago, Regents Policy 443 which says that antisemitism and other forms of discrimination have no place in the University, and the regents called on University leaders to challenge antisemitism and other forms of discrimination whenever and wherever they occur. That was done specifically to call it antisemitism per se as an area of focus, and we take that quite seriously, and we do our best to act on it.

In these last several months, from my office, we've developed a $7 million fund. The campuses apply for this money to use for programmatic support, for communications, for support of students, for other things that will address antisemitism and other forms of discrimination, but specifically, antisemitism called out on our campuses. We divided this into two tranches. The first tranche went out a couple of months ago. We had 55 proposals from the campuses on things that they want to do, and these are happening on all the campuses.

We're pleased about that. The second Sebri's requests have arrived at the office and are being reviewed now. And these are meant to support dialogue and support building a sense of community when we have so much. The community is so fractured. I will say about UC Berkeley that you mentioned the entirely unacceptable event of three weeks ago, and we've talked about the specific nature of that event. Criminal investigations are underway, and that's appropriate.

I, as with you, was pleased that the statements that came out later in the week were more focused on exactly what the incident was. I'll say that we've had both a protest and another speaker from the same position on, another speaker speaking in favor of the actions of the Israeli government and doing everything that it could to protect Israel. But controversially, the same as the speaker who was rescheduled that second speech was able to take place. There was better planning, I think, in advance of that.

And so the University's commitment to free speech and protecting speakers and protecting audiences that wish to speak is manifest, and that's the normal policy. We'll continue to work on these things. We have an interesting circumstance at our campuses. We celebrate so much diversity and inclusiveness, bringing people from all parts of the map to come and work together and to learn together, but also on our campuses to live together. We have 100,000 students that live on our campuses.

By having that diversity, that leads to the rich tapestry of ideas and points of view. But not everyone agrees and we have friction between groups from time to time or between individuals from time to time. And we have, as a daily commitment to do all we can to protect and support the safety of our individuals and also the feeling of being at home and being welcomed in your home, for every student, for every faculty, for every staff member, and we'll continue to be committed to that.

Thank you. I have just one more brief question, then I'll be done. And Mr. Chair, I'm very appreciative of the time. So we have seen both departments, individual professors, and also within classrooms and teaching not just biased but historically inaccurate statements I'll post on our official websites and also in curricula in classrooms. And this is also true, frankly, in some K through 12 settings, teaching just ahistorical information about Israel, about the Jewish people's connection to Israel.

And really curricula designed, frankly, to demonize Jews and to demonize any relationship between Jews and Israel. We know that Israel is home to 7 million Jews. One-half of all Jews on the planet live in Israel. Jews have had a connection to Israel for thousands of years. Palestinians also have a deep connection to the land. And I condemn people who try to erase that connection.

And I'm just curious how, and I know it's complicated because of academic freedom, but academic freedom has its limits when falsehoods are being taught. I'm just curious if you have any comments on that general issue.

Yeah, I'll say that as we look at what individual faculty members teach on individual circumstances, we find that there are times when faculty Members have positions that are outrageous or unsupportable. Broadly, that it's a rare event. We have tens of thousands of lectures that happen, more than that, hundreds of thousands in a year. And broadly, the faculty itself sees the privileges of academic freedom being balanced with the responsibilities of academic freedom and academic accuracy.

And the faculties themselves, then, are the, over the years, that's the ecosystem in which these things are balanced out. We don't prescreen, we can't correct, we can't guide everyone's position when we hear of things that are inappropriate or inaccurate. We do our best as a system to balance those things with actual truth. You know, there's a line that Clark Kerr said years ago that I think of a lot. He said that our job is not to make speech safe for students.

Our job is to make students safe for speech. And we try to educate people to be able to hear things, even when those things are counterfactual, and to be able to process those and respond appropriately to them. When we hear things that are inaccurate or not truth, we try to counteract that with more truth and just continue to push forward in that way.

Thank you.

Yeah, I'd like to add to that. I think that in addition to that, our diversity, equity and inclusion, and our Students' Affairs and the Provost Office does a lot of professional development on diversity, equity, and inclusion that would include things like antisemitism, et cetera, that we're hoping that faculty will attend and learn from. And once a small group starts to go, you start to hear across campuses, and I used to do this at Fullerton, that this is a good thing to go to.

And more and more faculty will go. And also, you know, to continue to say that we do have a responsibility as academics to have difficult discussions, but to make sure that it is accurate. And so we make sure we say that as well.

Thank you. Thank you, Mr. Chair.

Senator, Min, you asked to be recognized.

Thank you. I want to thank my colleague from San Francisco for bringing this forward. And it is very troubling to see the rise in hate on college campuses around the state and around the country, and in particular the rise of antisemitism, particularly following the horrific attacks of October 7. But I understand this is a tough debate as well. President Drake and I were back at UC Irvine together when Erwin Chemerinsky was the dean of the law school there.

And I know that Erwin has talked quite a lot and written quite a lot about college speech, freedom of speech. And certainly, as someone who is part of these communities, I believe strongly in academic freedom and freedom of speech. At the same time. I think it's very clear, and I think my colleague from San Francisco articulated this very poignantly, that antisemitism should have no place on college campuses. Racism, calls for genocide have no place in our University community.

At the same time, I want to be clear. Islamophobia and hate of all kinds, particularly when these take the form of activities like harassment that jeopardize the feeling of safety and security, have no place.

And I know that sometimes finding that balance is difficult because we do have a core mission of any higher education institution, this belief that we should have freedom of expression, and so trying to articulate guidelines and rules and markers for when this blurs the line, when it crosses over the line into something that's unacceptable, I know can be challenging.

And so I guess my question to you both, and that was a long statement, but I right now am prepared to support SB 1287, the legislation that's being proposed by my colleagues in the Legislative Jewish Caucus, to kind of force the hand here and dictate that the CSUs and UCs shall create certain guidelines. And I think, by the way, they've struck the right balance. I've had the chance to read a draft of what they've proposed on some of these competing principles.

But I guess my question to you is, would legislation be helpful? Do you feel like you're able to do this on your own without legislation? Because I think my colleagues are concerned when they see, and I'm concerned when we see the rise in hate on these campuses. So I guess my question to you is, is this helpful and how so?

I'm sorry. Let me begin by saying that we've already started doing a toolkit on this for what's acceptable and what's not. We had this presentation with all the presidents maybe a month ago, recently. We are having our people of diversity, equity, inclusion, as well as our attorneys give this cool toolkit to our campuses to ensure that this does not happen again. We stand strong on anti-Islamophobia, every sexism, racism, everything that we are strengthening, strong, especially now. Especially now.

Our campuses need to be, as Senator Wiener said, the educational laboratory where students live, work and debate together tough decisions. And it's up to us to make sure that we can manage that.

And that's why we think the toolkit is wonderful and we're hoping that everybody puts it into place and that we will continue. We will continue to have these difficult dialogues, but we have to make sure we manage it and that we protect all of our students, including our Jewish students and our Islamic students as well, and all our students, quite frankly.

Well, pardon.

Let's take more time. I would just echo what Chancellor Garcia said. We work on these things on a daily basis. We have actually, three of our campuses are working with Hillel International on a program that Hillel International has to train leaders. Fourth campus is signed up to begin next month. And the other five campuses, other five undergraduate campuses, actually are speaking about having a special program developed just for them to help continually retrain and refocus and resensitize our leaders as to what is happening.

I'm actually meeting tomorrow on this with Hillel and meeting on Monday again with another former member of this body to talk about ways that we can continue to push these things to the front of our minds. You spoke, Senator, men, about activities that were taking place at UCI 15 years ago, and we were actively involved 15 years ago with those issues.

It led to the formation of the National Free Speech Center, which I believe I'm something of the President of or something, but Dean Chemerinsky and Chancellor Gilman are the co-chairs of. And so it's an ongoing, active thing for us on a daily basis. And it's at the core of our mission and I think really the pedals to the metal on doing everything we can to focus on these areas.

As several of you have said, we are speaking today primarily about antisemitism and the rise of antisemitism over these last several years focused on the rise that's happened after October 7. We have discrimination and marginalization of students from a variety of backgrounds all the time. So we try to keep ourselves elevated every day on these topics.

Yes, Chancellor.

One last thing I'd like to say. When I met with Senator Wiener and Assemblyman Gabriel, we offer that we would love to work together. I think this is something that you know, not only working with experts, but anything you can offer to us that you see we can improve on. We're willing and able.

And if I can, just one quick thing, Mr. Chair. I just want to say that now we're going through a very difficult time in this country in terms of the relations between the Jewish community and the Muslim and Arab and Palestinian communities. It's a time of war. It's just a very tense time. And healing is going to be challenging, but it's so critical. But what's happening now, what I'm seeing with Jews and some of the attacks we're seeing in this country, it's not the same.

But it draws me back to 23 years ago after September 11, what Muslims and Arabs went through and still go through in this country in terms of just suspicion, sort of tagging people with, because you're linked somehow to that and demonizing people. And we saw rises in harassment, intimidation, violence against Muslim and Arab people in this country.

It's just so important that in a really hard time, but that over time, we just all recognize that this hatred, it just takes a lot of different forms and targets different communities, and we have to find ways to have common ground. Thank you.

Thank you. And just to maybe make a closing comment, I would be lying if I didn't say I was slightly apprehensive about this discussion beforehand. And I think it's been very thoughtful, and I think it's been very helpful. I subscribe to your comments, and I'm glad you brought it. And I think the responses were good.

And I think maybe it's hindsight, but the college presidents on the East Coast could have really learned from how you talked about this today and how you have acted in a way that has been very good. And I think Senator Wiener and Senator Min have talked about the fact that as present as this is and as unjust as some of the things are that is going, it is not in isolation from other things that are going on.

And I would like to just call out that President Drake has been the object of some things to his property and potentially his person in a way that that needs to be called out as well. And that needs to be where there's a line that somebody that is a leader should not be subject to those acts of racism and worry about his own personal security or the security of the place that he lives that we support.

And so let's just acknowledge that this is an ongoing discussion and an ongoing discussion that because the events will be ongoing in different ways, that will trigger different pieces of this and we will have to adjust.

And interestingly, later in the agenda on point, we'll be talking about the diversity of enrollment, and we'll be talking about the Native American repatriation of Graves and other things that are our ways to try to deal with injustices and issues of diversity that in many places, you are the front lines for. So I really appreciate this exchange. I appreciate everybody's participation.

And as I announced at the beginning, we usually have comments reserved to the end, but there's anybody here about this item that wishes to address us? Could I see your hand right now? One, two. Am I missing anybody? Then I will allow each of you on this subject to speak for up to 1 minute at the podium. So please come forward and address us.

Thank you, Committee. Thank you, Senator Wiener, for opening up this conversation and for this important topic. My name is Rabbi Adam Naftalin-Kelman. I am the The Rosalinde and Arthur Gilbert Foundation Executive Director of Berkeley Hillel, the Jewish student center that has been on the UC Berkeley campus since 1927 and has been part of the- and it is part the Hillel International movement that serves over 180,000 Jewish students across campuses in North America and throughout the world.

In the last 15 years, as the Executive Director, I have seen the expansion of Jewish life for students to engage their whole Jewish identity through many avenues, including Hillel, multiple educational opportunities, social academic centers, Jewish communal living, and, in fact, a few years ago, a co-founder of the anti Semitism education initiative at UC Berkeley. Even with all of these opportunities, Jewish students are not able to fully engage or express themselves because they are experiencing increased exclusion and harassment.

While the University Administration has worked to support Jewish students, they must do more. After the violent protest on February 26, as was referenced earlier, Jewish students deserve an Administration that will hold those involved fully accountable and enforce University policies. And even at this moment, there are University policies that are being violated and they are not being enforced.

The tireless work of building a vibrant Jewish community at UC Berkeley and across all of the UC system and the Cal State system, who my son hopefully will be going to next year, will be for naught if Jewish students cannot fully express themselves safely as Jews as a part of a Jewish community without fear of threat on their identity.

But not only should they be tolerated and safe and accepted, but they should be celebrated for who they are, Members of a diverse community that add something to higher ed. Our Jewish students deserve your strong leadership, not just words, but strong actions to ensure that they can fully express their Jewish identity. Thank you.

Thank you very much. And we have one other speaker here.

Thank you very much, Senator Laird. Good morning, everyone. My name is Nancy Appel and I'm with the Anti-Defamation League. I've had to revise my prepared remarks as this has gone on because Senator Wiener, so poignantly, as you said, walked us through, frankly, what's just been a parade of horribles on campus. Anti-Semitism has spiked alarmingly throughout the state and on its college campuses. We've tracked over 100 antisemitic incidents in California campuses since October 7. And that's just what we know about what's reported to us.

And these include assaults, vandalism, harassment, and rallies that use antisemitic rhetoric. The only extra I will add to what Senator Wiener talked about was that the event at San Jose State University also was shut down. So the heckler's veto won out. And I'm not saying it's causation, but very shortly after that event, the Jewish studies Professor who had sponsored the program suffered a heart attack and won't be able to continue teaching this year for this term.

So our ask is that is for administrators to make plain that there will be real consequences for antisemitic discrimination and harassment, full stop. This means enforcement of all nondiscrimination and anti-harassment policies, plus meeting out disciplinary measures where warranted. We're asking for both Word & Deed for them to stand up for their Members of their Jewish communities and all Members of the communities on campus. As campus leaders, then here today make requests of the Legislature.

We ask our elected officials to demand that they ensure a safe and welcoming environment for Jewish students, but also for all Members, all students and faculty and staff on their campuses so that they can be safe in their identities. Thank you.

Thank you very much for your comments, and we appreciate the comments and the discussion and the participation. And we know this will be an ongoing discussion. So thank you, everybody, for participating in that today. We are going to return to the subject of the budgets of the CSU and the UC system. And let me ask first, because I think you're still good, but does Senator Min have any questions you wish to.

Yeah, I had two quick questions, and if I have time, maybe a comment after that. And I guess really just want to go back to the 50,000 foot level if we follow the LAO's recommendation here. And I guess, actually, let me preface this by saying I appreciate your leadership, both of you, and I believe strongly in the mission of both your institutions.

And I think you've heard me say this before, but I often quote the Greeks who once were reported to say that "A civilization is great when its elders plant trees whose shade they know they'll never sit under." And to me, the highest form, the most productive form of investment we can make in the future is education. And we're planting trees in our young people to produce people who contribute to our society.

And I know both of your institutions have such a great role to play in California. I particularly want to just shout out the CSUs, because I think you're often overlooked, but you produce such a massive share of our workforce. But we're in challenging times right now, and I personally have heard from, I'm trying to figure out if these are structural deficits we're facing or cyclical deficits and to what extent we're seeing evidence of either.

But I've heard from both sides compelling reasons to think that this downturn might be more than a couple of years. I've heard people who are more optimistic, who think we're going to get out of this in a year or two. But I think, as we have to do with budgets, assume the worst and hope for the best.

And in that context, I'm not sure that the LAO's recommendations are imprudent, but I do kind of want to drill down and ask, if we were to follow those recommendations, what would that mean in terms of student experience, faculty, workforce, things like the deferred maintenance backlog that I know the CSUs are facing. And how would you try to adapt? And I know each of you have different, very different business models, but I just kind of wanted to touch base on that.

I think very large and important question of what does it mean if we're adopting either what the Governor proposes or what the LAO proposes, particularly if this downturn lasts more than a couple of years?

Yeah, great.

It's clear a PhD or an MD doesn't help with your Bill.

With the defective microphone that you're presenting. So a couple of things. So, first, I appreciate your comments, Senator, and also with Chancellor Garcia said, we are a long-term investment. We don't go in yearly cycles. We go in longer cycles, and that our students come for four years. Our faculty are with us for careers. Our research projects take 3, 5, 10 years. And so we can't just turn them on and turn them off. So we have to have a longer time horizon for the things that we plan.

What we are dealing with are two or three things that we're dealing with on a daily basis. One, we're dealing with this very minute. If you go to any of our hospitals, if one of you were to go as a special person in one of our hospitals and need care, you'd be likely, if you got to an emergency room, take hours to be seen, or if you had an emergent condition, had to be treated right away, often hours before you could get to a bed.

Every day here at UC Davis, but in San Francisco, in LA, at Irvine, ec cetra, for these last several years, we're boarding patients in our ERs because there's not room in the hospitals to accept them.

More than that, we turn down about 20,000 patient referrals, transfers a year, nets, transfers from other hospitals, patients in our regions that those hospitals cannot handle appropriately and seek our care for the particular problems they have about 20,000 per year across our system where we could provide the care if there were only space to do that. But we don't have room. And so we're trying to grow our healthcare enterprise to provide more care to Californians who need it as we speak. And that growth requires money.

The rate at which we're able to grow will depend on our funding. So no funding or less funding means less growth, means longer waits, et cetera.

And a quick follow up just for you. I know part of the compact that was important to a lot of us was the increase in in-state slots.

Yes.

Is that something you'll be able to continue doing if we were to, say, adopt the LAO's recommendation?

The increase in insulate slots came because of discussions we had here with you and your colleagues about ways that we could finance the increase in those slots. And so we have done that. We have a decreased number of nonresident and international students and the increased number of California students over these last several years. Thousands more California students. And we have a plan to grow that through 20,000 students over this decade. We're on target for that.

If funding is to stop, then that growth is the kind of thing that we can't continue to do exactly that. Again, I would say that comes from specific conversations we've had here about what we could do if we had the right support. And we believe in that compact. We've moved forward with that, and it's worked quite well. But if it's not funded, then we don't have the faculty, we don't have the facilities to be able to make those slots available.

Thank you for the questions, Senator Min. Let me begin by saying we have tried to look at this, and it's not a pretty picture. As of March 2024, we estimate we would have, like, a $345 million operating deficit in 24-25. If the compact is not funded for scale that is equivalent to 19,600 courses affecting 451 seats, it would affect 17% of our staff workforce and 8% of the faculty workforce. That amount is the entire operating budget of CSU San Bernardino.

We are looking at cost reduction strategies that have to come with really tough decisions. Consolidated programs, defer capital maintenance projects, reduce hiring and eliminate programs positions, increase class size, reduce courses to reflect student demand, reduce part time faculty lecturers, reduce the services levels provided by staff, reduce travel, restructure departments, restrict nonessential purchases. Most everything in our operating budget in 24-25 would not be funded because we only have only tuition to work with.

The possible outcomes could include not grow enrollment at our most in demand campuses. And you heard me speak earlier that our enrollment is going up and we don't want our Californians not to have the access to our wonderful universities. And we would really strand our campuses with many unfunded cost increases. We would have to expand Title IX and CalAPA work at the expense of wraparound student support services and academic offerings. And we would have to strand our campuses with nearly all compensation cost increases. So I think that gives you a picture.

Thank you. I have to leave in a moment, but I just have one quick, unrelated follow up comment I just wanted to raise to President Drake. You and I had a very, very brief discussion about this, but you and I talked a few years ago about the decision for the University of California to end standardized testing.

And if I'm remembering at that point in time correctly, I think you assured me we had a lot of different proxies and metrics that could be used to predict student outcomes and performance that could end up being superior to standardized tests. I will just note that since that time, MIT, Yale, Brown have resumed the use of standardized testing. The University of Texas Austin just resumed it and eliminated that optional no test requirement prong.

And they released a lot of data that I actually found very, very interesting. Finding that on average, the students that did not submit test scores performed 0.86 on their GPA, almost a full letter grade worse than their counterparts who went under the standardized test regime.

I was on the Admissions Committee for a year at UC Irvine law school, and I'm aware of some of the data that we have aggregated that really strongly suggests that standardized tests are a strong predictor of student outcomes and performance. I understand,- I think the reasoning behind trying to move to a different proxy, and I applaud the goals here. I think equity is really, really important in higher education, particularly given the long history of discrimination of failed outcomes among marginalized communities.

And I applaud the effort to try to lift people up. At the same time, if we're ending up with an outcome where you have students underperforming, where it potentially impacts graduation rates after they're admitted, I do have concerns about that. And finally, I guess I just mentioned, as an Asian American, as Vice Chair of the API Legislative Caucus, I have received a lot of concerns about from Asian parents and students who believe that this is a backdoor mechanism of discriminating against API students.

And I can just tell you that sentiment is very widespread. And I think I would be remiss if I didn't mention that particularly given the decision by a number of prominent institutions to reverse on that. So I guess I'd just be curious. I don't have time for a response, unfortunately, because I have another commitment. So I don't want to leave a cliffhanger.

But I'd love to continue this dialogue, and I'd love to see at some point if UC has collected data on performance outcomes as well, because I think this is an important discussion to have. Thank you.

As you're leaving, I'll say 15 seconds to say we've looked at this, and since our conversation, I looked at the preliminary results of our classes 2019 class compared to 2023. We find the persistence rate of students the same to the decimal point. So it's not gone down at all. We find, in fact, increases in the percentages of African American, Latino, of Asian students in our schools since 2019. 10,000 more offers to Asian students in 2023 than was the case in 2019. So we've been growing.

We'll talk more about this, but we have data that shows that things are actually not working so badly.

Okay, thank you.

Thank you, okay. Now going to some global questions as well. I want to talk about the deferrals in different ways. And let me ask the question where I know what the answer is going to be, but I'm going to ask it anyway. I'm going to ask the Department of Finance, how do you have the confidence that we could give a 10% raise to UC and CSU in the next budget year by deferring these 5% this year?

Yeah, certainly we look at the totality of the budgets from one year to the next. We recognize that there is some risk. Our multi-year projection does show an out year deficit. That said, it remains a priority of the Administration to support the institutions of higher education in the state, specifically our community college system, our California State University system, our University of California system. So our degree of confidence is that we remain strong supporters of our higher education systems.

And while we don't know, we would certainly say that we would do everything in our power to make sure that that's funded.

I appreciate that, and I always have to announce my snarky comments and snarkly. I would say we're strong supporters of everything we're cutting this year. And so I have great concerns about our ability to give a 10% bop to UC and CSU next year if there is a residual deficit of any kind, and particularly the chancellor was very articulate about going through.

But if this year, what I don't totally understand is do each of you dip into reserves to make the 5% expenditure, betting that the 5% will come next year and it will even itself out? Is that how you are handling the deferral? I'll start with the chancellor, and then the president.

Yes, it's one time money, it's not recurring funds. We would take it out of our $766 million and use it to really get us through this year and hope for the next year.

We do a combination of things, actually. Some of that, some borrowing, some shifting, and then also some pulling back on the rate at which we're expanding programs, hoping and believing that the Governor and the Governor's Budget will come to fruition. But understanding that that's not 100% guaranteed, we don't want to be surprised next year. So we're thinking even now about pulling back on expansions that we were expecting.

And what it really means is if in fact, we have a residual deficit and could only do, say, 5% next year, and that's optimistic. I mean, if it's really residual, the whole thing could be challenged. Then you're out reserves, and you might be slightly okay where you've contracted or not expanded, spent, but then you're out whatever it is that you spent.

And we would be out reserves. Our reserves broadly, I mean, we have reserves in our hospital systems that are there for buildings, and we're constructing hospitals at this time. So those are there. But the General campus reserves or the reserves in my office are actually minimal. So you mentioned nine days reserves, so we could spend into reserves, but they get us to the middle of next week, so there's just not much there.

And then back to the Department of Finance on the out of state student backfill, is that part of the 5% or is that on top of it? And is it a deferral or is it an actual cut that you're proposing?

Yeah, that would be on top of the 5% deferral. We are proposing to also defer that amount from one fiscal year to the next, and that also would be repaid and become part of their ongoing base in 25-26 as well as the additional amount of funding for the next 902 students would also be part of that base the next year as well. So you'd have that same sort of double payment scenario occurring.

You'd have a one time payment and a doubling of the payment for that particular endeavor as well.

One of the things about public life is that there are many times when people have the right to say, I told you so, and then you're very grateful when they don't actually do it. And it was Ms. Verton that testified in front of this Committee saying there will be a downtime and there will be a time that the out of state tuition backfill is challenged if we agree to that.

She was skeptical at the time of the overall thing, and we moved on that, but here we are. And so I think that we have a strong concern that that be made totally good and happen. And then I have a different unique question for each segment and for CSU, for the chancellor. The contract that you agreed to with the faculty, as I read it, says that you have to make good the 5% increase this year, the 5% increase next year if base funding is not cut.

Is that the right way it is formulated, so that if, let's just say right now in this year, the 5% from the compact might be deferred, and then you are making good the 5% on the salary, even though the compact, which might help you pay for it, is being deferred.

Correct.

And then if you were in the worst of scenarios, out 5% or 10% because the deferral isn't made good, you have a 5% next year as well, and you are also eating that within your budget.

Correct.

So it makes an urgency to making sure that the deferral truly is a deferral to make sure that happens.

Absolutely. Yes. And we are praying and hoping that that will happen and thank the Governor for his continued support.

Yes. But as I reminded President Drake, there's other people besides the Governor involved in this project.

I understand.

And then with President Drake, we have had discussions the last two or three years about the contracting out issue with the University of California. And you issued a report last, I think it's August, on the status of what contracting out is. How would you characterize that at this point for the Committee on Just how you're doing on that issue, where it's going, whether you feel like you're on top of it.

Yeah. So first, we're a very large enterprise, as you know, with all our campuses, et cetera, and our division of agricultural and natural resources all across the state. And our goal is to have as many of our workers in source, University of California employees as possible. There are any number of times, though, when we don't have employees that are available or particularly tuned for the type of service that we need.

And so it's necessary for us to have contracts with other entities from time to time, a tiny one just for the Committee. When I was at UC Irvine, we had olive trees at the residence that had to be pruned once a year over about a two week period. It didn't make sense for us to have a full time employee who knew this specialty. That was something that we contracted out for because it was a one time issue.

We also have circumstances where we can't find through our normal employee base, we can't find employees to cover the work that we need. We see this in two ways now that come up. One, nurses. We have to use registry nurses a lot. When we had mentioned how overburdened our hospitals are, we spend millions of dollars more than market rates to bring registry nurses in to do services. Because we can't keep a workforce hired to be able to tend to all of our services.

We'd much prefer to do that. Much less expensive for us, much more effective. But the workforce is not there. And we've had this happen with food service workers and other things during the pandemic. In particular, we had to shut down some of our food service enterprises because we didn't have enough applicants for the jobs we needed to be able to serve people. So those occasions occur. But overwhelmingly. But our first choice, always and overwhelmingly, we follow the guidelines of our regions and state law.

The regions restrictions are in many cases more impactful, even. And so we do our best to keep up with the auditing of and reporting of our contracting out. And I think that it's working quite well. Garcia has some, I know, individual data if you need that, but we find that we're overwhelmingly able to work with in source labor all the time. That's great. It's not 100%, and we keep careful records when it's not.

I won't work with her over time. I just wanted to make sure that the hearing didn't go by without us acknowledging that that's an issue and that we're concerned, and we want to make sure there's progress. And I can also tell you that Governor Brown gets former staff Members to do free labor on olive trees. You might consult with him.

I don't know that we would know. We believe in paying people fairly for their labors. We appreciate them.

Yes, but he would have not paid his cabinet secretaries if he could have gotten away with it. I can testify to that. And you also have, it's in our packet, a list of labor agreements that the negotiations are coming up on. And so what we do here will reflect on your ability to deal in those negotiations, correct?

Thank you. Yes, we have several that are coming up this year. And next year. And we have about 15, I think, system wide and 22 campus wide. So there are always ones that are coming. There are several that we've just been through. So we do our very best to be good partners in those discussions. We appreciate the collective bargaining apparatus that we have in place. We believe that our workers have the right to organize, and we do our very best to be good partners in this.

We want to be the best place to work in the state.

Right. And then one last question for both of you. I let you off the hook. We have an anti acronym policy here, and you managed to say NAGPRA and let it go by, which is the Native American Graves Protection and Repatriation Act. I wanted to ask you both about it, and before you got here, Chancellor, there was an audit, and there was a rather lively hearing on it in the Joint Legislative Audit Committee.

I think one of your references was, you really want to do this, but you're going to have trouble if you don't have money to pay for it. Could you comment on your progress, and you comment on what it will take to fully implement what's needed under the act?

So let me begin by saying that this is something that is really important to me and to the system. I always think about this as what would you feel like if you had your own ancestors items utilized the way they're being utilized on our campus? So for me, this is very important. As well as our board and each one of our presidents, we have begun consulting and collaborating with our charitable partners to repatriate all ancestors and cultural items.

We've established a positive and collaborative relationship with the California Native American Heritage Commission. On two occasions, Executive Secretary Raymond Hitchcock addressed our board of trustees and our presidents on the importance of repatriation and consultation. Our campuses continue to move forward. For example, Chico State repatriated 532 ancestors and more than 87,935 cultural items to a consortium of six local tribes. Sacramento State repatriated 112 ancestors and 23,720 cultural items to local tribes.

We have a Humboldt at repatriated land that they will be working together to use in teaching and learning. We also are making.

Well hopefully they can use all that extra money they've gotten for being a Cal Poly.

We also have made sure that we're completing reviews of our University collections, creating a system wide NAGPRA policy, hiring a full time NAGPRA coordinator at each University, creating system wide and campus committees that will have Native American tribal representation, and prohibiting the use of items in teaching and research. This continues. We have one President, for example, actually working with all college presidents to ensure that it's working.

It is also discussed at every meeting that I have with the President to make sure that they are on target. And in addition to that, all presidents have that as one of their goals. As they meet with me at the end of the year to tell me how they are progressing and abiding by the audit and abiding what is moral.

Thank you. We really appreciate it and we'll want to just keep track of what's going on there. President Drake.

Thank you. Similar we're committed to the repatriation of Native American human remains and cultural items in accordance with the Federal Native American Graves Protection and Repatriation Act and its accompanying regulations, and CalNAGPRA as well. We developed and issued new UC policy on Native American cultural affiliation and Repatriation, which took place in 2022. It follows many iterations and revisions to the CalNAGPRA under AB-2836 and AB-275, as well as important feedback from numerous stakeholders, including California Native American tribes.

I meet with an advisory board every quarter and we have a robust discussion. This by no means represents the end of the University's efforts. These are ongoing efforts over many, many years. We this last year have hired a system wide coordinator for the repatriation efforts and she's been working with each of our UC campuses for the past several months to support and expedite their repatriation efforts and activities.

And we provided system wide funding to assist the campuses in the funding that they already are providing for this ongoing effort. And I'll mention one other thing that we've done this last two years ago now not strictly under CalNAGPRA or NAGPRA, but broadly in focusing on Native American fellow citizens, we've done two things.

One, we've developed the Native American Opportunity Program which says that for California Members of Federally recognized Native American tribes, we cover the tuition for their attendance at the University of California at all of our campuses. That's a new program. And actually since that program was announced, we noticed that next year we have about a 40% increase in Native American students at one of our campuses that had early data. So we think that that's a good thing. We're pleased about that.

And we mentioned the prime programs, earlier programs in medical education that focus on underserved communities. And last year we started a prime program focusing specifically on the health issues of the Native American population here in California. So we are dedicated to doing our best under CalNAGPRA and doing more to help support our fellow citizens.

Okay. Thank you very much. And we as well with you will want to keep track of it and make sure, because I think we're finally getting on a track to deal with this, but we want to make sure it's done and expeditiously. So that completes my questions.

And we have other things you've mentioned that we'll get to in the other items, like the medical school funding and enrollment and diversity and other things, but we started very late and this has been much longer as an item than we had anticipated. So I know you're both very busy people, and I really appreciate the fact that you stuck it out and participated with us today.

Senators and Senators, thank you. Thank you, Senator Laird, for really giving us the opportunity for all of your support that I know you love both CSU and the UC and look forward to your continued support.

I'll throw in community colleges.

Well, they're not here, but I'll throw them in too. How's that? As a community college graduate I get it.

Perfect.

I appreciate it very much. And thank you.

Thank you. We will move to issue number two, which is higher education student housing. And I believe we'll have Alex Anaya Velasquez from the Department of Finance. Jennifer Pacella, I have, will remain here. Seija Virtanen will remain here. And we have Paul Gano from the California State University System, and I think we'll go in the order of Finance, Legislative Analyst, University of California State University System. So welcome. And let's start with the Department of Finance.

Good morning, Mr. Chair. Alex Anaya Velasquez with the Department of Finance. For the California Student Housing Revolving Loan Fund. The 2023 Budget Act approved a multi-year investment of 1.7 billion, one-time General Fund for over six years, which is comprised of 200 million in the current year 2023-24 and then 300 million, one-time General Fund each year from 2024-25 to 2028-29. Given the budget revenue outlook, the Governor's Budget proposes suspending funding for this program.

I'm Jennifer Pacella, again, Ledge Analyst Office so you have several capital items before you within this issue regarding the Revolving Loan Fund Program that you just heard about. We think it's a reasonable budget solution. It's by far the largest higher ed solution before you at 1.7 billion. It's one of those solutions that won't have a direct, immediate impact on students, faculty, staff. So we think it's reasonable to consider given the state's budget condition.

This includes pulling back the plan 1.5 billion one-time General Fund investments from 2024-25 to 2028-29 and reverting 194 million of the 200 million one-time General Fund appropriated in the current year 2023-24. This concludes my remarks, and I'm happy to take any questions at the appropriate time.

Great. Thank you very much. We'll go to the Legislative Analyst.

Turning to the UC projects over the last three years, the state has approved eight UC housing projects and three academic projects. Of the eight housing projects, six are under construction and or UC has already borrowed for the project. The remaining two projects are the Santa Cruz Intersegmental Housing Project and the Merced Intersegmental Housing Project. Of the three academic projects, two are in the construction phase and or UC has already borrowed for the projects. The one remaining project is the UC campus expansion project.

So we recommend the Legislature pause the three projects, the two Intersegmental Housing Projects and the Merced Intersegmental Housing Project. They remain in early planning phases. UC has not sold the bonds. In total, it's 306 million in project costs, 22 million in debt service. All three projects are new construction, meaning there's not only the near-term cost of building it, but also the longer-term cost of having a new facility in their portfolio to maintain over time.

The objective again of pausing the projects is just due to the state's budget situation. All three projects could be revisited when the budget situation improves. Turning to the CSU projects, over the last three years, the state has approved 12 student housing projects at CSU and nine academics and other projects. Of the 12 housing projects, four are in construction. The remaining eight are in preliminary plans or working drawings and design. CSU has sold University bonds for nine of those 12 projects.

For the other academic other projects, only one is in the construction phase. CSU has sold bonds for all of those particular projects, whereas the University typically sells bonds once projects are nearing completion. They did sell bonds sort of early this time around, so they normally do tax exempt bonds, and this time around they did taxable bonds, which give them effectively longer to complete the projects. Those taxable bonds come at higher interest rates.

Similar to UC, we recommend the Legislature pause the three student housing projects for which bonds have not yet been sold. That totals 149 million in project cost, an estimated 12 million in debt service. As you'll hear more about, this would be problematic for the San Jose Housing Project. The state approved it as a new construction project. It's now under an already executed leasing arrangement, which would make causing that project problematic.

We also recommend the Legislature consider just oversight of CSU projects, and if you're interested, we could talk more about that. Lastly, for both UC and CSU, we recommend the state consider aligning debt service funding with actual debt service costs. So the thing the state typically does is wait until projects are ready, nearing the completion stage to sell bonds and start paying the debt service on those bonds.

It did something different last year where it provided the money upfront and before either segment had issued the bonds, before either segment had incurred debt service. This is a pretty innocuous budget solution. It just aligns state funding with actual debt service costs. In 23-24, we think there's about 50 million in UC funds that were not needed for initial debt service costs and about 75 million in CSU funding that wasn't needed for debt service costs.

Now, these amounts will shrink over time as additional bonds are sold and debt service is incurred. So it's just a small short term solution to give the state some additional near term budget solution as the universities issue their bonds over the next few years. Thank you.

Thank you very much. We'll move to the University of California.

Thank you, Chair Laird. For the record, I'm Seija Virtanen for the University of California. The University of California has greatly expanded the student housing availability over the last eight years. In 2016, the University began the student housing initiative, which aimed to support current and future students by expanding campus housing options even further through identifying available land where housing could be located and exploring a variety of financing options. These efforts have resulted in the completion of over 28,600 new student housing beds since 2016.

I want to thank the Legislature and the Governor for the investments in the Higher Education Student Housing Grant Program. With the help of the funding received, the University of California will be opening 4,736 new beds this coming fall, and we will complete another 11,000 beds by fall of 28. These projects are currently going well, and only the UC Berkeley People's Park Project has an unknown timeline for opening for the students.

That was supposed to start about 1971, right? Keep going. Sorry.

Hopefully sooner we will be continuing that project. The University of California is committed to the compact, which seeks to increase student access, success and affordability, and we see housing availability as an important part of an affordable education. The compact working group on housing has been meeting twice a quarter to discuss student needs, and this working group consists of both campus staff and student representatives, and the University worked with the California Educational Facilities Authority to provide feedback on the Revolving Loan Fund program criteria.

And on January 5 of 2024, we submitted formal comments on the proposed Revolving Loan Fund regulations. And while the application process for the loan program was not opened, we do know that at least two UC campuses were getting ready to submit applications. In addition, we had other campuses with projects that intended to apply for the Higher Education Student Housing Gran Program that did not get into that first round of funding that would have then applied for the revolving loan Fund.

And if I could address one of the LAO's comments on pulling back our bond funds very quickly, I was going to address that at the end, but I wanted to say regarding withdrawing the bond payment funds, the University is not able to issue bonds if we cannot prove the ability to repay those bonds. So we would request the ability to work with the Committee if you're going to go that route. If we could have some language that reverts those funds a little later.

We do intend to sell bonds this coming year, and we would need that ability to demonstrate repayment ability. But there will be some savings because we're not selling those bonds for six to eight months. And we can discuss a method then if you want some of those funds returned.

Great. Thank you. And then CSU.

You had it there a moment because I could hear your thing. Just start talking. And if not, you press it again.

Thank you. Good afternoon, Chair Laird. My name is Paul Gannoe. I'm Assistant Vice Chancellor for Capital Planning, Design and Construction with the California State University. I appreciate the opportunity to be here today. Just. I'll give you a really brief overview of our housing portfolio. We currently have about 61,000 beds across the system, which supports about 14% of our student population.

In addition to the beds that we have in our portfolio now, we have about 10,000 that are planned, just a little under 10,000 that are planned in our five year capital outlay program. On top of that, we have about 5200 beds that are being either in design or construction right now as part of the Higher Education Student Housing Grant program. And about 1500 of those will come online in Fall of 24 in time for the next semester.

About 3200 of those will be at affordable rates under the program. And we appreciate the funding that we've gotten for that Higher Education Student Housing Grant program, and we know that those beds will really impact our students positively. Also would echo the University of California's comments on pulling back funding for our bond program. If that does happen. Those programs, we're actively working on those. They're in schematics, working drawings. And if that program goes forward of sort of pulling back some of those funds, we'd really like to work closely on how that gets managed. Thanks.

I think that there's almost no purpose in asking questions because everybody was crystal clear about what the facts are and what their recommendations are. So I'm going to make some comments, and last week - I think it was last week - when we heard the state library, there was a dividing line about whether grants had been awarded and people were acting on the basis of the grant award in terms of construction or other things.

And it was our hope that that dividing line would be recognized in the budget, that if there are awards made and people are moving on it. And I think that's the difficulty with the Legislative Analyst recommendation about pausing, because it's pausing when some people are into this in different ways. The Santa Cruz one is obviously very painful, and I will not want it paused. But when you look at what the facts are, there was a question about public private partnership, and we whacked that back.

There was a question about, because it was the community college, whether it violated the University's contracting out, and we whacked that back. And there was the question in the budget last year of the administration's proposal on financing, and UC stepped forward with the bonds to move that past it. And now there's one remaining EIR issue that is there.

But it's sort of, as everybody has taken time to work through their process, we would be rewarding those delays by, even though they're doing this EIR, they're expending money and moving ahead. And meanwhile, the Santa Cruz campus has said they're not going to admit new students unless they have housing, and they're closing down the parking and the temporary camping that's been there for a long time.

And if there's not something that comes behind it, they're not going to be able to meet their own commitment about not admitting a student until there's housing there for it. So given the fact that these have been awarded, in my view, they're a small number, relatively, and it's very important for them to go ahead.

And either way, I think as a Committee, I would hope we would work on the bond language to make sure that we do our best to maximize that and be flexible and have that ready for however the budget moves ahead. And then on the Revolving Loan Fund, there's sort of a euphemism, because it's like, put a pause on the Revolving Loan Fund.

But if I remember the number right, there's 269,000,000 of unexpended money that would have gone for community college housing that by pausing the bond fund is pausing that funding. And I can see that one there's no commitment to. As much as I don't like it, that makes more sense. Moving ahead. And just to remind everybody, while we're having this discussion about money and grants, if we have a Revolving Loan Fund, then it is paying back, and we are creating a permanent source for higher education housing.

So it's very important for us to start that whenever we can so that we are creating the permanent funding source for higher education housing. And I respect where we are this year, and I'm the one that gave the speech at the first hearing that everybody has to be uncomfortable about some of the cuts we're going to have to make because of the haircuts. But just if we do pause that, I want everybody to understand that that's also pausing.

269,000,000 or whatever the number is for community college housing. And it's meaning we'll just take an extra year or two years to get to having a revolving source for higher education housing because we haven't started it and invested in it. With that, I would just make those comments that we will take into account as we have further comments on the budget. And I don't know. Nobody looks like they're reaching toward their mic. Well, actually, somebody does. Maybe it's the person whose recommendation I took on.

Recognizing that all the decisions before you when it comes to balancing a budget are going to be difficult this year, potentially. I just did want to clarify that whether it's the state library or across higher education, we applied the same standards, which was to look at money that had not yet been awarded, encumbered or spent. We worked with the Department so that we were all sharing an understanding of what that meant.

So when we do offer up a budget solution for you, it is meeting that criteria. Now, I appreciate in the capital projects, it's a little bit different than all the programmatic initiatives. For many state agencies, the state will fund by phase. So it'll fund the preliminary plans, get a better sense of cost, fund design, and then fund construction. And it hasn't done that with ... It's funded all phases upfront. So I could see how there might be an interpretation issue there.

Well, but if it turns out - to respond to that - if it turns out that they can continue doing what they're doing in finishing the Environmental Impact Report, which needs to be paid for, and the other planning, which they are doing, that the bulk of the expenditure is in the out budget year, then phasing, to me makes some sense. But if UC has to bond on the whole thing, then we have to talk to them about how that works and whether it's done in the right way.

And the minute you bond, you incur expenditures. And so the goal is to keep it moving forward. And if it turns out that because it crosses budget years and maybe some expenditures are in the out budget year, that allows for some kind of solution, I'm sure we're open to that. Great. Well, then, thank you very much. We appreciate everybody being here for this. And we will move to issue number three, which is the California State University system enrollment.

And we have Devin Mitchell from the Department of Finance, Lisa Qing from the Legislative Analyst Office, and Nathan Evans from the California State University System. And when everybody's seated in reading, we will go, in that order, the Department of Finance, the Legislative Analyst Office, and the California State University System. So welcome, actually, in your case, because you were here for the library or something last week. Welcome back to the Committee. There it was on. Just talk and somehow we'll get there.

Sorry about that.

Does he need to press it again?

Okay, thanks. Good morning, Senator. Senator Laird. Devin Mitchell with the Department of Finance. The Administration expects the CSU to continue making progress towards the system's goal of 1% annual enrollment growth during each year of the multiyear compact agreement. The compact also specifies this enrollment increase must maintain, at a minimum, a share of new undergraduate transfer student enrollments that is consistent with existing admissions practices.

For new undergraduate enrollments. Enrollment growth, among other shared priorities, is supported by annual 5% General Fund base increases, with the caveat that, as you heard, due to the budget shortfall this year, the 2024/25 base increase has been deferred to 2025/26. With that, I'll yield to the other panelists and can answer any questions at the appropriate time. Thank you.

Thank you. We'll go to the Legislative Analyst Office.

Good afternoon Chair Laird. Lisa Qing with the Legislative Analyst Office. If you turn to page 16 of your agenda, you'll see a chart that summarizes some key figures relating to CSU enrollments. On the top section of this chart, it shows CSU's enrollment target over time. This is a number that CSU has tracked for many years, and it reflects the students for which it's received state funding to add. In the current year 2023/24, the target is about 387,000 resident students.

Below that, the next section of the chart shows CSU's estimates of actual enrollments for this same period. In 2023/24 CSU was estimating as of the Governor's Budget that it was enrolling about 368,000 students, resident students this year. That's below the target level by about 19,000 students, or 4.9%. Now, looking at the same chart, you can also see that estimated enrollment this year is up from last year by several thousand, as you also heard this morning.

Much of that growth, however, is attributable to a certain change in how Summer enrollments are counted. Historically, many CSU campuses have offered Summer courses on a self supported basis, meaning that the instructional costs are entirely covered by course fees. They don't receive State General Fund and the students enrolled in these courses don't count towards state enrollment targets. Last Summer, some campuses shifted certain self supported courses to the state supported side, meaning that the students enrolled in them newly count toward the state enrollment target.

We think that this approach to increasing enrollment is likely not in line with legislative intent because it doesn't add new students. It really is more focused on reclassifying the courses they're enrolled in. As the Department of Finance has noted, the Governor's compact sets forth an expectation of increasing CSU's target by 1% in 2024/25. Given that CSU is about 19,000 students below its current target, we don't think this is warranted.

We recommend instead holding CSU's target flat for 2024/25. In the coming months if this state budget condition continues to deteriorate and the state is in need of additional budget solution, one option the Legislature could consider is lowering CSU's target and removing the associated funding to better align with its actual enrollment level. Thank you. I'd be happy to take questions.

Thank you very much. And then we'll move to the CSU system.

Good afternoon. My name is Nathan Evans, and I serve as Deputy Vice Chancellor and Chief Academic Affairs Officer for the California State University. Chair Laird, thank you for the opportunity to speak with you today. As you heard in Chancellor Garcia's comments, the CSU is incrementally closing the gap towards the state's long range enrollment target.

Contrary to recent reports, which focused on CSU enrollment outcomes during the late pandemic period, enrollment of California students in the current college year 23/24 increased by more than 7500 FTES over last year. This was achieved through focus work to recruit and retain and supporting continuing students, students returning to higher unit loads, retaining and engaging students during Summer sessions, and reconnecting with students who stopped out during the pandemic.

And as also noted by the Chancellor, the CSU enrolled the largest freshman class of California residents in our history, more than 64,000 students last Fall. That new class mirrors the diversity of California, with more than 56% of those students identifying as Latino, and half of those students will also be the first in their family to earn a college degree.

I would also share that after enrolling more California residents than funded by the state for 12 years through 2022, the CSU has seen just two years below the overarching target. The impacts of the pandemic disrupted that overall enrollment trajectory, but the CSU system and campuses have responded intentionally for both the short term and long term, and future trends are also maintaining that momentum. Undergraduate applications for Fall 2024, this Fall, have increased over the prior year.

First time freshman applications are up by more than 5% and transfer applications are up 1%, despite continued enrollment declines in community colleges. We're also internally taking steps to match resources with enrollment demand. In consultation with our University presidents, we recently laid out the groundwork for a multiyear enrollment and budget reallocation plan that will better align resources with student demand by campus. We've begun that work by reducing enrollment at eight campuses by 3%.

Their enrollment target and associated resources, and redistributing that to nine campuses with sustained demand across the system. We've also augmented statewide recruitment through targeted enrollment marketing and advertising, and partnerships with school districts like LA Unified. Finally, looking to the future, CSU is also working on redesigning our online application to allow campuses, using the state's cradle to career data system and in partnership with local school districts, to directly admit all CSU eligible applicants in a school or district without students even having to initiate an application.

This strategy is particularly of interest to campuses in Northern California, which have seen multi year declines tied to population changes in their region. Our system and universities will continue to place a strong focus on strategic enrollment planning. Thank you again for the opportunity to speak, and I would welcome any questions.

Thank you very much. Let me start with what the issue that the Legislative Analyst raised, because it seemed that counting 5000 Summer school students that aren't full time year round is more an accounting mechanism than it is a genuine increase in enrollment. Could you speak to that concern?

Absolutely. I do appreciate the question. So historically, campuses have made Summer enrollment available broadly to the general public. There are fully self support courses that are being offered. That means they're only covered by the fees collected for those courses. Before even the current year.

Three of our campuses, San Francisco, San Diego and San Luis Obispo, as part of their sort of overarching student success effort, had really begun to more strategically use Summer as a retention mechanism and running Summer through state support so students paid and could expect the same instruction and fee structure during Summer that they would in the rest of the year, so that we can hold on to those CSU students and get them to degree more quickly and support them.

The other difference that those campuses recognize that now other campuses have is access to financial aid. When courses are offered through self support, the only students that can really avail themselves to those courses are students that can pay that full cost out of pocket, whereas when they are state supported, then students have access to institutional aid, and in many cases federal aid through Pell grants if they have that eligibility remaining. So we went from three campuses that had used that strategy.

We had 10 more campuses really examine and look to add that as an opportunity for their students to continue. And the remaining 10 campuses at this point haven't decided if they'll move in that direction, but that's what they're thinking about. So the student profile of who enrolls in Summer is quite different. When courses and offerings are undertaken through self support versus state support.

You mentioned, that it's for retention. Do you have statistics on if there's 5000 that were enrolled in the Summer, how many actually are retained? How many continue to the Fall or the rest of the academic year?

I don't have it at hand, but we'd be happy to get that for you.

Because it seems to me that's in part the proof of the pudding. If it is 5000 Summer school students and 10 of them stay, then it is an accounting mechanism. If it is 5000 students and 4000 go on to the rest of the year, then your retention and recruitment issue is truly being addressed and it makes more sense. I know I'm not supposed to respond to quizzical expressions, but I see one on the face of somebody from the Legislative Analyst and I wonder if you have a comment on this. And I know you're going to try to be more opaque going forward, but I would welcome your comment.

All I would note is that in looking at the data on Summer enrollment, while we did see an increase on the state support side of 5400 students, we did also see a decrease on the self support side of about 4700 students. So that suggests to us that much of the increase we saw in the state support summer enrollment was offset by this decrease in self support and the net increase in students looking across those two models was relatively small. So that suggested to us that it had more to do with converting the courses from one side to the other than increasing the number of students that were enrolled in the Summer.

Okay, I think we're going to want to have further conversations about that as we move through the Spring to make sure that this is like a valid thing for the purposes of counting it. Then, I didn't want to belabor an already long opening panel, but the issue of diversity in enrollment is a big one at the CSU.

And I know that in one of my home campuses of Cal Poly, I can't remember the number, but the number of African American first year students was minuscule and it was pointed out all over the place. And I did have coffee with the President, who told me all his plans to make sure that doesn't continue. But could you speak to that system wide? What are you doing to make sure that there's diversity in the incoming student body?

Absolutely. Really appreciate the question. It's a commitment you heard from our chancellor in terms of the role that the CSU plays in supporting, as she describes America's and California's new majority. So there are a variety of things, as you described, work at a particular campus. There are many similar efforts going on locally.

What I would offer at a statewide level, you may have heard in other discussions with CSU colleagues, are recent work around black student success and a task force that was established last year to make recommendations that span the continuum, both from early engagement of African American students in communities and schools all the way through alumni. And so as one aspect of that, there's targeted work in outreach and community engagement.

We have historically, for example, our Super Sunday events that just took place in September, which are just one of a sort of annual effort year round, working with, in this case, religious communities, black churches, first and foremost, being and communicating about the opportunities in the CSU and then following through with on campus visit opportunities.

You may have heard from your engagement with President Armstrong from San Luis Obispo about direct school partnerships, where they're working with diverse high schools throughout the state to really attract students that are particularly interested, in their case, in polytechnic and STEM majors, and being intrusive in those schools and then inviting those school communities onto their campuses. So those are replicated in a variety of ways. At the transfer level, the CSU launched last year our new dual admission program, which had been supported through legislation.

We went above and beyond what that legislation called for to allow students while they're still in high school to get a guaranteed dual offer of admission from both a community college simultaneously with a specific CSU campus, not just the CSU writ large, but a particular campus and making that commitment to engage with them while they're at the community college to ensure that students that are at schools across California have that access.

And I appreciate that and I appreciate - I mean, one of the other just anecdotal things, is I also have Cal State Monterey Bay in the district, and the new President has made the statement that there are majority of Latino students and that it is not being considered unless you affirmatively talk about it as a campus that is more Latino based and more addressing disadvantaged students or disadvantaged communities, and that where there has been some success enrollment, it's not being called out in the way that might do it and is looking for sort of that recognition and assistance over time.

The last question I have off the top, and I didn't want to drag out that first hearing, is the enrollment seems to be clearly tied. Enrollment was a thing in the compacts and clearly tied to the compacts. What happens with just the fact that it's deferred this year? But if it's not the full percent next - 10% next year, what happens to enrollment? How does that come out the other end in what you would see for CSU enrollment.

As been acknowledged, certainly appreciate the complexity and the challenges in balancing a budget, in this particular situation, I will share that the compact framework has allowed our campuses to really plan on a multi year horizon. I described the internal CSU enrollment and budget reallocation process, and that was staged along the same timeline as the compact, so that it allowed for those campuses that have seen sustained enrollment declines, that could be a predictable and gradual reduction in their enrollment target and corresponding resource, while again transferring that to areas of the state where we know there is continued very strong demand. It would truly interrupt that ability to sort of mitigate that over time. As one artifact.

The other piece, I would say, in terms of direct student impact here in March, most admissions decisions for Fall 24, in this case, are already out the door, many if not most. And so the timing and sort of choices that campuses have really just relate to course instruction and course availability. And so in terms of sort of leveling that out over the balance of the college year. So making a decision by May, as I said, sort of one of the remaining levers is in course availability throughout the rest of the year and having to sort of tamper that down.

But certainly, as I said, the benefit of the compact was a multi year horizon for that planning, as we are sort of reconciling what's happened with demographics and population in some areas of the state, you heard from the Chancellor, a majority of our students come from the immediate area around their campuses, as you know of the two in your district, and they tend to stay. And that means that we're looking to try to balance that over time and not make those abrupt changes, to recognize how some of that's changed. So it would definitely disrupt that and at the student level, would impact, most likely, course availability.

Okay. Appreciate that very much. And as I said yesterday during lobby day, I actually say I have two and a half because so many faculty and students commute to San Jose State, which is just outside the district. But I appreciate this, and I think that what we're seeing in the different items is the complexity of the compacts and the deferrals and how it's reflecting to some of the things that are our goals, whether it's enrollment or housing or other projects, and the fact that, of course, we're elected officials, we want the best of all worlds, which is maybe shorting you a little on money and still having you produce. But I think that we would like to figure out how to have that not be the choice and try to continue on all these goals. Yes.

Sorry, Senator, to prolong your hearing. Can I go back real briefly to the Summer discussion a little bit? We understand the recommendation that the LAO has provided is a current hot button issue right now, but if we could step back just about 10-15 years on Summer, one of the things that we had to do in the Great Recession was to significantly curtail that wonderful thing known as Summer term, which allows students to persist and complete their degrees during the Summer term or get ahead of their completion while their midstream career.

Over the last 10 years, there's been more and more interest by the Legislature to do more and more Summer to get back to utilizing more state support Summer. And most recently there has been a grant program that has been adopted by the State of California to provide $6 million every Summer for financial aid, for state support, or for summer term utilization. We have a number of campuses that want to use more Summer going forward and we'll be doing that in the future.

But I just wanted to put that on the radar as Summer is a very valid thing for our students and a goal of ours for many of our campuses to utilize going forward. So it wouldn't be the end of the story on Summer. We really want to make sure that we're utilizing well.

Let me comment on that because there's a bunch of disconnected things that fit to that. And one is that I know there's been pressure because of facilities issues that rather than expanding facilities, you expand the time courses are offered and it doesn't require the same addition of facilities. I appreciate that. The whole notion.

Our first panel was so prolonged that I wanted to talk about school bonds and making sure higher education is in them, even though with the bond capacity, we're not sure what we'll be able to do on everything. But it still raises the issue that we talked about earlier, is knowing that who's in the Summer are really year round students or enticed in a way that it's not an accounting mechanism, that it is truly tied to ongoing students that are doing that and making a difference.

And so while I appreciate your point, that will still be the question, and I think it's important to do. Anybody else have any comments? Then thank you. I really appreciate this discussion. And we're going to move on to the University of California enrollment and we have Gabriela Chavez from the Department of Finance, Ian Klein from the Legislative Analyst Office, and Seya Vertan and again from the University of California. And we're very lucky that that happens to be the fifth panel as well. So just get comfortable in your seats. We'll go that order. So let's start with the Department of Finance. Go to the Legislative Analyst and go to the.

University of California welcome to the Committee.

Good morning, Chair Laird. Gabriela Chavez with the Department.

Unfortunately, you prepared your statement thinking you'd be speaking in the morning, but it is afternoon.

Well, it was at 9:30. Good afternoon, Chair Laird. Gabriela Chavez with the Department of Finance. The Governor's Budget reflects the third year of the multi year compact with the University of California, and despite the state's current fiscal condition, the administration remains committed to the shared goals of increasing access to the University of California and improving its student success.

To address the projected budget shortfall, the Governor's Budget proposes a onetime deferral for the plan of 227.8 million ongoing General Fund increase in 2024-25 as part of the Multiyear Compact investment and the planned investment of 31 million ongoing General Fund in 2024-25 to offset the revenue reductions associated with the replacement of 902 nonresident undergraduate students.

Ongoing General Fund support for the UC will remain at approximately the 2023-24 baseline levels while enabling the UC to use interim financing structures, other internal borrowing or cash reserves to support planned operating expenditures in 2024-25. This approach will enable the UC to continue its efforts to meet the compact goals to expand student access, equity and affordability, and to create pathways to high demand career opportunities. The administration will continue to monitor the UC's actions toward meeting the compact goals.

Happy to answer any questions you may have.

Thank you very much. We'll move to the Legislative Analyst.

Thank you very much, Chair Laird. Ian Klein with the LAO. We would like to discuss three issues with you with respect to UC's enrollment. First, the 22-23 budget act set an undergraduate resident enrollment target for UC of 203,661 full time equivalent students by 23-24. UC currently estimates that they will fall short of meeting this goal. While the enrollment numbers won't be finalized until later this year, we recommend scooping any unearned funds as part of the 25-26 budget cycle once those numbers are finalized.

Second, we recommend holding the enrollment target flat at the 22-23 Budget act level for 2024-25 and 25-26. Both the administration and UC, as you've heard earlier today, expect enrollment growth for the budget year. Despite no book based augmentation being provided as part of the Governor's Budget, it is expected that UC will cover the cost of enrolling these additional students for that year. We acknowledge that there is strong demand to attend UC in general and at several campuses in particular.

However, there are a few factors that have impacted UC meeting their enrollment targets. Several campuses needed to go further into their list later in the application cycle, which resulted in some campuses missing their enrollment targets. There are also demographic issues to consider, with both the number of California high school graduates and California's college age populations currently declining and are expected to continue to decline in the out years, which, all things being equal, could shrink the pool that would be applying to UC.

Additionally, first year retention rates recently declined for three consecutive years from 2019 through 2021, which also impacts the total enrollment levels. Given these factors, and in light of the budget outlook that the state faces, we recommend holding the undergraduate enrollment level flat. Lastly, UC continues to implement the nonresident reduction plan at the Berkeley, Los Angeles and San Diego campuses. Maintaining the nonresident reduction plan would come at a cost of $31 million.

The administration, once again, as you heard earlier, did not provide the funding for this purpose in the Governor's Budget. Given that student demand is so strong at these three campuses, the legislature may request that UC use a portion of their uncommitted reserves, which you heard earlier today is roughly 238 million to continue implementing this plan.

We acknowledge that while using reserves for ongoing enrollment costs is not sustainable over many years, this action could be considered on a temporary basis given the nonresident production plan has been such a high legislative priority. That concludes my opening remarks and I'm happy to answer questions.

Thank you very much. I will move on to the University of California.

Thank you, Chair Laird. Seija Virtanen for the University of California. As President Drake shared in his opening remarks, in fall of 2023, the University of California enrolled our largest ever entering class of California undergraduates. In fall of 2023, UC campuses enrolled 59,810 new California undergraduates. For the 2023-24 year, the University estimates that we will have record enrollment of over 202,000 California undergraduates.

This increase in access to California students has been due to the deliberate investments made by the legislature and the Governor in the university. In the last decade, the state provided annual funding for increasing access to California's undergraduates, and during this time, UC campuses grew California undergraduate enrollment by over 29,000 students. This includes growth at UC Merced, but it far surpasses growth at a single campus and reflects real expansion of opportunity for many students. With the legislature's future investments, the University can continue to grow.

The university appreciates the strong partnership with the Governor, and we request the legislature support the proposed deferral of compact funding to continue to offer access to a quality education. The proposed deferred funding would support an additional 1% growth of California undergraduates and the replacement of 902 nonresident students with California residents. In addition, the deferred funding will support necessary existing core operating cost increases for our campuses, including instruction and student services. For the 2024-25 year,

we intend to continue to grow California undergraduate enrollment at all of our undergraduate campuses to meet the compact growth and to continue to reduce nonresident enrollment at Berkeley, Los Angeles and San Diego, and the university continues to decrease the number of nonresident students. This fall, we enrolled our smallest number of nonresident students since 2017, with a three year decline, leading to a systemwide nonresident share of 16.6%, all thanks to state support.

The compact enrollment growth for 2024-25 will be 2,927 FTE California undergraduates, and in addition to that enrollment growth, the University intends to grow enrollment to ensure that any shortfall to the 2023-24 funded target is made up next year. We might still meet the funded target this year given that it is in FTE and our student credit hours are showing great promise of increasing over the previous year, so we think we might actually get very close to that goal.

I want to mention that the university has aspirations to grow our graduate health sciences programs to address the current inequities in the state. The university is requesting $3.5 million in ongoing funds to establish and support enrollment growth for two new health sciences programs modeled after the programs in medical education or prime. These new programs would expand an innovative training curriculum focusing on addressing healthcare workforce shortages and meeting the needs of California's underserved populations in dentistry and pharmaceutical care.

We're also requesting $800,000 for the DVM serve, which will prepare highly motivated, socially conscious leaders to expand access to veterinary care in underserved areas. The university's goal continues to be to offer additional opportunities to California's future college students. As part of the 2030 capacity plan, we intend to grow enrollment by at least 23,000 students between 2020 and 2030 in order to help California meet the needs for a highly skilled workforce and to provide our students with the opportunity to reach their aspirations.

Thank you for your time today.

Thank you. And I already in an earlier item talked about the backfill, which I would have talked about here about UC enrollment. So at least that issues on the record. I did ask the CSU representative in that item about failure to, I should use another word, like inability to make good on the deferrals. How would that infect enrollment if that turns out to be the case?

So the university intends to grow enrollment in this coming year, and that will cost us money if we do not receive funding to cover that enrollment on our base costs, we will have a deficit. As the president stated, we are currently in the process of trying to scale back on certain expenditures. We're delaying launches of new programs. We're delaying some contracts. In order to alleviate expenditure pressure for this coming year, we would have to take steps in prior recessions.

What we have done is we have put in place hiring freezes. We have utilized furloughs as well. We may have to have a negotiation with the legislature about re enrolling some additional nonresident students because we would not have the money for that replacement. And those students do provide us with additional revenue that actually supports our resident students beyond the cost of their own fees. So those are some of the options available to us.

I do want to point out that for the 2024-25 year, the university's estimated cost increases in our core campus operations actually total over $580 million. A lot of the student tuition at the nonresident, supplemental tuition, the investment income and donations from private individuals are intended to cover the rest, and about half are being requested from the state. So if we don't get the state funding, those other funding sources actually cannot fully step into that void and cover them completely.

So we will have to take some action steps to reduce our budget if the legislature chooses not to give us the deferral.

Okay, I don't know if anybody else wants to comment on that.

Just a small point of clarification. So what we're recommending is level funding. So maintaining the existing level of funding, not at this point, pulling any funding back. So any additional funding that was mentioned in terms of the school's funding plan would either be for new services to take care of the additional students that the campus is planning to enroll, which, again, we're recommending not undertaking at this time.

Okay. And I don't know, maybe you have partially addressed this, all of you, and maybe to try to put it in one form, the issue originally was a particular growth over, I think it was 21-22 and there was, I don't know how to characterize it, a disagreement over what the actual enrollment was for a period of time after that. And I think that's been clarified, and it is likely that the university will meet the enrollment growth that was predicated on that in the next year.

You were referring to that. I just want to know, in the overlapping issues, is that threatened by the other things we're talking about? Are you on target? And you just expect to meet that goal that was set forth in the previous budget. How would you characterize that?

That previous enrollment growth has already been funded by the legislature. And we really appreciate that you gave us a two year target from 2021 to 2023 of 7,800 FTE students. When we got to 6,400, though on the headcount basis we're at 7,300, we're down so much because our summer enrollment declined a lot.

That's because they all went to CSU.

That's right. I guess they like it better there. Because that enrollment is already funded, if we enroll those students next year, that will not be a cost to us unless the legislature were to exercise an option to pull the back funds now. And we hope you don't do that. We do think that the student credit hours will get us closer to that 7,800 mark in the current.

Well, I think the issue was, and it's always nice to say we funded enrollment. Our goal is that the enrollment actually shows up after we funded it. That's where the disagreement was, or in numbers or whatever. And we just want some good feeling that it's actually going to reach that because there's an extra year that's been given because of what the concerns or differences were over it before.

Campuses are making offers to students right now with the intent to enroll those additional students for the fall of 2024. Yes.

And the Legislative Analysts have any comment on that?

I'll reiterate my point that we recommend holding their enrollment target flat for 24-25 and 25-26 with respect to meeting the Budget Act, the 7,800 students, I'll just provide some very brief background for that. That was consisted of three separate components, one of which was the 902 students that were to be replaced with resident students. That was successfully achieved. Additional funding was provided to increase resident undergraduate enrollment by 4,730 resident students. We believe that to have been achieved.

And the difference here is the remaining 1% growth that was to take place by the 5% base augmentation where they're falling just short right now. We don't have major concerns with them being behind at this point. As we have looked at going back 10 years, UC's budget enrollment estimates at the governor's proposal to what the actuals ended up being in most years, they ended up being closer or greater than what the estimates were at Governor's Budget.

So we are anticipating some fluctuation and that's why we made the recommendation to scoop back any unearned funds once those numbers are finalized in the next budget cycle.

Okay, thank you. Any further comments? I think you've benefited by being fourth because we had all these discussions about pieces of this before we got to. So then thank you very much. We appreciate it and we'll look forward to seeing how we come out with all that. And then we're going to move to the governor's proposals for UC, which are really the one at Merced and the one at UCLA. It's exactly the same panel.

So let's go in the same order, starting with the Department of Finance and then the Legislative Analyst and then the University of California.

Good afternoon, Chair Laird. Gabriela Chavez with Department of Finance consistent with the 2019 Budget Act, the Governor's Budget includes an increase of 14.5 million ongoing General Fund to support a medical school project at UC Merced beginning in 2024-25. Also, the governance budget proposes to forego a planned investment of 300 million one time General Fund to support for the construction of an Institute for Immunology and Immunotherapy at the University of California Los Angeles. I'm happy to answer any questions you may.

Thank you Legislative Analyst.

Thank you Chair Laird. Ian Klein with the LAO. We have two comments related to the Governor's Budget proposals. First, we recommend adopting the governor's proposal to forego the additional funding for the UCLA Immunology and Immunotherapy Institute as the additional funding is no longer needed due to a project scope change. Second, regarding the medical school project at UC Merced, we recommend the legislature pause the funding of this project.

The 29 Budget Act authorized UC to pursue a medical school project at or near the UC Merced campus and included legislative intent to support the debt service for that facility. This comes to a cost of 14.5 million, beginning with the 24-25 budget. UC has indicated that it has not yet drawn commercial paper nor issued a revenue bond for the project. Given that this project is still in its early stages, we recommend that it be paused and revisited once the state's budget condition improves. Thank you.

Thank you, University of California.

Thank you Seija Virtanen for the University of California. California's Central Valley is struggling to provide adequate health care to its residents and recognizing the need for additional doctors in the Central Valley. In the Budget act of 2015, the legislature directed UC to use our internal funds to cover the cost associated with the process to look at creating a medical school at UC Merced.

Then in 2019, the legislature directed the UC to construct the medical school building at Merced and said you would cover the bond funds costs associated with that. The campus is about to break ground on the important building that will serve as the future side of the medical school at UC Merced.

The building will house the medical education and allied healthcare programs and their associated instructional facilities, two allied departments, psychological sciences and public health and Health Sciences Research Institute, and general assignment classrooms to support increased student enrollment. That will allow the campus to expand enrollment by housing growing departments. The LAO has recommended that this project be halted, but the university requests that you allow the building to continue because it's necessary to develop the medical education at UC Merced.

The cohort of students who will receive their medical education at Merced have been selected based on the student's interest in working with underserved populations in the Central Valley. UC Merced cannot receive accreditation for their medical school without the proper instructional facilities, and the legislature has repeatedly endorsed the funding for the medical education at UC Merced, and stomping now would not be cost effective in the long run.

The state's own Department of General Services, which tracks the California Construction costs index, stated that in February of 2024, construction inflation in California was at 9.6%. If we stop now, it'll just get more expensive. So for this reason, we request that you allow the university to continue on with the medical education building at UC Merced. Now I'll move on to the Westside Pavilion, which is in the agenda. Just wanted to note a few things about this UCLA project.

Great. I was going to say Westside Pavilion. That's UCLA, right? And then you went right to it. I was just going to clarify.

If you want me to pause for your questions.

No, that was the question. You just said Westside Pavilion, and half the people would not understand. That was UCLA. But as I was trying to interrupt you, you said UCLA. We're good.

That's right. Great. Glad it was clarified. So UCLA acquired this Westside Pavilion in December of 2023. They used state funding as portion of the purchase price. The Westside Pavilion is a 700,000 square foot property located 2 miles from the UCLA main campus, and the site will be renamed the UCLA Research Park. The UCLA Research Park will house the California Institute for Immunology and Immunotherapy, the UCLA Center for Quantum Science and Engineering, as well as other programs in many disciplines.

The research park will bring together scholars and industry experts from around the world, and it will serve as a Center for innovation and scientific discovery, and it will provide an engine for economic growth for Southern California and beyond. In August of 2023, the UC regions approved a term sheet agreement for the California Institute for Immunology and Immunotherapy, and this Institute is a private, nonprofit organization that will rent space from UCLA at the research park.

And per this term sheet, the Institute will be responsible for tenant improvements to the space that they occupy. The term sheet also addresses intellectual property rights and requires the Institute to pay UCLA 7.5% for profits for their inventions that the university did not contribute funding towards. And other details of an affiliation agreement are still being determined. But at this time, the university estimates that the research park renovation will cost $560,000,000. That's an early cost estimate, and it will change.

We do expect the Center for the Quantum Science and Engineering to move into the space in 24 months, but we are still in the process of developing those preliminary plans and studying how much it will cost and getting all the actual timelines for you.

That completes your comments?

That completes my comments.

Then moving to the questions, let's start with that one, because the Legislative Analyst has sort of indicated that the thing was accomplished without needing the 300 million. I could not tell in your comments whether you agreed or you were saying that it's needed for the things you lined out. Help me here. Compare your two positions.

The state funding that was initially requested was not a UC proposal, but it was a governor's proposal. The original cost of the building was estimated at $1 billion, and we are now at a little bit less because the purchase price was just over 300 million, and the renovation cost will be about 560 million. Still to be fully determined, exactly where we land on that.

So you're trying to offer a comment about a proposal that wasn't yours.

This is a University of California owned building, and we will be renovating it. The proposal was not originally ours for the state funding.

Well, let's try it this way. Do you oppose the Legislative Analyst recommendation that you don't need the 300 million?

The University of California supports the Governor's Budget.

Okay. For once, it's not the Finance Department that's doing that. So before we leave that subject, would you like to comment on that? Short of saying you stick with your recommendation?

I think we're going to stick with that for now. Yes.

Okay. Although somebody's coming up out of the crowd.

Jennifer Pacella, just to be clear, everybody's saying the exact same thing in just different words. So the governor's proposal takes the money out. So I think UC is saying, of course, 300 million would be better than not, but it's not in the Governor's Budget, and we're just recommending that of all the budget proposal solutions before you, this one's reasonable. Actually.

I like that. And all the other solutions weren't reasonable? Is that generally it. I'm just kidding. I really appreciate the translation. That's very helpful. It sounds like we will like that, too. So thank you for doing that. Thank you for letting me tease you.

And then on the other item on Merced, that was the one my initial question was sort of addressed, but maybe the Legislative Analyst or Finance can talk about it, because my question was going to be, what do we lose by not doing this in the progression of a project? I mean, what does it do? Does it just move certain pieces of it off a year and expect that the entire project moves off a year?

Obviously, in what was said, the expectation is if you do that, the cost of construction will go up, it'll cost more. And it seems like it's a relatively small amount of money that is going to put us on the hook for a bigger amount of money, but gets us there sooner.

So Jennifer Pacella, Legislative Analyst Office. This was one of the more difficult recommendations we made because it is of legislative interest. The legislature has approved the project. It has advanced. It just hasn't gone to construction, and they haven't sold any commercial paper bonds for it. In addition, the accreditation process is going to take many years. So we again were trying to find budget solutions that would have no immediate direct impact on students, faculty and staff. And this does do this.

It also is going to be the most expensive state, the costliest state facility the state has ever funded. For UC, it's costing double what the UC Riverside School of Medicine building, which we toured this fall, it's costing double that. And once you lose these opportunities to pause capital projects where the deficits to persist, the options next year are layoffs and things that are going to sound, relatively speaking, even more adverse.

Okay, you look like you have a comment.

Thank you, sir. I'd like to respond to the comparison to the Riverside School of Medicine building. So the Riverside School of Medicine building that the LAO referenced was actually the School of Medicine building number two. They now have two separate buildings because they've discovered the first one was not big enough for their school. In order to grow, they need a second one.

That second one was primarily classrooms and did not include some of the other things that were in the first building, which are the refrigerators that can store the cadavers and the specialty labs that are required for a medical school. So if you look at actually the two buildings together, you get to far more comparable costs.

We're trying to build a building at Merced that would allow them to get medical school accreditation and grow at the same time, the halting of the project, they are about to break ground, will greatly complicate moving forward with the construction. So we would ask that you not pull back the funds at this time.

Okay. I would just say, I appreciate your comment on how hard. It is would obviously be our preference to keep going, but we'll put this all in the mix for what the challenges are. It just makes sense, and particularly with what could happen next year, and try to keep this on track. But I know that we have a monumental deficit and we're looking for ways to bridge it. Do you have any last comments on this? Okay, then. Thank you very much. We appreciate this.

And on the previous items, we're going to move to public comment. And some of you have been patiently waiting. Let me just take an informal poll. How many of you would like to make public comment in addition to the person that's already standing at the podium? I see six. So if that's the case, we'll give everybody up to two minutes to address the committee, and if the rest of you would line up and be ready so we can just do this.

Thank you very much for all six of you and the person at the podium being so patient in waiting through all our various discussions to get to this moment. Welcome to the committee.

Thank you, Mr. Chair. Paula Treat on behalf of Pechanga, Tahone, and Kaluta Indian tribes. On the area of tribal repatriation, and this is very near and dear to me, so I wrote it down so I would get my thoughts across. I've heard promises for three decades of representing tribes. It's hard not to like President Drake and chancellor Garcia, but their positions cannot give away. Accountability, talk and broken promises are what tribes have received for 30 plus years that I've represented them.

It took years to get repatriation laws on the books. The simple truth is that UC and the CSU have not followed the law for over two decades. Thousands of items and remains are kept in the back rooms in plastic bags and boxes. Some professors have private collections. It's state and federal law, and it has been their lowest priority. The UC and CSU budget should be tied to their repatriating back to tribes per institution. For example, UCLA has been great.

My Alma Mater, UC Berkeley, has dragged their feet. The very most Phoebe hears should be shut down until at least 90% of their hoarded items and remains are repatriated back. And that includes the held back items in the back rooms that they keep when they tell tribes they have no more items.

This subcommitee and full Budget Committee needs to send a strong edict that tribal remains and items do not belong to the UC or the CSU, and if these were your family members, you would want them back long ago. Tribes are tired of begging for their ancestors to be returned. On behalf of my clients, I hope that the committee will do something after all these decades.

Thank you very much. We appreciate your comments. Next. Welcome to the Committee.

Thank you. Good afternoon, Chair Laird and members of the committee. My name is Molly Maguire with the Campaign for College Opportunity. The Governor's Budget largely continues the state's investment in college access and student success, and we are deeply grateful that amidst fiscal uncertainty, the January budget proposal protects and preserves higher education funding. That said, there are a few areas of the budget that merit additional attention from policymakers.

While we agree that reliable base funding increases to the UC and CSU through the compacts are critical to their ability to plan for and fund vital student success and retention work, those base funding increases were part of a 2022 agreement to pair funding increases with meaningful improvements across several areas, including access, completion and affordability. We would argue that those improvements have been uneven at best, in particular around transfer student success and the removal of equity gaps.

We would also argue that some of these improvements, in particular around transfer student success, are relatively low cost, and therefore it's unclear why we haven't seen more consistent progress. It suggests not a resource problem, but a resistance to treating transfer student success on par with first time freshman success, which ultimately reinforces equity gaps. We look forward to working with members and the administration over the next few months to prioritize the segment's commitment to making good on all of the compact goals, even the difficult ones.

Thank you.

Thank you very much. Next speaker. Welcome to the committee.

Thank you. Tiffany Mok with CFT, a union of educators and classified professionals. We are here to testify that we have concerns about the deferral of the compact funding for the UC segment, but we would oppose, which is different than a concern, any cuts to the compact. We believe that it is essential to funding our faculty and ensuring our bargaining agreements so that we can provide the same services and the supports that students need to succeed.

Just because we have more diverse students, we shouldn't have less robust services. Thank you so much.

Thank you so much. Welcome to the Committee.

Good afternoon. My name is Raymond Gonzalez. I am a student at CSU Stanislaus and a student for quality education, intern for the California Faculty Association. Today, I'm here to ask that you match the governor's higher education budget proposal and ensure the CSU remains funded.

I joined the fight for quality education because, as a low income, first generation college student with three younger siblings coming into the system after me, this funding is incredibly important, as it would allow myself and others with backgrounds like mine to have access to quality education. With the current tuition increases that we're facing that will directly affect CSU students, we are seeing a disproportionate amount of students that can't afford less funding.

We need to keep our classes current programs and maintain current Calgetzi for a well rounded education. One such choice is holding the CSU to its core mission of providing students an attainable quality education. With your oversight and careful shepherding of California's finite resources, I trust that the people's university will live up to its mission. Again, I urge you to fully Fund the CSU. Thank you for your continued advocacy to higher education.

Thank you very much. Welcome to the committee.

Good afternoon, Chair Laird and members. My name is Taylor Hawkins. I'm also a student at CSU Stanislaus and an intern for students for quality education with CFA. I'm here today to ask you to match the governor's higher education budget proposal and ensure the CSU remains funded. I joined the fight for quality education because I believe fulfilling the master plan for education is the key to upward social mobility. I'm a first generation student. My dad is a Navy veteran of 26 years.

His servitude and the Navy's upholding their agreement allowed me the opportunity to scrape by and attend higher education. But I also have had steady employment. I've had to take out a student loan. I've racked up $10,000 in credit card debt to pay for tuition. I moved 400 miles to an affordable CSU town. We're doing everything that we feel is we've been told to do, pretty much.

We've pulled ourselves up by our bootstraps, so to speak, but we still feel the weight of entrenchment nipping, like, at our heels. It's right there. All that I mentioned I've done before. That was before the tuition raised 34%. And I know you have a difficult decision to make, and there's significant progress on the line, but it's taken my family, three generations of sacrifice, to barely get here. And just as we're getting here, the line is being moved.

So I would say we would ask you to fully fund the CSU and let the CSU be a resource rather than another system not built for us, that we have to circumvent, because initially it was built for us, but I would also encourage for you to encourage reallocation of funds because you giving the funds for the students, for the CSU, that's helpful for us.

But if it's not being given for us, if it's being hoarded at the top, if we're seeing our faculty and staff have to fight nail and tooth for us to get proportionate amount of counselor student ratios and for their working conditions, our learning conditions to be improved, and we don't see the same thing from admin. I know you feel for it. Both of your parents were teachers, right?

Yes, even though I'm not supposed to respond, but we really appreciate your comments. They're heartfelt and they're personal. But if you could begin to wrap up.

That's all. We'd encourage you to fully fund the CSU, and we appreciate your support this far.

Thank you for your comments and for waiting to be able to give them. Welcome to the committee.

So good afternoon, Chair Laird. Stephen Felling. I'm the political action chair for the California Faculty Association. I'm also a professor of accounting and ethics at CSU Stanislaus and deeply proud of my students, as you've just seen. I want to note that my colleagues appreciated hearing the presentation and the conversation they had to leave to provide the high quality education that our students deserve.

In other words, they had to go teach. We are here to ask that the legislature concur with the governor's January proposal for CSU funding, and we're very pleased to see that reflected in the senate early budget action plan. We agree that the proposed deferral of the base increase is a reasonable adjustment given the state's revenue forecast, and we're also comfortable that the CSU has sufficient resources to bridge funding during that period.

CSU provides unparalleled opportunities for California students, would be a disaster for them if CSU was forced to cut classes and severely constrain our students' ability to complete the education that empowers that social mobility Chancellor Garcia talked about. Our society and our state have a continuing commitment to California's students and a moral obligation to provide them with the educational opportunities they deserve. Again, we respectfully ask your continuing support for funding in the CSU. Thank you.

Thank you very much. Appreciate your comments.

And now we're going to get to the three people that sat in the front row for 3 hours waiting to speak. So welcome to the committee.

Thank you. My name is Joshua Smith, and I'm a student at UC Davis, and I ask that Cal Grants be supported for next year's that you can match the Governor's Budget, which includes Cal Grant's support and expansion of the Cal Grants in the next year's budget. And for context, I am a transfer student at Davis who unfortunately took out loans and debt in the past and which is not atypical for other students.

Had it not been for Cal Grants, however, I would have not have attended UC Davis's or even accepted UC Davis's admission letter in 2021. Nor I would kind of be here as well. I'm proud to say that I'm one of the countless success stories of California's extensive funding into Cal Grants, where I am on track to receive summa cum laude, which is the highest honor from UC Davis by the time I graduate with my two degrees.

But I could have only done this without the stresses and burdens of self funding of my ever rising university tuition, which for UC fortunately locked in my tuition. But had it been anywhere else, it would have still continued to hire. Yet it's very much an understatement to say that Cal Grants changed my life by funding my college education and furthermore in my family.

I have siblings who attended community college and moved on to CSUs and have also received extensive financial aid packages from California's higher education budget allocations. So I'm a family of California educated family. So I'm proud to say that. Once again I ask the subcommitee to support Cal Grant and continue to change many more students' lives, and ease the burdens of rising college costs. Because so far, Cal Grant has done so much more than make college costs much more manageable but also accessible.

It makes it both equitable and accessible to make each student decide how they get to excel in life, as Cal Grants gave me so many opportunities by letting me attend here at UC Davis. Thank you.

Thank you very much. We appreciate your comments. Welcome to the committee.

Thank you. Hello. I would just like to thank everyone who decided to participate and engage in today's meeting. It is important to have a dialogue about the Cal Grant.

If you could please identify yourself so we know who you are.

My name is Luis Marin. It is important to have a dialogue about the Cal Grant because it has opened the door to many of us to achieve a higher education. As a first generation college student and an undocumented student, I can say with certainty that the Cal Grant has been a fundamental part of my academic journey. I could not have imagined being here where I am today if state funding like the Cal Grant didn't exist.

This generous grant has allowed me to afford community college the supplies necessary for school and my books. I remember my mother telling me, son, if it wasn't for the help you're getting from financial aid, I don't think we could have afforded your schooling. As a low income student with no opportunities to work legally due to my status, the Cal Grant has helped me make college accessible and a possibility.

It has also allowed me to be able to go to my dream school, UC Davis, where up until this quarter, I found that my eligibility will run out. This has made me worry because Cal Grant was one of my only sources of funding since AB 540 students do not get access to federal aid. My eligibility ran out because of the time it took me to navigate community college and to transfer. Due to family and financial obligations.

It was difficult to graduate with a STEM associate's degree in two years, especially after the COVID-19 pandemic and the obstacles that presented. I have the optimism who may not have access to the higher education without Cal Grant and the underserved. I have been fortunate to have received the Cal grant, but hope that its expansion and reform helps the future generations of Californians.

I hope that my testimony has highlighted the importance of the caligram for the undocumented community, but has also showcased the necessity of its reform as it not only impacts current students, but the future generations that look at us as role models. I appreciate your attention. Thank you for considering. Thank you.

Thank you very much. We appreciate your comments. I know they might not have been easy, so welcome to the last speaker. Thank you for your patience.

Thank you. I wrote good morning, but good afternoon. My name is Shelley Signs. I'm currently a third year student at UC Davis, and I am also here to ask for the funding of the Cal Grant equity framework. I'm a first generation college student and also a first generation high school graduate from rural Southern California. I'm from Hesperia, California. It's in the Inland Empire. Yeah. So growing up in a household where my father's disabled and my mother works as his caretaker, my family was consistently facing financial uncertainty.

And Cal Grant, for me has been a beacon of hope in my pursuit of higher education. Back home, I am faced with poverty and limited resources. But here in Northern California, in Davis and Sacramento, I have curated a community of stability. And my education and stability are tied together because of my compounded financial aids and grants, one of them being Cal Grant, which consistently helps make my education completely free.

And so the proposed Cal Grant reform is not just about funding, it's about safeguarding the stability of students like me who rely on this program to navigate the challenges of pursuing higher education and by supporting the Cal Grant implementation and the reforms and allocating the funding in the 2024 and 2025 state budget.

You're not just investing in a program, you're investing in the stability and future success of students who depend on the Cal Grant, like me, to overcome their adversity and achieve their dreams, as well as future stability in education. So I'd like to thank you for your time along committee hearing and the profound impact of your support on students like me who rely on Cal Grant as a pillar of their education. Thank you.

Thank you very much. We appreciate your comments and we appreciate the comments of everyone. And let me just also say for the last few that just testified, our last hearing was a complete hearing on student aid. And if you didn't see it, I believe it's available online. And we went through the equity framework and other things. So I don't want you to think because they didn't come up very much today, that we gave short shrift to them. We really reached out.

I appreciate everybody for sticking to it. That completes what we had on the agenda. And if you were not able to testify today, you can submit your comments or suggestions in writing to the Budget and Fiscal Review Committee or visit our website to do it. Your comments and suggestions, as you have just heard, are important to us and individual store are really helpful and we want to make sure that we include your testimony in the official records. That concludes our hearing.

We really appreciate everybody's participation and patience with its length. Budget Subcommitee 1 on education will stand adjourned.