Last month, President Fram Virjee addressed Cal State Fullerton’s Academic Senate to provide an update on how COVID-19 is impacting the university’s budget.
“I know we are all under tremendous stress and, in some cases, fear,” he began. “However, we can be grateful that most of us can work remotely and that our employees are still being paid. I want to be honest. It’s a bleak budget picture.”
Fiscal State of the University
As background, the California State University always requests a certain baseline budget from the state each year … and that funding rarely comes close to the request. For the fiscal year 2019-20, the system received an added $332 million (from an initial ask of $376 million). That was considered a good year.
“This year, because of increased enrollments and other expenses, the CSU asked for $489 million (in January),” Virjee explained. “We were told to ‘take our foot off the accelerator’ since the previous year’s request was quite generous. We were told that we could expect about $199 million. Now, it’s doubtful we will even see that.
“State allocations make up almost 46% of our revenue and 44.6% comes from students,” Virjee explained. “The remainder comes from philanthropy and other fees. Just over 70% of the budget goes toward salaries and wages. Enrollment reductions as a budget reduction is not an effective way to balance a budget. With declining numbers from the state, we will need to be looking very carefully at our expenses. For instance, there is a hiring ‘chill’ on new hiring. We will have to look across all divisions and see where and how cuts can be made.”
Among the areas hit hardest are Academic Affairs (because of its size) and Auxiliary Services (facing significant potential losses because they are not able to generate revenue).
“As of March 31, the end of the third quarter, we were in good shape, having spent about 68% of our annual budget,” Virjee explained. “We were not overspending, but keep in mind that during that period no costs for COVID-19 were recorded. Our losses will be reflected in the fourth quarter and into next year.
“Travel expenditure will be down but IT expenses will be up. It will take about $3 million to put cameras in classrooms, add computers, mini units, etc.,” Virjee continued. “And that’s just the beginning. Salaries and benefits are up as is financial aid. And there are miscellaneous operating expenses — insurance premiums, pension loan payments, repair and maintenance and more. Space rental of Titan Hall is down. Parking revenues are down. Housing is down.
“The bottom line is that we are about 8.4% above expenses compared to last year,” he said. “Not only will most of our COVID-19 expenditures come in the fourth quarter, much of that money is already designated to projects that need to be paid such as construction costs.”
The campus has about $24 million in rainy day funds … but that won’t come close to covering expenses.
Impact of COVID-19 on State Budget Process/CSUF Implications
The state of California is also feeling the brunt of the budget losses. A shortfall of anywhere from $8 billion to $20 billion is projected based on loss of revenues due to the economy. The projected statewide COVID-19 expenses could rise to $8 billion (with the potential of some recovery from the federal government).
Generally, the state develops a budget and makes revisions in May. This year, because tax payments have been postponed until July 15, the May revise won’t be as informative. California law requires passage of a budget by June 15, but a final budget most likely will not be unveiled until August or September.
It wasn’t all bad news. The good news is that the campus and the CSU are in a better position than they were in 2008 when employees were furloughed for 24 days. And the state has $20 billion in “rainy day fund” reserves that it can tap into.
“But I think we’d be remiss not to see the writing on the wall,” Virjee warned. “We had a revenue shortfall when the January preliminary budget was proposed. And receiving $199 million from the state isn’t tenable. In fact, there is a possibility that state reductions could be imposed on us.”
Experts predict there will be a reduction of about 25% in taxes, the general fund will decline by 41.2%, and there will be a $55 billion budget shortfall this year. In fact, projections are that the general fund budget for the state will be 3 1/2 times the rainy day fund.
“Gov. Jerry Brown set up funds that will act as some cushion, but it’s not enough,” Virjee said. “Our hope is not that the university will receive any additional funding. Getting nothing or remaining flat will be good news for us.”
CSUF administrators are in the planning stages for possible budget reduction scenarios so, in the event that cuts are needed, they’ve been discussed with members of the Academic Senate, Planning Resource Budget Committee, the unions, etc. If there are recommendations for furloughs or salary cuts, those would have to be made and bargained with at the system level.
“CSUF is projecting a $17,856,691 loss from COVID-19,” Virjee said. “This is based on data from Housing and Residential Engagement, Parking and Transportation Services, Extension and International Programs, Associated Students Inc., Auxiliary Services Corp., Cal State Fullerton Philanthropic Foundation and others (athletics, miscellaneous trusts, etc.) This does not include the campus operating fund.
“Nobody wants this but our revenue losses from COVID-19 may well continue for several more months,” he explained. “We will receive $41,021,512 in CARES Act funding that will allow us to provide some student assistance ($20,510,756 will be provided directly to students who meet the FAFSA requirements). The remainder of the funding will help cover some of the budget shortfalls the university has experienced over the past two months. But it is a help, not a panacea.”
Meanwhile, expenses continue to rise.
“We made it through 2008 we’ll make it through this,” Virjee said. “It’s not going to be easy. And I want to thank the Academic Senate, PRBC, staff, faculty and students … We have been working collaboratively with them to try to imagine what fall will look like.
“But we have proven that CSUF is a leader within the CSU system, the state and the nation. We care about our students, faculty and staff. When we moved to virtual learning, it was fast but it wasn’t easy or perfect. There was lots of work to do, but it showed who we are.
“Thank you to this community. We are sharing this information in the hopes that we can, as a campus community, navigate this difficult time in a way that empowers us to better serve the Titans who need us most. And make no mistake, we will make it through this.”
Contact: Valerie Orleans, firstname.lastname@example.org