Audit: California State University Stashed $1.5B While Hiking Tuition

SACRAMENTO, Calif. (CN) – On the backs of tuition hikes and taxpayers, the California State University system has recovered nicely from the Great Recession. Gone are semesters of mandatory teacher furloughs, staff cuts and campus demonstrations during the late 2000s that often resulted in students getting arrested for protesting tuition fees and raises for administrators.

Now with the state’s coffers full, CSU stands accused of asking students and lawmakers for more money while building a secret $1.5 billion surplus.

In a report released Thursday, State Auditor Elaine Howle says CSU amassed a “discretionary” surplus in part by “undermining” a state law that requires it to give information to lawmakers and students regarding proposed tuition increases.

“As a result, legislators were unable to evaluate whether CSU’s accumulation of surplus funds was reasonable and to consider whether that surplus should be used to fund certain portions of CSU’s budget requests rather than the state’s general fund,” the audit states.

Consisting of 23 campuses and more than 480,000 students, CSU is the largest public university system in the country. It’s managed by a 25-member board of trustees and an appointed head chancellor. While most of its budget is decided by the Legislature, state law allows CSU to deposit revenue from tuition and other fees in accounts outside of the state treasury system, ostensibly for financial emergencies.

Howle’s investigation found CSU routinely petitioned for more funding without including in financial reports the budding surplus, which had grown to $1.5 billion by June 2018. Meanwhile, CSU nearly doubled undergraduate tuition rates, from $3,000 in 2008 to $5,700 by 2018.

CSU’s Chancellor’s Office contends the money is not discretionary and that it is used to “deal with” short-term obligations, maintenance and infrastructure repairs and for times of budget uncertainty.

“The California State University is transparent in its financial operations, and detailed information about monies held by the university is readily available for review by Californians and our state’s lawmakers. We have gone to great lengths to publicly report information about investment balances, net assets and reserves,” said Chancellor Timothy White in a statement. “We are disappointed that the audit report misrepresents CSU practices, concerned that it might mislead the public and are perplexed that the report’s recommendations are so disconnected from the language used in the headline.”

The group and lawmaker that called for the audit said its time to ramp up legislative oversight of CSU’s outside accounts.

“Unfortunately, the state auditor has again uncovered violations and waste that occur when we allow the CSU to operate its campuses without adequate state oversight or accountability,” said Assemblymember Sharon Quirk-Silva in a statement. “The Legislature must enact measures to ensure state funds cannot be hidden in outside accounts and are being spent in the best interests of students.”

Howle recommends the Legislature require CSU to annually report on its surplus balance and estimate how much tuition contributed to the total. She also says the Chancellor’s Office should make similar surplus reports available publicly and better promote alternate transportation methods on its campuses.

According to the audit, CSU also jacked up student parking costs over the same period of time to build new parking facilities, but the projects have had minimal impact. It says CSU even built a costly new parking facility in San Diego that students aren’t allowed to use.

“San Diego State built a parking facility that was not intended for students, despite using students’ permit fees to pay for the facility’s construction,” the audit states.

Neil Jacklin, president of the CSU Employees Union, called the audit disturbing and the CSU leadership irresponsible.

“For years, the CSU has claimed ‘poverty’ and now we find they’ve been holding $1.5 billion in outside accounts,” Jacklin said in a statement. “This is just the latest example of CSU leadership irresponsibly managing public funds without fear of consequence.”

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