Lawmakers Question Cal State’s $1.5 Billion Stash Amid Rising Tuition

The Walter Pyramid at California State University, Long Beach. (Summum via Wikipedia)

SACRAMENTO, Calif. (CN) – California lawmakers grilled leaders of the California State University system on Monday after an audit revealed the statewide institution failed to disclose it squirreled away $1.5 billion while it significantly raised tuition during the Great Recession. 

An audit released by State Auditor Elaine Howle found that CSU actually built its reserve fund over the last decade or so and kept it secret from taxpayers and students, who were asked to provide more funding for the system with their tuition payments. 

“Whenever the CSU proposes to raise tuition it needs to share information with students prior to doing so,” Howle said during a joint legislative oversight hearing in Sacramento. “By not disclosing the information, they precluded the ability to have a conversation and that’s our concern.”

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.

Several lawmakers expressed outrage during the hearing and noted that the entire purpose of creating reserves is to be able to use them during hard economic times, rather than punishing students and families struggling to afford the rising cost of higher education. 

“This is a shameful moment in California,” said Shirley Weber, D-San Diego. 

Weber was a faculty member at San Diego State University during the Great Recession and recalled how she and other faculty members took a 10 percent pay cut because they believed the CSU system faced an existential threat. 

“I look back on this and it makes me very sad the institution did not care about its staff and faculty as much as the institution itself,” she said. 

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

Chancellor Timothy White attempted to push back on some of the findings in the audit. 

Only a small portion of the fund is discretionary, White said, meaning the university system did not have the ability to deploy the full extent of its reserves to help with operating expenses.

He also said the university system did not hide the money, but just failed to disclose it during discussions with students about the tuition raise. 

“A lot of the information out there unfairly tarnishes CSU’s reputation,” he said. 

Assemblyman Kevin McCarty, D-Sacramento, said the fact that reserves went up during economic hard times while tuition was also raised did not make intuitive sense. 

White did pledge to create a more transparent reserve policy.

“I appreciate and agree with many of the findings,” he said.

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