Legislative watchdog leery of Newsom plan to boost college spending

SACRAMENTO, Calif. (CN) — California's nonpartisan legislative analyst says the Golden State’s deficit, which could approach $58 billion, is too great to support Governor Gavin Newsom's plan to augment funding for higher education.

The Legislative Analyst’s Office said in a report Tuesday that Newsom’s $21.7 billion support for three segments of the state’s higher education is overestimated. The proposed budget contains a $226 million boost for higher education over the last budget, including $171 million in new discretionary spending.

Nearly all of the proposed new spending is for community colleges, by withdrawing nearly $500 million from the Proposition 98 reserve. Passed by voters in 1988, Proposition 98 mandates that K-12 education and community colleges receive the greater of a fixed percentage of state General Fund revenues or the amount they received in the prior year when adjusted for enrollment and inflation.

For California State University and University of California campuses, the largest non-state fund source is student tuition revenue, which increases annually for some students. Total tuition revenue is estimated to increase 5.4% at the CSU to generate $148 million, and 4% at the UC, to generate $191 million, next year. Newsom’s budget contains no community college enrollment fee boost, leaving it at $1,380 for full-time students — the lowest in the U.S. and well below the national average.

For the universities, the governor proposes to defer base increases and commit to double funding and back payments in 2025. The Legislature agreed to provide funding to backfill UC for the loss of any nonresident supplemental tuition revenue. Newsom proposes to delay $31 million in funding until a one-time back payment for implementing the nonresident enrollment reduction plan is made in 2025. This will impact the UCs in Berkeley, Los Angeles and San Diego.

The analyst said Newsom's plan has “major shortcomings” because available Proposition 98 funding is insufficient to cover existing university costs and the deferral proposals will contribute $1.5 billion to the state’s projected budget deficit in 2025. 

“When facing multiyear deficits, the state historically has contained higher education costs rather than increased them,” the analyst said. 

Although Newsom’s package of proposed higher education spending reductions achieves a total of $2.4 billion in non‑Proposition 98 General Fund savings, the analyst recommends an even more prudent package of cuts and deferrals to protect existing programs and holding funding for all higher education flat in 2024‑2025, to be revisited in the next budget year.

“Our office has long advised against payment deferrals, as paying bills late is poor fiscal practice and ultimately can affect the state’s credit rating, resiliency, and overall fiscal health,” the analyst said. “In addition, state payment deferrals transfer risk to the affected government entities, as the state sometimes decides to increase the size of payment deferrals the next year rather than eliminate them.”

The analyst also suggested allowing one‑time higher education initiatives to stand without adjustments. 

“Pulling back these funds now would allow the Legislature to maintain more of its reserves, which in turn could help protect ongoing programs from cuts over the next couple of years,” the analyst said. “Asking UC and CSU to operate their programs at a level the state currently cannot afford puts not only the state and the segments at risk but also other state programs that might be cut next year to make room for the added higher education spending.”

The governor’s press office did not immediately respond to a request for comment.

This analysis comes amid pressure for CSU to improve compensation for lecturers following the 6% annual tuition hikes, with faculty going on strike this past month and suing over bans on discussing the strike in classrooms. The strike ended with a deal that includes a 5% pay raise, increased salary floor for the lowest-paid faculty and 10 weeks of parental leave.

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