Governor Brown’s decision to cut the CSU Budget

PRO

Brown's decision to cut the CSU budget is in the best interest of

taxpayers and citizens of California.

California’s DebtCA began the 2011 year with a budget gap of

more than $25 billion.Jerry Brown plans to reduce the deficit by

$12 billion this year through cuts and shifts in spending.

Proposes to reduce CSU funding by $500 million, which represents an 18 percent reduction in state funding from last year's budget.

Students & TuitionTuition costs will rise and force those who

aren't serious about college into the workforce.

This will also help the overcrowding of college campuses and classes.

A student that truly wants a higher education will continue to attend no matter the slight increase in tuition.

This is Nothing NewDeregulated electrical industryHousing industryGas prices

It’s absolutely necessary to cut the state’s CSU funding in order to maximize our success in conquering California’s debt.

Economic IssuesHigher Education subsidies impose taxes on

blue collar workers to pay for the tuition of future white-collar professionals.

Economic IssuesRise in student subsidies over the decades

appears to have fueled inflation in education costs.

Con Economics

2011 Budget ActThe 2011 Budget Act includes total funding

of22.1 billion, ($12 billion General Fund and $

9.9 billion other funds) for all programs for Higher Education System in California,

Major entities comprising the higher education in California include: CSU, UC, CCC, and CSAC

Reductions$ 650 million to CSU and an additional 100

million reduction if state revenue forecasts are not met.

The cut brings the CSU’s new budget to a total $ 2.1 billion and represents a 23 % decrease in support (year over year).

To address the first $ 150 million budget reduction, it was agreed that the university would enroll 10,000 fewer students in the fall of 2011.

Apply an estimated 146 million in revenue from a tuition fee increase

Reduce the 23 campuses budget by a combined $868 million.

Reduce the Chancellor’s Office by nearly 11 million.

Cuts will be made through:Administrative and instructional efficienciesExpenditure reductions in travelInformation technology, Equipment, book and journal purchases by libraries. The 2.1 billion budget in state funding allocated to the

CSU in the 2011-2012 will be at the lowest state support the system has received since 1998-99, regardless of the cuts, the university is currently serving an additional 90,000 students.

The Past Economic SituationCalifornia spends more money each year than it

makes, which is not sustainableOur Legislature will not vote to raise taxes to make up

the gap, and as a result Since 2008 Spending to Social

Services, including Higher Education, has been Cut.

The Current Economic SituationThe California State University System

consists of 23 Colleges and 412,000 Students2007 budget (438,000 Students) $2.93 Billion

reduced by $868 Million, a 29.62% CutGovernor Brown Cut CSU $650 Million,

another $100 Million Cut pending in December

The Economic Situation -Looking Forward

Our population is growing, we need to maintain healthy economic growth to maintain the standard of living

Short Run -Cutting the CSU's budget Will Lower Consumption and Lower Government Expenditures

Long Run -Cutting the CSU's budget Will Lower Human Capital, and Slow Technology Growth

Short RunAD & AS models are useful to measure

Inflation, Economic Growth, Unemployment, & Net Exports.

Two different ways of deriving Aggregate Demand1) AD = Consumption + Investment +

Government Expenditures + Net Exports2) AD = f(Taxes, Transfer

Payments, Government Expenditures, Money Supply, Expected Income, Expected Prices, Net Exports)

Decreasing CSU budget decreases Government Expenditures, leading to increased tuition, lessens disposable income, lowering consumption, thus decreasing AD & decreasing GDP, leading to less economic growth and declining standard of living.

Short RunIn the Short Run Price is fixed & therefore AS is flat, suggesting this will lead to decreased output thorough increased Unemployment. (consistent with Keynesian economics, Cobb-Douglas production function)

Short Run Multiplier Effect- this idea specifies that an

exogenous variable will have a quantifiable affect on an endogenous variable. More simply put, a cause will have an effect. 

According to the Office of the Chancellor CSU Impact Report every $1 in government expenditure spent on California State Universities causes $5.43 of economic impact in California within that year.

This suggests that Consumption will be affected by more than five times greater than the amount the government cuts the CSU's budget.

Medium to Long Run AD & AS models are useful to measure

Inflation, Economic Growth, Unemployment, & Net Exports

Aggregate Supply AS = Labor + Capital + Resources +

TechnologyDecreasing the CSU's budget can negatively

affect Labor, Capital, and Technology. 

Medium to Long Run

Medium to Long Run Instead of cutting CA's budget or Increasing Taxes,

California can become more productive, consequently the government will receive more revenue; and this will take place due to:  increased Marginal Productivity of Labor increased Human Capital increased Technology 

All of which contribute to the economic growth necessary to maintain the standard of living, **ALL OF WHICH HAPPEN AT THE CSU.**

Pro Political

Everyone is affectedA Budget cut is necessary; the state deficit is

the most important issue at hand, above all other programs.

Budget cuts are not permanent, but presently they are necessary to facilitate and maintain financial stability for California.

Budget cuts can’t pick and choose which programs it wants to give to; it involves everyone by cutting from every program to be fair

The Government Serves EveryoneCalifornia government serves nearly 40

million peopleThe government serves the following

students, which is less than 10% of the population

UC 222,000 students CSU 412,000 students JC 2.6 million students

The Budget for Higher EducationThe governor’s budget

$11,140,400,000 for higher education, which was 8.6% of the budget

The education system serves less than 10% of the population. Of this percentage, only 1% of students are enrolled in the CSU system

Is it the governments job to cater to 1% or even 10% when they have duties to the rest of the population?

CA has duties to it’s entire population

The majority of the budget goes to the majority of the population, such as K-12 education which is roughly a third of the population

And Health and Human Services

Both of these programs have also suffered budget cuts as well

Democratic CapitalismDemocratic Capitalism would support

budget cuts because it is one step closer to a free higher education market.

The government should not interfere with the free market. By having a institution such as a public higher education, this market is being manipulated.

Con Political

According to Jefferson,Jefferson believed the survival of the United States

depended on having honest leaders, knowledge, and most importantly education.

He believed the people needed to be educated in order to recognize corruption, and when they are being taken advantage of.

Universal educationHe fought to insure that some form of universal

education would be provided to the people of the United States. It partially came true with grade school and middle school education being supported by taxes, but the quality of the education still isn’t excellent, and college education is far from being universal. What little funding is being provided to students is being threatened by budget cuts.

Already 2300 students were turned away by the University of CA in 2008 and that is expected to grow in the next few years.

As a result teachers will lose their jobs, less classes will be offered, and students will be turned away.

BACKGROUNDIn July, 2011 Governor Jerry Brown approved budget cutting

state funding for CSU by $650million for 2011-2012 CSU Board of Trustee implemented a 12% tuition hike,

increasing tuition by $249 per semester for full-time undergraduate students

California is undoubtedly in the midst of a financial crisis that demands a solution, but CSU budget cuts are NOT the solution

Cuts to higher education limit societal investment in a far more valuable educated citizenry 

KNOWLEDGE IS POWER Thomas Jefferson was a strong proponent of public

education Education as man's greatest protection in the

political process Allowed citizens to have the capacity to have a

shared influence over government  Successful government could not coexist with an

ignorant populous  More educated constituency in CA would in turn

make for a more effective government and political system in CA

SOCIAL BENEFITS OF HIGHER EDUCATIONSocial Democrats measure efficiency through social costs,

not just financial figures Center for Community Engagement (formerly Office of

Community Service Learning) - CSU was the 1st higher education system in the country to establish an office of this kind

In 2007-08 approximately 50% of CSU students took part in community service projects, totaling 32 million hours of service, or $624 million in in-kind services

Contributions in the work force - example: CSU awarded 82% of bachelor's degrees in social work in 2007

Long term: affordable public education --> equal opportunities --> greater earnings --> contribute more to CA (economically and socially) 

Pro ConclusionGovernor Brown’s cut is a five year

deal to get CA back in good economic standing.

Does create a burden on universities and colleges, however; they have

ability to help.

Can increase tuition costs.Control student attendance.Control their budgets.

Copy of letter to CSU Long Beach regarding salaryAs reported in California Newswire link from California Governor website.

In 2008 Nat’l Center for education Statistics reported that 65.4% of high school graduates

went to college in California

This ranks California as a middle state nationally.

College-Going Rates of High School Graduates: 2008

WA

OR

CA

AZ NM

NVUT

ID

MT

WY

CO

TX

OK

KS

NE

SD

ND

MN

IA

MO

WI

IL IN

MI

OH

KY

TN NC

SC

FL

GAALMS

AR

LA

AK

HI

VAWV

PA

NY

ME

DC

MD

DE NJ

CT RI

MA

VT

NH

Source: National Center for Education Statistics’ Digest of Education Statistics

Top Ten StatesBottom Ten StatesMiddle States

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WHO IS GOING TO COLLEGE?

So of attending college how many stay and Graduate?

Community college level typically a two year Associate’s Degree and finish or transfer

University Level typically four year’s to earn a Bachelor’s Degree

Three-Year College Graduation Rates for Associate and Certificate Students: 2009

WA

OR

CA

AZ NM

NVUT

ID

MT

WY

CO

TX

OK

KS

NE

SD

ND

MN

IA

MO

WI

IL IN

MI

OH

KY

TN NC

SC

FL

GAALMS

AR

LA

AK

HI

VAWV

PA

NY

ME

DC

MD

DE NJ

CT RI

MA

VT

NH

Source: Integrated Postsecondary Education Data System’s Data Center

Top Ten StatesBottom Ten StatesMiddle StatesNo Data 40

WHO IS GETTING ASSOCIATE DEGREES?

The National Public Average for 3 year

college graduate is 29.2%

California graduation rate for a three year graduate is 38.2 %.

Almost 10% higher than the national avg.

Source: Integrated Postsecondary Education Data System’s Data Center

Six-Year College Graduation Rates for Bachelor Students: 2009

WA

OR

CA

AZ NM

NVUT

ID

MT

WY

CO

TX

OK

KS

NE

SD

ND

MN

IA

MO

WI

IL IN

MI

OH

KY

TN NC

SC

FL

GAALMS

AR

LA

AK

HI

VAWV

PA

NY

ME

DC

MD

DE NJ

CT RI

MA

VT

NH

Top Ten StatesBottom Ten States (with ties)Middle States

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WHO IS GETTING BACHELOR DEGREES?

For Bachelor’s Degree Nat’l Avg is 57.4% for a

SIX yr graduationThe California rate is 64.4% this is

close to the national average and we are in the top ten states.

Part of the issue is that students are taking longer to get their

degrees

Education is important, yesBut being a student forever is not helping

anyone.Students by paying a higher tuition out of their

pocket have more motivation to finish their education timely and not drag it out, and take

it more seriously.

Excerpt from San Luis Obispo Tribune

Here’s what has happened at Cal Poly, and the tale is similar at the other CSU and UC campuses:

Twenty-five years ago, California taxpayers provided Cal Poly with 90 percent of the money needed for each student’s education; today, the state pays only about 41 percent of the cost of a Cal Poly education. At the level of the CSU, the budget is less than that of 13 years ago, yet the system serves an additional 70,000 students.In the past four years alone, Cal Poly’s annual

state funding has declined by 40 percent, plunging from $150 million in state support to about $89.5 million this year, with an additional midyear cut

looming.

What does this mean for CPP?

Cal Poly’s tuition will be less than $8,600 annually, still one of the best values in higher education. Further proof of that can be found in the fact that despite recent increases, Cal

Poly continues to receive about 40,000 applicants each year vying for about 4,500

seats.

Questions?

Overall Economic Effect of Budget Cuts