The California State University (CSU) serves more than 480,000 students at 23 campuses located throughout the State. Its mission is to extend knowledge, learning, and culture and to provide Californians and others with the opportunity to obtain baccalaureate and advanced degrees. As part of this audit, we visited the CSU Office of the Chancellor (Chancellor’s Office) and four campuses. We examined two of CSU’s financial practices that have the potential to negatively affect students: its accumulation of surplus revenue from tuition and other sources and its focus on building new parking facilities rather than on implementing other transportation options. This report concludes the following:
The Chancellor’s Office Did Not Fully Inform Legislators and Students About CSU’s $1.5 Billion Surplus
As of June 30, 2018, CSU had accumulated a surplus of more than $1.5 billion, primarily from student tuition, that it can use at its discretion to cover the costs of instruction or other operations. During the period when CSU accumulated much of this surplus from fiscal years 2008–09 through 2017–18, it nearly doubled the cost of student tuition. Further, state funding for CSU also increased significantly after 2012, when California voters approved additional taxes to support education. Although the Chancellor’s Office considers the surplus to be critical for supporting CSU’s operational needs, it did not disclose the surplus to students when consulting with them about raising tuition costs, thus undermining the opportunity state law affords the students to provide input and ask questions about the need for tuition increases. The Chancellor’s Office also did not disclose the surplus to the Legislature when it provided information about CSU’s available financial resources. 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 appropriations.
The Chancellor’s Office Has Failed to Ensure That Campuses Consistently Plan for Alternatives to Costly Parking Facilities
From fiscal years 2008–09 through 2017–18, the four campuses we visited raised student parking permit prices to as high as $236 per semester, largely to pay for the millions of dollars in annual debt payments they took on to finance the construction of new parking facilities. However, these costly new parking facilities have had a minimal impact on parking capacity. Moreover, the Chancellor’s Office has not ensured that campuses have consistently planned for or implemented options for alternate methods of transportation (alternate transportation)—such as shuttles, carpools, and bicycles—before requesting to build new parking facilities, as CSU policy requires. CSU’s growing enrollment emphasizes the importance of it adopting the most cost‑effective transportation solutions so that campuses can accommodate additional students. Nonetheless, the Chancellor’s Office has not consistently provided the leadership and oversight necessary to ensure that campuses implement alternate transportation programs.
Other Areas We Reviewed
We also reviewed CSU’s fiscal practices and the transportation services programs at each campus. We found that CSU has appropriate practices in place to safeguard the accounts it holds outside of the Centralized State Treasury System. We also determined that the savings CSU has realized because its salary costs were lower than budgeted (salary savings) can contribute to its surplus. However, because CSU is exempt from budget requirements that would make it necessary to track salary savings, some campuses had limited information about their salary savings. Finally, we also examined whether campuses appropriately spent parking fine revenues, whether they disbursed interest and earnings from parking revenues appropriately, and whether they required quotas for parking violations. We did not find issues in these areas.
Summary of Recommendations
To ensure transparency about CSU’s available financial resources, the Legislature should require that, beginning in September 2019, the Chancellor’s Office provide legislators current balances and projections of the surplus CSU has accumulated for discretionary spending on operations and instruction, and an estimate of how much tuition contributed to that surplus, no later than November 30 each year.
To ensure that students have equitable access to campuses and that campuses provide the most cost‑effective mix of parking and alternate transportation options, the Legislature should require the Chancellor’s Office to include relevant additional information in the five‑year capital improvement plan that it submits annually to the Legislature, such as the status of campuses’ implementation of alternate transportation strategies and how those strategies have reduced parking demand.
To improve its transparency, the Chancellor’s Office should publish on CSU’s website by October 2019, and annually thereafter, information for all stakeholders about CSU’s surplus for operations and instruction, including an estimate of how much tuition contributed to that surplus.
To ensure that campuses thoroughly investigate and consider alternate transportation strategies, the Chancellor’s Office should immediately require that when campuses request to build new parking facilities, they must submit information on whether implementing alternate transportation strategies reduced parking demand and their plans for future strategies.
The Chancellor’s Office indicated that it believes we have mischaracterized the manner in which it reports its investments and designated reserves. It also indicated that, to the extent possible, it will implement the recommendations in the audit report.