Fall 2009 Convocation Speech
“Sharing Pain to Persevere”
President Ruben Armiñana
August 24, 2009
Fall 2009 Speakers
Provost and Vice President for Academic Affairs
Chair of the Faculty
Associated Students President
Staff Representative to the Academic Senate
Welcome to the new academic year of 2009-2010. I especially want to welcome the 16 new tenure-track faculty and students who have just joined us. To the returning faculty, staff and students, it is good to have you back. I like to start these remarks with good news and for this year it is that we have an approved State budget. There have been years where we began the school year without one. The bad news is that it is a terrible, lousy, and unfair budget. And the worst news is that this might not be the last of the bad years as the full effect of this yearís cuts will not be felt until 2010-11 when the federal stimulus funds are expected to dwindle or disappear. Next yearís budget is already expected to be about $8 billion in deficit. The economic recovery is still at least two years away, but the need for funds now is urgent.
California is in terrible financial straits, the worst it has been in the last three decades and it will take years for conditions to improve. This past February a two year budget agreement was reached and it resolved a $15 billion deficit; but just a few months later the State found itself in a much greater deficit having increased to $26 billion and with revenues declining at an alarming rate. After much negotiating and posturing, a budget agreement was reached at the end of July. This budget is full of suffering and it is inadequate to cover the needs of the people of this state. There are major spending cuts, but there are also accounting gimmicks, fund shifts, borrowing, too-optimistic revenue projections and significant amounts of one-time federal stimulus money. Needless to say that the financial woes that afflict California have not disappeared; as matter of fact, even at this late stage, about $500 million in line item vetoes to health and welfare programs made by the Governor just before signing the budget bills are being challenged in court. Borrowing from local governments and redevelopment agency funds is also being challenged. If these court challenges are successful and revenues do not materialize as predicted, this could result in even larger reductions, including to education, at mid-year. I do not tell you this to frighten you; rather to give you information you need to know. The challenges will be many over the next two years or so, and we will be sharing the pain in order to persevere.
Californiaís fiscal and political structures leave it extremely vulnerable to changes as a result of the business cycles. Different from most other states, our tax system depends very heavily on personal income taxes. According to The Press Democrat in August of this year, ìSince 1950, income taxes have grown from 11% of the stateís tax revenue to about 50% today. In recent years the stateís wealthiest 1% have generated the bulk of thatóroughly half of the total income tax take, and one fourth of the stateís overall tax revenue.î (The Press Democrat, August 11, 2009) In other words, we are too heavily dependent on few millionaires to fund the state, and their income fluctuates widely since it is based on capital gains. In good times it is great, but in bad times it is terrible, and these are bad times. Dan Walters of the Sacramento Bee said in July, ìThe state rides a roller coaster of revenue that soars when the economy jumps and plummets when it sours, leading to binges of spending and tax cuts, followed by deficit hangovers.î (Dan Walters, The Sacramento Bee, July 28, 2009)
If you add to the tax system a political system that protects the political partiesí status-quo in the Legislature, term limits, a two-third requirement for budget approval, inflexible government spending dictated by propositions and court orders, and the inordinate influence of special interests, it is no wonder we are in bad shape. Perhaps, these difficult times will make it possible to enact some important reforms but this will take time and more importantly it would require a great deal of the political will that has been lacking in California for decades. We will see more political competition for the seats in the Legislature by 2012. There is a Commission on the 21st Century Economy that has been charged to recommend changes in the tax structure to smooth the revenues over years, and a new citizensí commission entitled California Forward which aims to re-write the Constitution. We will see if these changes are possible.
As it relates to higher education there was very little or no debate in the Legislature and by the Governor about budget cuts and their consequences. The magnitude of the budget cuts to us was pretty well settled early on and the only reason they were not increased any further was the limitations set by the ìmaintenance of effortî provisions in the federal stimulus legislation. Simply put, we do not have strong advocates in the legislative arena in Sacramento. Democrats wanted to preserve as much as possible the programs that provide the social safety network for the needy of California and the Republicans were adamant about no new taxes. K-14 was promised re-payments of budget cuts in future years but not so for the CSU and UC. We were promised the restoration of $305 million of one-time cuts, but the health of the economy will dictate if that promise can be fulfilled. Fortunately, funding for the Cal Grant programs was maintained despite an earlier proposal by the Governor to eliminate them.
In the end, CSU was cut by $564 million. The CSU is now funded by the State at about 20% less than it received in 1999, ten years ago, despite now serving 100,000 more students. Had it not been for the federal stimulus funds, the cuts would have amounted to almost $1.3 billion. The $564 million reduction does not include the $66.3 million in permanent cuts that were made in the February budget or the $40.5 million of new mandatory costs for a total of almost $671 million. Support per FTES has decreased $932 in one yearófrom $8,466 in 08-09 to $7,534 in 09-10.
Chancellor Reed, based on his 40-year career in state public service and education, said, ìThere has never been such a steep drop in state support in such a short amount of time. We are in the midst of a financial meltdown and need to take immediate action in order to preserve our institutions.î (CSU Press Release, July 21, 2009) There is no doubt that this massive cut has a severe impact on student access, affordability, and educational quality. It deeply affects every employee, it puts in doubt the viability of the educational opportunities of future students, and it compromises the economic and social prosperity of California.
In order to meet this financial meltdown, a number of actions have been taken. The goals for closing the budget gap of $671 million were to serve as many students as possible with quality instruction and related services, to protect as many jobs as possible, to preserve the Universityís financial integrity, and to plan beyond the 2009-10 fiscal year. To this effect the Board of Trustees took the following actions:
Reduced labor costs by establishing two days a month furlough for
a year for most employees as 85% of the CSUís budget is in personnel.
Increased undergraduate student fees by $672 per year for undergraduates. A third of the increased fee revenues are set aside for financial aid.
Called for a reduction in enrollment by 40,000 by 2010.
Closed student enrollment for the Spring semester, and
Reduced another $163 million in campus expenditures through a hiring freeze on non-essential positions, the elimination of vacant positions, the cancellation of non-critical equipment and supplies purchases, and travel restrictions.
There are no good choices here. All of these actions create pain that is shared by students, faculty, staff, and administration.
In terms of the State University fee increase, while regrettable during these difficult economic times for of our students and their families, about 47% of our students will experience no impact because one third of the revenue goes directly to financial aid. As a system, this offsets the increase for our neediest 187,000 students, those coming from families making $75,000 or less. In addition, thanks to the increase in the tax credit and the lowering of the income eligibility threshold, families making up to $180,000 will be eligible to benefit from the tax credit which also offsets the fee increase. Pell grants have increased to a maximum of $5,350 a year for eligible students. The CSU is the largest single institutional recipient of this federal financial aid receiving an estimated $81 million a year for about 120,000 students. The CSU remainsóby a significant differenceóthe lowest cost public university system in the country.
Perhaps, the saddest consequence of the budget cuts is the restriction in enrollment to 40,000 eligible students in these two years in order to align enrollment with financial resources. This amounts to denying access to students who would fill about six universities the size of Sonoma State. Already we are seeing significant student reductions at this campus and everywhere else. This comes at a time when more new students than ever are eligible to come to the institutions of higher education in California. Spring enrollment for new students is unavailable despite the fact that first-time freshmen or those who come to us as transfer students are prepared to enroll. Systemwide, we usually enroll 35,000 new students in the Spring.
Limiting and denying access to Californians has detrimental consequences for the individuals as well as the state. This is especially true when it comes to minority students who are less represented in higher education than their share of the population. According to a recently released report by the Public Policy Institute of California, by the year 2025 more than 41% of the jobs in California will require at least a bachelorís degree. At the present rate, barely a third of all Californians meet that standard. By 2025 the shortfall will amount to a million workers. According to the August 14, 2009 editorial in The Press Democrat, ìAt the same time, the number of high school graduates will outnumber jobs for people with that level of education.î The days of importing educated and talented workers from other states and nations to service our increasing technological economy and to do the research and development needed to start new businesses is over, given the growth and development of their own economies and the difficulties plaguing California.
The editorial appropriately points out that, ìThe ripple effects are costly: higher unemployment means a bigger demand for social services. A less educated work force means less personal income and, therefore, less tax revenue for public services.î Economic theory tells us that this is the time to increase the investments in education, but instead we are drastically and dangerously reducing them. Even before the current budget crisis, state support for the CSU had been declining and despite the inadequate financial support the CSU manages every year to preserve access to more than 400,000 students, keep tuition and fees the lowest in the nation, and provide an outstanding level of educational quality that results in more than 90,000 graduates every year. I am afraid that we cannot continue doing all of that with the present level of state support. California, for the sake of its future, must reinvest in the CSU in order to strengthen its economy.
What does the budget reduction mean to Sonoma State University?
Our share of the reductions amount to $15.8 million, about 17% of our General Fund support from the State. These reductions are met with the following actions:
- $5 million from the State University Fee increase, after the one-third set aside for Financial Aid
- $5.9 million as a result of the two-day per month furlough of most employees
- $4.4 million by reducing enrollment by 378 FTES. And, $500,000 of reductions distributed to all the divisions
But behind these numbers there are real and unfortunate consequences for all of us. There is shared pain.
The fee increase is real and affects a great number of our students and their families. There is a price shock for a population that was promised affordability, which for many meant little or no tuition/fees costs. I often hear that, ìI paid only $50 a year just few years ago.î That is what I paid in another state more than 40 years ago. But those days are gone and will not come back. Still, fee increases mean less money available for other needs and they mean more hours of work for the great majority of our students who work while attending school, and in some cases lead to greater debt. I also hear the valid complaint that, ìI am paying more and receiving less.î True, there are fewer class offerings, larger classes, and limits to the number of units one can take. The Board of Trustees has issued a directive to examine the academic progress of every student with more than 120 units and if he or she has met the requirements for the degree, it will be issued. I am afraid that the days of unregulated double and triple majors and several minors are coming to a close. I am pleased to announce that the degree audit feature of PeopleSoft for this campus will soon be operative and the students and their advisors can easily see what progress they are making toward graduation and what courses still need to be taken to fulfill the requirements of the degree. SSU is a wonderful bargain for the cost and the quality education we provide. Our reputation is excellent and our graduates are most competitive in the market place. They are proud of the education they receive here.
The furloughs are another instance of shared pain. They have two major consequences. One is that there is a temporary salary reduction amounting to 9.23%, but it does not affect health and retirement benefits. Still, this monetary reduction for this year is a significant hardship for everyone. The other consequence is the commensurate reduction in the time available to get the job done at a time when there is an increasing amount of work and fewer people to do it. The furloughs affect all levels of the institution and we can expect complaints from students and the public about things not getting done as well, or as much, or as fast as they had been. This year the University will be closed 17 days including 6 Fridays in the Spring semester when traditionally classes were held. During these ìState Budget Closure Daysî almost no business will be transacted, including classes and library services. These closures will surely send a message to the people and decision-makers of California of the dire consequences of the severe budget reductions imposed on the CSU.
While the need for the reduction in labor costs was imperative, I am so proud of the actions taken by the staff and faculty who voted for the furloughs in order to save jobs and classes. Had it not been for the furloughs, 15% of all classesóabout 225 at SSU (22,000 course sections systemwide)ówould have been cancelled. Unfortunately, some classes will be cancelled anyway, but not as many, and others may have to make adjustments to the days and times in which they meet.
As I mentioned before, one of the most tragic consequences of the budget cuts is the reduction of enrollment by 40,000 students in the next two years. For Sonoma State University this is a reduction of 450 FTES from our previous target of 7,500 FTES. We expect to reduce this yearís enrollment by about 372 FTES and another 78 FTES next year to meet a new target of 7,050 FTES. This is required in order to align student enrollment with the reduced level of state funding and to be able to maintain educational quality and services to the students. All campuses are impacted and students are encouraged to apply as early as possible, by October 1, for the fall semester of 2010.
The additional half million dollar reduction to the divisions is being met with decreases in operating expenses, reducing subsidies to self-supported funds, and further reductions in personnel costs.
Where do we go from here?
Professor Mike Visser recently commented in Senate-Talk (August 3, 2009) that, ìThe economy will recover, but this time it will be slow and painful. In the meantime we have been stripped bare. This represents for us an opportunity to take stock of what we really value, what we are good at and what we are not, and what we want the CSU to look like in the future. This means seriously considering changes to how we organize ourselves and to how we do business. If we capitalize on this opportunity, we can have a great deal more influence over our future than has been the case in the past. A key component to achieving additional autonomy would be reducing our reliance on state funds, so that when the next recession does come, we can afford to continue letting students in rather than shutting them out.î
First, the State of California must restore the funding per FTES to at least the 2008-09 level of $8,500 and honor the commitments to the restoration of $305 million vetoed in this budget. It also must restore the Compact agreement. These are required actions needed to prevent the further deterioration of the university system which provides the human and intellectual talent which is the engine of economic and social growth and prosperity for California.
Second, we must change what we do and how we do it at all levels of the University. Mohamed Qayoumi, a colleague President at another CSU campus has pointed out that, ìBalancing the budget for a campus or the system should involve options for both revenue enhancement or substitution, as well as cost reduction. Cost reduction can come from greater efficiencies and from reducing the scope of what we do. Doing less means exactly that.î (Perspectives on CSU Budget Gap, July 24, 2009)
There are efficiencies to be gained in the area of information technology by consolidating operations and applications hosting and support and staff services as well as sharing expertise and by adopting projects and technologies that provide cost savings opportunities. The advent of technological capabilities such as cloud computing, cloud storage and new buying clubs present an excellent opportunity for the CSU and its campuses to contain and even reduce the increasing costs of information technology including the use of energy.
Another area where changes could result in savings is in our business processes, such as purchasing, accounts payable and receivable, financial aid processing, payroll transactions, and many others. Most of these processes are characterized now in variations across campuses rooted in the ìfossilized organizational mythî that each campus is so different from another. These processes are basically the same across the CSU and should be treated as commodities where standardization and economies of scale results in lower costs. The Common Financial System being developed now is a move in the right direction. Similarly, there is a need for a Common Human Resources System and a Common Student Services System.
And third, but more important in the long-run, there are areas for gains in efficiency in the academic arena. For instance, as President Mohamed Qayoumi, said, ìOne fundamental change will be moving from a ëseat-timeí model to a ëproficiency-basedí model where using more sophisticated assessment tools could help to measure the studentsí competency rather than the number of credits and/or faculty contact hours.î (Perspectives of CSU Budget Gap, July 24, 2009). Another area for consideration would be increasing the use of technology in the teaching and learning process where face-to-face contact between the faculty member and the students is mixed with technological engagements and projects which would enhance access and learning. These are the technologies that our graduates are experiencing in the workplace and they should be academically prepared to use them and become critical users of information.
It is time to clarify, examine and prioritize all of our activities, programs and services while keeping in perspective the long-term future of the university. We must not make short-term decisions that result in unintended negative consequences, but relying on variations of across-the-board reductions is not sustainable. The reality is that we are operating, and for the foreseeable future will continue to operate, under conditions of inadequate financial support.
I am asking that every division establishes and examines:
- What they do
- The reasons for doing it
- How it is done
- How well it is being done including recommending areas for improvement
- How central it is to the mission of the University
- What priority it should have
Then these division plans will come together for examination and discussion with the goal of formulating and adopting of a University-wide Priority and Allocation Plan based on the recently adopted University Strategic Plan. I am asking the University Strategic Planning Committee co-chaired by Provost Eduardo Ochoa and Vice President Larry Furukawa-Schlereth to coordinate this effort.
Despite these extremely difficult times when we all are sharing pain we must persevere. The University is too important and key to the lives of present and future citizens of California, as well as to other states and nations, to give up and abdicate our responsibility in transforming and improving lives, communities and the state and nation. It is through education that we better ourselves, our families and our communities. The history of higher education is one of perseverance through dark ages, through war and pestilence, through ignorance and depressions, through apathy and bigotry. We are the second longest human institution in continuous existence and we plan to be here for many more years. We should not only survive but even thrive and prosper in the years to come. What we do is important and transforming. It is a noble enterprise in which all of us have many great contributions to make.
Have a good and rewarding semester.