Capitol Alert

CSU says its $1.5 billion reserve isn’t a ‘surplus,’ but California lawmakers want answers

The California State University insisted it didn’t do anything wrong when it accumulated $1.5 billion in reserves over the past decade, but lawmakers at a hearing this week pressed it for more details on how the college justified raising tuition while stashing away so much money.

The hearing followed a June report from California State Auditor Elaine Howle that drew attention to reserves lawmakers may have overlooked because of the way the California State University system recorded them.

The money, primarily from student tuition, piled up in accounts outside of the state Treasury even during the Great Recession, according to the audit. In that austere period, California raised student tuition and cut government services.

“All the impacts on the campus were painful for students, and you would say that your bank account increased during those times, they would say (expletive), how does that happen?” Kevin McCarty, D-Sacramento, said at the hearing on Monday. “It’s a rainy day fund, and there’s a monsoon outside, so you would think that [the reserves] would go significantly down.”

California State University officials, including Chancellor Timothy White and Associate Vice Chancellor Brad Wells, countered that Howle mischaracterized the reserves.

White said the reserves are essential tools for funding capital projects, covering grant payments and acting as a safeguard against economic uncertainty.

“While not untruthful, [the audit] is profoundly misleading,” White said in the hearing.

Wells noted the CSU used the reserves in 2007 to mitigate cutbacks, but that was not reflected in the audit because Howle’s report covered only 2008 to 2018.

Howle found that CSU failed to fully disclose its 1.5 billion dollar “surplus” in outside accounts while increasing student tuition and lobbying the Legislature for more funds. The audit also highlighted that student parking permit fees on some campuses rose to $236 per semester to help pay for new parking facilities, which did not significantly increase parking capacity.

She stood by her findings during the legislative hearing, pointing out that the CSU did not disclose the reserves when it discussed tuition increases with student associations.

Howle encouraged the CSU to develop a clear policy for managing the reserve accounts. Her audit did not find any specific parameters about the amount of reserves CSU should have and who exactly has the authority to decide how that money should be used.

White said he took the audit’s recommendations seriously and would respond to them.

He referred to the reserves as “one-time” funding that should not be used for operating expenses, such as salaries. Jack McGory, a member of the CSU Board of Trustees, said that spending the money on regular expenses would lead the CSU back to the Legislature to ask more funding.

But some lawmakers said they wanted to see a different approach for the accounts.

“I hear you loud and clear that certain things are operating costs and they can extend over a year, but I’d like to challenge you,” said Assemblyman Miguel Santiago, D-Los Angeles. “How do you turn the conversation so it’s not hiding behind the saying, ‘these are dollars for one time expenditures.’” “Let’s talk about putting that value that we call ‘one time cost’ into a longer term strategy to try to solve that issue.”

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Elizabeth Shwe, from Princeton University, is a local news reporter for The Sacramento Bee interested in politics and immigration. She grew up in New Jersey.