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CSU system may implement 6% annual tuition hikes to cover a $1.5 billion budget gap

July 10, 2023

More than 460,000 students at the 23 California State University campuses could see annual tuition increases in coming years — for the first time in nearly a decade.

The CSU Board of Trustees’s Committee on Finance will weigh a proposal on Tuesday, July 11, that would implement 6% tuition hikes every year starting in the fall 2024 and ending in the spring 2029 semesters. The potential move, university officials say, is necessary to cover $1.5 billion of unfunded operational costs in the system’s budget, though students and others say it could financially harm students — and further hurt enrollment.

The proposal will require full board approval, which would likely happen sometime in September.

A CSU workgroup first identified the massive funding gap in a nearly 70-page report released in May. It found that the system only has enough money to pay for about 85% of the actual costs of education, institutional and academic support, and student services at all of its campuses.

That’s largely because the CSU’s two primary revenue sources — funding from California’s budget and tuition — haven’t kept up with the ever-increasing costs of operating the nation’s largest state univeristy system, the report said.

Gov. Gavin Newsom, in 2022, proposed an agreement with both the CSU and University of California systems to increase state funding to both by 5% annually for five years.

Officials from both systems hailed the funding compact, saying it would bring much-needed stability to their budgets and support long-term educational investments.

Despite problems within its own budget — including a 2023-24 shortfall of about $31.5 billion dollars — the state still set aside the agreed upon 5%, or $227.3 million, for the CSU’s base budget this fiscal year.

That compact with the state, according a CSU finance committee report for the Tuesday meeting, is expected to add $1.3 billion in new funding to the CSU’s budget by 2028-29, if the agreement continues beyond the originally proposed five years.

But still, CSU officials said, it’s not nearly enough to cover the growing operational budget gap.

“The state general fund — the CSU’s largest revenue source — is volatile and wholly dependent on California’s economy,” CSU Chancellor’s Office spokesperson Hazel Kelly said in a Friday, July 7, statement. “If the CSU were to continue to over-rely on the state general fund, it could jeopardize the university’s financial situation and its ability to serve students.”

Another problem is that the CSU’s secondary source of funding, tuition revenues, has been stagnant for nearly a decade. The last tuition hike — which was 5%, or $270 a semester — came during the 2011-12 academic year.

“The absence of a tuition increase has also prevented the CSU from having sufficient resources to keep up with rising costs,” the report said. “Implementing the multi-year tuition proposal would provide the CSU with an additional $840 million in tuition revenue by 2028-2029.”

The CSU system also has seveal unfunded mandates it will eventually have to pay for in order to maintain compliance with federal and state educational regulations, the report said.

Those include up to $1 billion for employee raises, $18.7 million to institute Title IX regulations, and another $5.8 billion to upgrade decades-old campus facilities that have fallen into despair because of deferred maintenance, the report said.

“Financial sustainability and predictability are critically important for the CSU to accomplish its mission and overcome its challenges,” the report said. “A strategic, multi-year increase to tuition would provide additional resources to better ensure that Californians have opportunities to earn lifelong, life-transforming benefits through CSU educational programs.”

Without developing a stable budget with revenues that match the increased costs of operating 23 universities, the report said, the CSU would have to redirect funding to where it’s most needed — which could result in fewer course selections, less student services and a limited capacity for the system to invest in updated learning environments or give pay raises to its employees.

As it stands, undergraduate tuition — not including other costly fees, such as housing, food and academic supplies — is around $5,742 per year. The tuition rate increase, if approved, would add an additional $342 to undergrad tuition starting in the fall 2024 semester, the report said, bringing the total to $6,084.

From there, tuition would go up another 6% annually for the next five years. By the spring 2029 semester, full-time undergrads would be required to pay $7,682 for the academic year, while higher-level programs, such as a doctorate in public health would total about $25,000 per year.

The CSU, in its report, said that the proposed tuition increases wouldn’t change it status as among the most affordable higher education systems in the country. It also added that about 60% of its student population would be unaffected by the change because of grants or fee waivers.

Cal State Fullerton officials agreed with CSU representatives, saying on Friday that 60% of its students with the greatest financial need will be supported with aid from various sources. A Cal State Dominguez Hills representative said much the same, noting that low-income students will have their aid amounts adjusted to cover the additional costs.

Even so, CSUF plans to streamline its scholarship application process in response to student complaints about the potential tuition increase.

That university will form a new scholarship office, housed within the Office of Financial Aid, to oversee all financial aid and scholarship opportunities, according to CSUF spokesperson Ellen Treanor. That office will allow students to apply for multiple tuition assistance options at the same time.

Cal State Northridge didn’t respond to requests for comment on Friday, while representatives from CSU campuses in Long Beach and Los Angeles declined to comment.

But for some students — those who don’t qualify for full tuition coverage, but aren’t in a position to pay for college out-of-pocket — the reality isn’t so simple.

Oliver Solares, for example, is a graduate student at Cal State Fullerton studying chemistry. His education is partly funded by a private grant, and he currently works at the university as a teaching associate — but he’s worried about how the potential change will impact his day-to-day life.

“Personally, I’m barely scraping by trying to pay rent, bills and food,” Solares said in a Friday interview. “So, increasing tuition makes trying to live a normal productive life as a student much harder.”

Jensen Walsh, another CSUF student studying for an undergraduate degree in history, said much the same Friday.

He pays around $2,300 per semester as a part-time student to balance a six-unit course load and a part-time job. He is also a recipient of a federal Pell grant — though that only covered about $1,900 of his fees last semester.

“It’s going to exacerbate my financial vulnerability. It’s going to take more money away from me when I already have so little,” Walsh said. “It’s going to be harder for me to get an education.”

Eloy Oritz Oakley, the former chancellor of the California Community Colleges who also had a temporary stint as a U.S. Department of Education adviser with the Biden administration, seemed to agree with the students’ concerns.

“I understand why the trustees are thinking about raising tuition,” Oakley said in a Friday interview. “(But) in an environment like this, with this economy, it will be a challenge for low-income learners in this state to continue to think about the CSU as a place to pursue their higher education. I would be lying if I didn’t say that it is a concern to me.”

Oakley stepped down as community college chancellor last year to serve as president and CEO of the College Futures Foundation, which works on issues related to equity and economic prosperity.

The crux of the issue with tuition increases, Oakley said, boils down to basic needs, such as housing and food security — especially at campuses in or near historically low-income communities, like CSUDH or CSUN.

“It makes it very challenging for learners to afford the total cost of attending college, and certainly tuition is part of it,” Oakley said. “I think one of the challenges that we hear being expressed from students right now is the total cost of attending college, which is why we have significant enrollment decline across the country. Students are questioning the value proposition.”

The CSU system, though, argues that the increased costs of tuition are unlikely to cause further student enrollment declines. Enrollment declines, the CSU says, have myriad reasons, including economic and emotional impacts from the coronavirus pandemic and the volatility of the economy generally.

“The reasons for the overall CSU enrollment decline are varied: strong employment demand, higher entry-level salaries, changes in regional populations and ongoing stressors on mental health are among the factors,” the CSU said on its website. “In addition, approximately one-third of the CSU enrollment decline is due to fewer California Community Colleges transfer students.”

The CSU website further said that it is “very unlikely” tuition played a role in those decreases over the past several years, as its tuition hasn’t been increased since 2011 and the CCC system is effectively free.

Oakley, though, disagreed that raising the cost of education would have no impact on whether students pursue higher learning in the future.

“Costs will always have an impact on enrollment, there’s no doubt about it — particularly for the kinds of students that CSU and community colleges serve,” Oakley said. “It may be the case that they need to raise tuition, but to argue that it wouldn’t impact students — I don’t see how anybody could say that with a straight face.”

Vivian Nguyen, an incoming CSULB senior, said Friday that though tuition costs have been relatively low at her school, things differ between majors.

“I am a biology major, and the more you progress, the more labs you have to take — which is extra tuition cost,” she said. “Every single year, it’s an increase of a couple hundred dollars or sometimes even a thousand dollars, depending on how many labs you take.”

Nguyen said she will pay about $7,000 for her classes this fall and spring. Nguyen said she feels lucky she doesn’t have to currently pay rent or for a dorm because she lives with family near campus. But she said she feels the tuition increase could pose a real hardship for other students with more financial burden.

“It’s difficult to even get money,” Nguyen said. “If they’re increasing (tuition), then they’re decreasing other people’s opportunities to go to college.”

Nguyen also said she doesn’t think the tuition increases are fair — unless the money is used to fund students’ priorities.

The five-year tuition increase proposal is expected to generate about $860 million over its first five years. About $280 million of that — or around one-third — would fund financial aid for students with the most need, according to the report.

The remainder of the funds, the report said, would be used to expand the work of the CSU’s Graduation Initiative 2025 — which aims to increase graduation rates for first-time and transfer students — alongside pay raises for the CSU workforce, academic facility and infrastructure upgrades, plans to boost enrollment, and other operational costs.

The CSU board’s finance committee will discuss the proposal and decide whether to send it to the full Board of Trustees for final approval on Tuesday at the CSU Chancellor’s Office in Long Beach, 401 Golden Shore.

The meeting kicks off at 1:30 p.m. in the Dumke Auditorium.

Staff writers Nollyanne Delacruz and Christina Merino contributed to this report.

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CSU system may implement 6% annual tuition hikes to cover a $1.5 billion budget gap

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