State gives CSU full control of student fee revenue


When California State University students pay fees this fall, a portion of this money will be put into fixed-interest government bonds and all earnings will go toward increases in campus budgets, as the state has allowed them to keep this money in their own bank accounts.

These campuses will receive a 5 percent return on money in their possession that would have normally gone to the state treasury, a move that has increased the university’s credit rating, said Sean Boylan, director of financial management for the CSU Chancellor’s Office.

Steve Boilard, policy adviser on higher education for the Legislative Analyst’s Office, said, “The Chancellor’s Office asked that the change be made. The CSU didn’t like fees going into the state treasurer’s account because the university couldn’t audit from its own account.

“My office didn’t support this move. I don’t see the point of it myself. At the end of the day, students still pay $1 billion to support the university, so the fiscal aspect of it isn’t that relevant. They’re just doing this to have more physical control of the money,” Boilard added.

Having control of more than $1 billion from students’ pockets that would have normally gone to the state would not completely protect this money if the CSU’s budget were ever cut again. The university system lost about $800 million from 2003-04 to pay the state’s budget deficit.

Margo Dutton, director of financial accounting for Cal State Northridge, said, “The law can be changed at any time should the state need the money to deal with, say, natural disasters or terrorist attacks on the West Coast. It all depends on the state’s priorities at the time.”

All campuses, except Fullerton, have deposited what remains of their student fee and state dollars into Wells Fargo accounts, Boylan said. State money will have to be spent before the start of the next fiscal year or it will have to be sent back to Sacramento, he said.

They are being urged to create secondary bank accounts by April 1 through which they will spend their money from then on, Boylan said. All future state funding in these accounts will be used to pay university employees, with fee money helping to pay for the rest of payroll, he said.

Boiler said campuses would no longer have to wait until the state budget is approved in June to spend fee money in these bank accounts. They will have to take on the responsibility of creating reserves to keep operations going for a month if the budget is delayed, he said.

CSUN has not been able to create reserves in the past. In fact, the campus overdrew $100,000 to $300,000 amounts from its old account to help pay for construction projects from mid-2004 to the end of 2005.

These construction projects included the renovation of the University Student Union, the B2 and B3 parking structures off Darby Avenue, and the new Parking and Public Safety building being constructed down the road on the corner of Darby and Prairie Streets, Dutton said.

Dutton said the new banking system prevents campus accounts from being similarly overdrawn because checks that require more money than what is available from student fee revenue will be paid through the state Controller’s Office from the university’s reserve funds.

This would also not happen again because student fee revenue cannot be used to pay for campus construction projects, Boylan said.

“We got dinged on that during the audit (conducted almost a year ago),” Barker said. “But we won’t need to use the revolving fund (the old state trust account) because we now have student fees in trust. We won’t need to use the revolving fund for construction anymore.”

In November 2006, the Daily Sundial reported that several CSU campuses, including Northridge, misreported financial information during their biannual internal audits because they did not have enough skilled accountants to keep timely records.

Along with a significant increase in construction projects in recent years and structural constraints that cannot be helped, the CSU has the most complex accounting structure of any university in the nation, a report by a committee of campus financial managers shows.

Boylan said having fee revenue in local bank accounts will cut financial managers’ work in half, as they will no longer have to record every single financial transaction in campus books and with the state Controller’s Office. They will only have to do the former, he said.

Total funding for campuses was $3.5 billion in 2006, with more than $1 billion that came from student fees, the CSU Web site shows.

Northridge’s campus received about $300 million, with more than $80 million that came from student fees, the CSUN Web site shows.

CSU has a record of investing its campuses’ money. Systemwide, its foundation earned about $200 million from $2 billion in investments by June 2005, the university’s financial statements show.

CSUN’s foundation earned more than $18 million from $46 million in investments by June of 2004, the campus’ financial statements show, and earned half as much money from more than $42 million in investments in 2006.