Audit Highlights . . .
Our audit of the CSU campus-based mandatory fees at four campuses, highlighted the following:
- » Unlike tuition which is set by the Board of Trustees, individual campuses establish and increase mandatory fees with little oversight and the fees vary considerably from campus to campus.
- For academic year 2019–20, Cal Poly's mandatory fees at $4,201 were the highest while Fresno State had the lowest at $847 per year.
- Although campuses began significantly increasing mandatory fees in response to reductions in state funding over ten years ago during the last state budget crisis, they have not decreased mandatory fees despite increases in both state funding and tuition.
- » The campuses we reviewed regularly use mandatory fee revenue to pay for some of the same fundamental costs and core functions that the CSU primarily relies on state funding and tuition to support.
- Three campuses have spent millions of dollars of the mandatory fee revenue annually on salaries and benefits to hire more faculty, offer more courses, and support students academically.
- All four campuses have used the revenue for instructional materials, equipment, software, and improvements to academic spaces.
- » Although campuses must obtain approval from the Chancellor's Office to establish new mandatory fees, campus presidents do not need approval to increase the amount of existing fees.
- » Campuses have not sufficiently justified their needs when determining and setting proposed fees or increases to existing fees, and the Chancellor's Office has not ensured that campuses adequately consult with students about proposed new fees or fee increases.
Results in Brief
To accomplish its mission, which includes advancing and extending knowledge, learning, and culture, the California State University (CSU) receives funding from the State's General Fund as well as from its students, who pay tuition and student fees. The CSU Board of Trustees (trustees) sets tuition, which is the same across all 23 of its campuses. In contrast, individual campuses determine the amounts of the student fees and collect them. Some of these fees are for specific services, such as on-campus housing and parking, and are therefore optional. However, CSU campuses also charge mandatory fees for other purposes that all students must pay in order to enroll. The amounts of these mandatory fees vary considerably from campus to campus and have risen steadily, creating a burden on some students. For academic year 2019–20, California Polytechnic State University, San Luis Obispo (Cal Poly) had the highest mandatory fees, at $4,201 per year, while Fresno State University had the lowest, at $847 per year. The Joint Legislative Audit Committee directed us to review the mandatory fees at four campuses: Cal Poly, Chico State University (Chico State); San Diego State University (San Diego State); and San José State University (San José State).
CSU campuses began significantly increasing mandatory fees in direct response to reductions in state funding that began during the onset of the last state budget crisis in fiscal year 2007–08. By fiscal year 2011–12, the Legislature had decreased the General Fund support it provided to the CSU from $3 billion to a little more than $2 billion. In response to these funding cuts, the trustees raised tuition to almost double its previous level. During that same four‑year period, CSU campuses began implementing new mandatory fees and increased existing mandatory fees, spurring rapid growth in fee revenue for the CSU system. By fiscal year 2014–15, systemwide campus revenue from mandatory fees totaled $574 million—almost twice the $306 million in fee revenue campuses collected in fiscal year 2007–08. Although the CSU currently receives more combined funding from state General Fund support and tuition per student than it did before the budget crisis, the campuses have not decreased their mandatory fees in response. If the mandatory fee trend continues, systemwide mandatory fee revenue could total nearly $1 billion by fiscal year 2024–25.
This growth in mandatory fees has made the CSU campuses increasingly expensive for students. Since academic year 2011–12, the trustees have increased tuition by only $270, or 5 percent, in academic year 2017–18, from $5,472 to $5,742. This stability in tuition costs is largely the result of the tuition freezes the Legislature negotiated with the CSU as part of the annual state budget process, during which the Legislature increased state funding to the CSU system. In contrast, from academic years 2011–12 through 2019–20, total mandatory fees on average across all 23 CSU campuses increased from $1,047 to $1,633, or 56 percent. The largest increase in total mandatory fees during this period was at Cal Poly, where the fees rose by 72 percent, from $2,439 to $4,201. Consequently, mandatory fees compose an increasing proportion of total enrollment costs to students. Because not all financial aid programs—which we define as grants and scholarships—take into account rising mandatory fees, students who are eligible for aid often have to find other ways to cover these fees, such as by paying out of pocket or with student loans. In fact, campus data indicate that students on average are paying more money out of pocket or through student loans to cover mandatory fees than they did in the past.
Because mandatory fees are campus-specific and therefore separate from tuition, we expected campuses to use mandatory fee revenue to pay for needs distinct from the core CSU functions of instructing and graduating students. However, when we reviewed some types of mandatory fees at the four campuses, we found that the official purposes for those fees referenced instruction, supporting student development, or promoting graduation rates, all of which are core functions of the CSU system. Campuses' justification for these fees even included operational concerns like campus accreditation, a process that certifies campuses' quality and effectiveness. Further, the campuses we reviewed spent significant amounts of mandatory fee revenue on costs linked to these core functions. For example, Cal Poly, San Diego State, and San José State have spent millions of dollars of mandatory fee revenue annually on salaries and benefits in order to hire more faculty, offer more courses, and otherwise support students academically. All four campuses have also used mandatory fee revenue to pay for instructional materials, equipment, and software as well as improvements to academic spaces. Thus, campuses are regularly using mandatory fee revenue to pay for the same fundamental costs and core functions that the CSU primarily relies on the General Fund and tuition to support. However, because campuses establish and increase mandatory fees with little oversight, these fees are not subject to the same transparency and do not receive the same oversight as tuition or state funding, which the Legislature determines through an annual budget process.
The CSU's current approach to managing mandatory fees does not ensure adequate accountability. Although campuses must obtain approval from the CSU Office of the Chancellor (Chancellor's Office) to establish new mandatory fees, campus presidents do not need approval to increase the amount of existing fees. In addition, the Chancellor's Office's systemwide fee policy (fee policy) contains only vague requirements that allow campuses to request approval for proposed mandatory fees or increase existing fees without justifying specific fee amounts. As a result, we found that campuses have not sufficiently justified their needs when determining and setting the amount of proposed fees or increases to existing fees. Campuses also have not sufficiently demonstrated that they have no other way to pay for those needs.
This inadequate fee policy—and gaps in the Chancellor's Office's enforcement of that policy—have also not ensured that campuses adequately consult with students about proposed new fees or fee increases. When a campus proposes establishing or increasing a mandatory fee, the policy generally allows the campus president to decide between two distinct consultation processes: a student vote or what the policy calls an alternative consultation process. Under the latter process, the campus presents information to students and solicits their feedback. However, the fee policy establishes only broad requirements for alternative consultations, and our review identified a number of concerns with the processes campuses have used. For example, the alternative consultation processes that San José State used for two fee proposals clearly violated fee policy requirements that the campus consult with required groups. In addition, Cal Poly did not collect or consider required recommendations from a campus committee before the president made decisions about any of the five proposed fee changes we reviewed. However, because the Chancellor's Office does not review increases to mandatory fees and its oversight of new fees has lacked rigor, it did not intervene in any of the cases to ensure that the campuses followed the fee policy's requirements.
Further, because state law requires binding student votes when implementing or increasing only certain mandatory fee types, most of the student votes that the campuses did hold were merely advisory. The campuses conducted student votes for eight of the 13 fee proposals we reviewed, but only one of these votes was binding. Further, although students voted against the proposed fees in five of these eight instances, all five of these votes were only advisory. Cal Poly chose to not move forward with two fees that its students voted against. However, Chico State overrode the results of the three unsuccessful student votes it held in 2018; it imposed all three fee increases despite the fact that more than 60 percent of voting students opposed the increases. Chico State's ability to override these student votes is of special concern given that one of the fees that students voted on, the student learning fee, should be categorized as a student success fee. Had the Chancellor's Office categorized the fee correctly, the fee increase would have been subject to state law requiring a binding student vote and therefore the campus would not have been able to override it. This example demonstrates the degree to which campuses can currently circumvent voting requirements based solely on a given fee's categorization. Extending a binding student vote requirement to all mandatory fee changes would address many of the issues we identified and increase campuses' accountability to students for the fees they propose.
As it stands, there is little chance that campuses will reduce or eliminate fees unless the Legislature makes significant changes to the current system. In addition to the fact that campuses have continued to raise their fees despite growing General Fund support, the campuses are budgeting and allocating mandatory fee revenue in ways that make it unlikely they will ever determine they no longer need that revenue. Further, because the Chancellor's Office does not consider mandatory fee revenue when allocating state General Fund and tuition money to campuses, the campuses do not have to decide between fees and state support. Moreover, students generally do not have any means of compelling campuses to reduce or eliminate fees, and the regular state budget process does not provide the same oversight for mandatory fees as it does for tuition.
As a result, reversing the current trend of increasing mandatory fees will require the Legislature to restrict the types of activities campuses may fund with mandatory fee revenue—namely, by barring them from using this fee revenue to pay for core CSU functions. Implementing this restriction could require increases to tuition, state support, or both to prevent negatively affecting students who receive instruction and other academic support that campuses are currently funding with fee revenue. However, pursuing these changes presents an opportunity to ensure that mandatory fees that support core functions do not continue to rise and to potentially increase the extent to which students have access to financial aid to pay for core CSU functions. Further, such changes could help control the CSU's future costs by ensuring that all funding that CSU uses for its core functions receives legislative oversight during the state budget process.
Summary of Recommendations
To ensure that all funding that students and the Legislature provide to the CSU system to pay for core functions receives the same oversight, the Legislature should determine the most effective centralized way to fund the core functions for which mandatory fees currently pay. The Legislature should prohibit CSU campuses from charging mandatory fees to pay for any of these core functions.
To ensure that CSU students have a strong voice regarding the mandatory fees they must pay to attend, the Legislature should amend state law to require campuses to hold binding student votes when seeking to establish or increase any mandatory fee.
To ensure that CSU campuses adequately identify the need for their proposed mandatory fee amounts, the Chancellor's Office should do the following:
- Revise its fee policy to require campuses to justify fee amounts by providing supporting documentation demonstrating the need for the fees, how they calculated the fee amounts, and how they determined that no other source of funding could pay for the needed services.
- Extend its review responsibilities to include reviewing increases to existing mandatory fees.
- Increase the rigor of its fee proposal review and approval process to better ensure that it detects campuses' violations of the fee policy.
The Chancellor's Office indicated that it would implement our recommendations to improve its policies and practices. However, it expressed concern that our recommendations to the Legislature would significantly undermine the trustees' current statutory authority. We disagree with the Chancellor's Office's characterization of the effect those recommendations would have if implemented.