Governor Brown’s May Budget Revision has short- and long-term funding implications for both CSU and UC. The annual May Revision to the governor’s January budget proposal reflects an unanticipated revenue increase of $7.6 billion. The revised budget does add $100 million in one-time funding for deferred maintenance at each system as part of a larger infrastructure spending plan. However, while increases are proposed for other major spending areas, funding for UC and CSU remains unchanged from the January budget: each system is still slated to receive $92.1 million from the General Fund. This is in contrast to revised budgets in previous years that increased funding for both systems by 3% to 4%. Moreover, if UC and/or CSU raise tuition, the Department of Finance would be allowed to reduce each system’s funding by an amount equal to the additional revenues raised.

This proposed policy has two goals: it creates a disincentive to raise tuition and is meant to account for additional state costs incurred when tuition increases. California’s primary financial aid programs— the Cal Grant A and B entitlements—cover tuition for more than 300,000 students, most of them enrolled at UC and CSU. For students who meet financial and academic requirements, UC or CSU tuition is fully covered for the equivalent of four years for Cal Grant A and three years for Cal Grant B. Consequently, when UC and/or CSU raise tuition, the state must cover the additional cost. Since the Cal Grant program’s inception in 2000, tuition increases in response to state funding cuts coupled with a rise in the number of eligible students has increased annual program costs from a little more than $800 million to nearly $2 billion.

Although the governor’s proposal, coupled with a healthy state funding reserve, could help keep tuition flat in the near future, it may have unintended consequences for large numbers of students. UC and CSU allocate one third of the revenue from tuition increases to institutional aid that augments Cal Grants and Federal Pell Grants to cover tuition for more than half of their students. Moreover, restricting state allocations to the two systems while also discouraging tuition increases could prompt each institution to turn away eligible students (in fact, CSU turned away 32,000 students last fall) or ratchet up eligibility requirements.

In the longer term, restricting access to UC and CSU could have a negative effect on California’s economy. If the state hopes to meet growing demand for skilled workers, it must produce 1.1 million more bachelor’s degrees by 2030. Achieving this goal will require a long-term funding plan that addresses not only the cost of tuition but also the full cost of attending college as part of a larger effort to increase access and improve outcomes for all students.