For all the math taught at college, the California State University system is stumped over an arithmetics problem it has less than five months to solve: How to keep operating when the governor has proposed cutting $375 million from its budget.

Without the money, the nation’s largest public four-year university system — enrolling more than 460,000 students — is likely due for a lot of subtraction: fewer professors teaching students due to layoffs and employment contracts that aren’t renewed, gutted academic programs and cancellation of majors that students are already enrolled in.

Gov. Gavin Newsom presented his proposed 2025-26 budget in January. The final budget is due by late June. It also comes at a time in which the system overall grapples with the reality that it hasn’t been able to afford itself since 2021, due to a mix of rising labor and insurance costs and greater student needs, plus a drop in enrollment after the COVID-19 pandemic.

If the reductions were to hold, what’s happening at Sonoma State “is the first of what we will see at every Cal State University campus,” said Sen. John Laird, a Democrat from Santa Cruz, who  chairs the subcommittee on education finance. He made those comments during a Senate budget committee hearing in late January that began reviewing the governor’s budget proposal, which includes the $375 million cut.

In an interview last week, Laird said the cut is “untenable.” On paper, it amounts to a nearly 8% cut to Cal State’s support from the state budget, but with the system’s growing labor expenses and inflation, he views that as closer to a 10% to 12% cut. He said his top priority this year is ensuring those cuts never strike Cal State or the University of California, which faces identical planned reductions.

Less money would also undermine the Legislature’s and governor’s ongoing efforts to enroll more new California residents. It would “prohibit new enrollment… and that’s just not acceptable,” Laird told Calmatters.Newsom’s proposed cuts reflect a larger budget problem for the state. Last year lawmakers and the governor closed a $47 billion projected deficit in part by cutting most state agency budgets by 7.95%. Lawmakers were able to persuade Newsom to delay those cuts to UC and Cal State by a year to give the systems more time to prepare. Newsom’s proposed budget for next year basically maintains the university cuts he and lawmakers agreed to last June. The system has been in a state of panic over these planned reductions since last summer.

As for finding money in budget negotiations this year to stave off the cuts partially or fully, the odds seem stacked against Cal State. Last month Newsom’s Department of Finance issued a letter saying that the recent Southern California fires and projected deficits of several billion dollars after 2025-26 “underscores the need for continued vigilance to strengthen budget resiliency and fiscal stability to protect and preserve essential programs.”

Julia Lopez, a Cal State trustee, attempted to translate that jargon in lay terms: “Don’t expect things to be much better in May. In fact, you may even plan for further cuts in May, and certainly don’t start anything new,” she said at January’s trustees meeting.

The governor seeks only about $570 million in new spending, underscoring just how fragile that balanced budget calculus is. The costs of natural disasters, including the Los Angeles area fires, and a dropoff in federal support for the state could wreck California’s budget plans.

Laird’s counterpart in the Assembly, Chula Vista Democrat David Alvarez, said in an interview that some cuts may be necessary but the hit both systems would be taking under this plan is unfair. “I’m just being realistic about our budget situation.”

He noted that the cuts to Cal State and the UC would represent 40% of all the reductions to the state budget in Newsom’s January budget. That’s because the two campuses receive a combined $10 billion in direct state funding, so an 8% cut bites off a much larger amount than it does for agencies with smaller operating budgets. Alvarez called the planned reductions to UC and Cal State “disproportionate.”

The issue is now a major concern for the leaders of the Legislature’s powerful budget committees. On Monday the chairperson of the Joint Legislative Budget Committee sent a letter to the director of the finance department echoing Alvarez’s points. “A cut this significant will undoubtedly result in cuts to direct services for students and possible layoffs or furloughs,” wrote Sen. Scott Wiener, a Democrat from San Francisco.

The 2025-26 budget can only be finalized through negotiations between legislative leaders and Newsom. Laird said he “will work over the next five months to try to make sure that the Senate leadership agrees with me.”

Right now, 42 out of the 119 state lawmakers in office represent a district with at least one Cal State campus. The districts of Sen. Dave Cortese and Assemblymember Ash Kalra include San Jose State. The districts of Sen. Aisha Wahab and Assemblymember Liz Ortega include CSU East Bay.

 

The 23 campuses together generate $7 of economic activity for every dollar the state spends on Cal State, a system report calculated in 2021. The ripple effect includes campus and student spending on goods, wages, housing and construction.

Cal State’s budget crisis

Seventeen campuses have cut a combined 1,200 workers between fall 2023 and fall 2024 while six campuses added almost 400 employees. San Francisco State posted the highest losses, with 180 employees. That amounts to 7% of workers, said campus president Lynn Mahoney, at the trustees meeting last month.

Three other campuses — Dominguez Hills, East Bay and Los Angeles — each reduced their workforces by more than 100 employees, according to data the system’s chancellor’s office shared with CalMatters.

Some of those losses were due to layoffs. In other cases faculty or staff left on their own and the campuses chose to leave those vacancies unfilled.

And that doesn’t include the job losses announced this year. Cal State Dominguez Hills sent layoff notices to 30 non-faculty staff last month, the school’s spokesperson said.

Despite $164 million in extra revenue this year from recently approved higher tuition, the system’s finance team projects a deficit of $375 million due to ever-growing costs for student financial aid as well as campus insurance, utilities, employee health care and the loss in state support. It’s an amount equal to the annual operating budget of Fresno State, which enrolls about 24,000 students. The system has also been relying partly on one-time reserves to plug budget shortfalls the past two years.

“There will be zero new funding for compensation increases” if the state cuts go through next year, said Ryan Storm, an assistant vice chancellor at Cal State overseeing the system’s budget planning, at the trustees meeting last month. “There will be no new funding for mental health services for our students or our facility improvements,” he added later in his remarks. About three-quarters of the system’s operating budget is spent on salary and benefits.

And that budget shortfall is on top of another fiscal blow to the system: the delay of about $250 million in promised funding from Newsom as part of his annual “compact” with Cal State to grow state support in exchange for higher student enrollment and improved graduation rates.

All told, Cal State is looking at around $620 million in less funding than it would get for 2025-26 were the state to live up to its end of the compact deal and avoid the budget cut. The system’s operating budget is about $8.6 billion — a mix of state support and tuition revenue.

Cal State leaders are adamant about lobbying lawmakers to prevent the cuts, from alumni groups to presidents appealing to their state representatives, said Greg Saks, who heads external relations and communications for the system, at the January trustees meeting.

 Mikhail Zinshteyn is a reporter with CalMatters.