BILL ANALYSIS Ó SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW Mark Leno, Chair Bill No: AB 1502 Author: Committee on Budget As Amended: June 25, 2012 Consultant: Kris Kuzmich Fiscal: Yes Hearing Date: June 26, 2012 Subject: Budget Act of 2012: (1) UC and CSU Systemwide Tuition and Fee Levels and (2) Contributions to the University of California Retirement Plan. Summary: This bill would: (1) contingent on certain conditions maintain UC and CSU mandatory systemwide tuition and fees at 2011-12 levels in 2012-13; and (2) provide additional funding in 2012-13 to address a portion of the UC's and Hastings' employer pension contribution costs for the University of California Retirement Plan (UCRP). Background: The governing boards of UC and CSU have formal authority to set student tuition and fees for their respective systems. Each university system collects tuition and fees from its students. These revenues help to support the universities' general support costs. The other main source of funding for postsecondary education costs is the state General Fund. For example, mandatory systemwide undergraduate tuition and fee levels for resident undergraduates is $12,192 at UC and $5,472 at CSU. The CSU Board of Trustees acted in late 2011 to adopt a 9.1 percent tuition and fee increase effective fall 2012. The University of California Board of Regents has not increased tuition and fee levels for the 2012-13 academic year. UC and Hastings employees are members of the University of California Retirement Plan (UCRP). This plan is separate from CalPERS and under the control of UC; UC not only controls its pension costs but also sets benefits levels for its employees. Prior to 1990, the state adjusted UC's GF appropriation to reflect increases and decreases in the employer's share of retirement contributions for state-funded UC employees. Starting in 1990, UC halted both employer and employee contributions because the plan -1- had become super-funded. This funding holiday lasted nearly 20 years until the plan's assets had declined considerably and contributions became necessary. In April 2010, both UC and its employees resumed contributions. Through 2011-12, the state has not provided UC with any funding specifically for that purpose. UC projects that annual total state costs would peak at about $450 million GF. The Budget Act of 2012 includes an augmentation of $52 million, with $51.5 million and $500,000 of that total for UC and Hastings, respectively, for employer contributions to UCRP for state GF and tuition-funded employees. This was the funding level proposed by the Governor at the May Revision. Proposed Law: This bill includes the following provisions: 1. For 2013-14, appropriates $125 million each to UC and CSU contingent on the following conditions: (a) the Schools and Local Public Safety Protection Act of 2012 is approved by the voters and (b) if UC and CSU maintain their respective 2011-12 mandatory systemwide tuition and fee levels in the 2012-13 academic year. 2. For 2012-13, appropriates an additional $38 million, split proportionally between UC and Hastings, to address a portion of UC's and Hastings' employer pension cost increases that are attributable to state GF and tuition-funded employees. Of the total amount, UC will receive $37.6 million and Hastings will receive $365,000. This bill links the funding to existing provisional budget bill language in UC's and Hastings' main budget items tying the funds specifically to contributions to UCRP for state GF and tuition-funded employees and stating that this funding does not constitute a state obligation to provide funding in future years and that future funding, if any, will be determined by the Legislature. Fiscal Effect: This bill increases GF expenditures in 2012-13 by $38 million. Support: Unknown Opposed: Unknown -2- -3-