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 
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          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
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