California State University is anticipating state spending cuts next summer of nearly $400 million and a delay in promised state support of more than $250 million. The projected budget gap may prevent the system from enrolling new students, offering employee raises and spending more money to boost graduation rates.

Mikhail Zinshteyn

CalMatters

Cal State’s Board of Trustees heard system senior finance staff detail the grim fiscal outlook Tuesday at a public meeting. They presented figures that show a 2025-26 budget hole of about $400 million to $800 million — a sizable chunk of Cal State’s estimated operating budget of $8.3 billion next year.

“I think we’ve got a lot of broken calculators in Sacramento,” said Trustee Jack McGrory at the hearing. “We’re expected to increase enrollment, fulfill the needs of the labor market and continue to grow the economy, and at the same time, we’re facing these incredibly massive cuts.”

He added: “What happens to our 500,000 students with these incredibly massive cuts? … We’re talking layoffs. Everybody’s got to face up to that.”

He and others stressed that the system has been in a state of fiscal distress for several years. Last year the trustees indicated that Cal State spends $1.5 billion less than it should to adequately educate its students — a figure that predated the austerity measures that may be on the horizon.

The smaller, $400 million amount is the projected budget hole from mandatory new expenses and state cuts, minus new revenue from the tuition hikes the board approved last year. Those tuition increases — growing 5% annually from this year to at least 2028-29 — aren’t enough to counteract the state cuts that lawmakers said they’d enact next year. The mandatory expenses include $60 million more for health insurance premiums for workers and $55 million in increased financial aid for students.

The proposed $400 million cut is equal to the money the system spends to educate 36,000 students. Cal State enrolled more than 450,000 students last fall.

“What happens to our 500,000 students with these incredibly massive cuts? … We’re talking layoffs. Everybody’s got to face up to that.”

Jack McGrory, trustee, California State University board

The larger $800 million figure is the budget gap when taking into account spending Cal State feels it should pursue, such as employee raises and more spending on student academic services.

“Cuts would particularly affect the most vulnerable students, limiting their access to academic support tools, advising, counseling and engagement programs,” the agenda document reads. Also at risk is the system’s efforts to improve graduation rates for Black students, a population Cal State has struggled to serve.

A trustees committee approved a budget request to Gov. Gavin Newsom on Monday that would largely avoid the projected deficit; the full board is expected to approve it today. In January, Newsom will debut his budget proposal for the next fiscal year. He and lawmakers will negotiate a final budget June of next year.

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Why Cal State Has a Budget Problem

That one-two punch of potential cuts and funding delays were spelled out in the budget deal that the Legislature and Newsom finalized this summer. It could have been worse: Initially, Newsom wanted to apply cuts to Cal State this budget year to address California’s multi-billion-dollar deficit. But lawmakers pushed back to buy the university another year to prepare for the cuts and possibly avoid them if the state’s revenue picture brightens. Steve Relyea, the top finance officer at Cal State, said system leaders should get credit for advocating for that reprieve.

Still, Cal State officials are setting a foreboding tone, warning of “severe consequences for students, staff and faculty across all CSU universities” that “could lead to larger class sizes, reduced course offerings, diminished student services, layoffs and hiring freezes,” the system’s 2025-26 budget proposal reads.

Some campuses have already laid off workers this year or plan to. Meghan O’Donnell, a lecturer at Cal State Monterey Bay and a senior officer in the systemwide faculty union, told CalMatters that the jobs of hundreds of lecturers have been totally slashed or reduced because campuses are cutting the overall number of classes they offer.

The lecturer job cuts have occurred at the campuses of Chico, East Bay, Humboldt, Los Angeles, Monterey Bay, San Bernardino, San Francisco and Sonoma. Lecturers have fewer job protections than faculty with tenure or who are on the tenure track.

The union expects to see formal system data about faculty job loss and work reductions in November. O’Donnell said Cal State Monterey Bay put its faculty on layoff notice last year, but the union was able to negotiate and five faculty marked for layoffs instead got voluntary separation agreements. Meanwhile, in her academic department of humanities and communications, four tenured faculty at Monterey Bay took early retirement packages while three others quit and found university jobs outside the Cal State system.

Meeting the state’s goals of enrolling a higher number of new students than past years is also at risk, officials said.

“Enrollment growth is very challenging at a time when you’re not getting the resources,” Relyea said. “You can’t bring in additional students if you don’t bring in faculty to teach the students”

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Current Budget Problems

Already the system is working to close an operating deficit of $218 million this academic year — even after new revenue this year from the tuition hikes and some extra state support. It’s a repeat of last year’s situation of ever-higher revenues but even higher expenses. And like last academic year, campuses are coping by pulling from reserves, not filling vacancies and combining under-enrolled classes or outright cutting them.

Several trustees also noted that the system doesn’t adequately sell its story to lawmakers and the public about the impact the reductions have had on the system. “We’ve almost been too effective at making these cuts year over year over year,” said Diego Arambula, vice chair of the board.
“A hiring freeze is a hiring freeze, and that does impact students if we’re not bringing someone into a role that we know is important,” he said. “It’s impacting our staff, who are taking on more to try and still meet the needs of the students who are here.”

“No organization can survive with that level of budget cut.”

Tomás D. Morales, campus president, CSU San Bernardino

Meanwhile, eight campuses are working with even less money because the system began its plan of pulling some funding from schools that are missing enrollment targets by at least 10%. Cal State leadership rerouted the money to nine schools with growing enrollments. Those eight campuses are down a combined $21 million this year — with San Francisco State getting hit the hardest by losing $6 million.

Relyea said the campuses are facing the prospect of pulling money from academic services to afford keeping the lights on. “If you’re going to delay maintaining that electrical system, there’s a risk. Are you going to take that risk? How does that compare to the risk of not funding student counselors.

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Even campus presidents with enrollment growth say they’re struggling. San Jose State has cut $55 million from its budget the past two years, in part by not hiring new staff and avoiding replacing non-faculty job openings, its president, Cynthia Teniente-Matson, told the trustees.

To raise revenue, the campus is enrolling 300 new non-resident students — who pay much more in tuition — in majors that aren’t over-enrolled, she said.

Cal State San Bernardino had an average operating budget of $266 million until last year. Now it’s eyeing an average operating budget of $217 million if next year’s expected cuts come through. “No organization can survive with that level of budget cut,” the campus president, Tomás D. Morales, told the trustees.

The system’s reserves also aren’t enough to ride out a large multi-year deficit. Cal State campuses have a combined $777 million in one-time funds saved for economic hardships — enough to sustain operations for about a month. The system’s goal is to have enough saved for at least three months of operations. Other reserves of about $1.5 billion are meant for debt payments, financial aid and contracts.

About the Author

Mikhail Zinshteyn reports on higher education for CalMatters. His coverage tackles state legislation, financial aid, labor issues, student demands, campus housing and college affordability.

About CalMatters

CalMatters is a nonprofit, nonpartisan newsroom committed to explaining California policy and politics.