California State University East Bay campus (Photo by Anne Wernikoff for CalMatters)

California’s budget heartache means its public colleges and universities are expected to receive nearly $2 billion less than planned for the coming year, but the financial aid that keeps tuition free for hundreds of thousands of students remains largely unscathed.

Those state spending cuts of 10 percent were part of Gov. Gavin Newsom’s revised budget proposal released Thursday, and include across-the-board reductions in state spending as the coronavirus pandemic continues to cascade across California and usher in a grueling recession. The proposed budget hits higher education twice — taking away money the governor projected it would receive back in January and forecasting additional cuts unless Congress and the White House agree on another rescue package for states.

A silver lining for students: The state financial aid that allows hundreds of thousands of students to attend public institutions tuition-free has been largely spared.

The state’s main financial aid program for higher education, the Cal Grant, remains mostly intact. Next year’s budget proposal also sustains other financial aid, such as the California College Promise Grant for community college, grants that reward community college students for attending full time, the Middle Class Scholarship and grants for college students with children.

“We’re not going to touch the Cal Grant program,” Newsom said during a press conference. Preserving the Cal Grant was a top priority, added Newsom’s finance director, Keely Bosler, “so that those people who are out of work can go back to college.”

But students attending private nonprofit colleges will get $1,028 less in Cal Grants under this budget. That’s due to a budgetary quirk that lowers state financial aid to those students if private nonprofit colleges in California don’t enroll enough students transferring from community colleges.

Barring a federal bailout, public universities and colleges will feel the hurt:

  • The University of California, which enrolls about 280,000 undergraduate and graduate students, is projected to lose $376 million in state general fund spending compared to what it received in the last fiscal year.
  • The California State University, home to roughly 410,000 undergraduates across 23 campuses, is eying a reduction of $404 million compared to last year’s budget.
  • The California Community Colleges is projected to receive $740 million less than the system of 2.1 million students got last year, said Christina Jimenez, public information officer for the system’s chancellor’s office.

Those proposed college budget cuts are on top of reductions in California spending higher education was promised back in January, when the state’s financial future was far rosier. For example, Newsom’s January budget promised the CSU $205 million in ongoing money for the coming fiscal year, which is now off the table. The January budget also projected an increase of $181 million in ongoing support for the UC. That’s also gone. Compared to what California Community Colleges was promised in January, the May budget proposal represents a $1.4 billion drop in state support, Jimenez said.

Newsom and Legislature have just four weeks to negotiate and find a balanced budget before a June 15 deadline.

Get creative

Newsom’s budget effectively says to do more with less, urging the three college systems to each use their “innovative strength” to maximize student access and equity “even in an era of constrained state resources,” the document says. That includes improving online instruction and awarding students academic credit for skills they learned on the job, in the military or developed over time.

Credit for prior learning “hasn’t historically been a very popular program,” said Su Jin Gatlin Jez, executive director of California Competes, a policy group focused on how education and the workforce interact. “We think it deserves a closer look, especially now that the governor agrees.”

Newsom’s new budget proposal harkens back to the brutal 2008 recession, said the community college system’s vice chancellor for finance, Lizette Navarette. Just like then, “when community colleges are needed most for the response, recovery and overall resiliency of our programs and our state, we’re taking devastating cuts,” she said.

Some community college programs may suffer more than others. The Strong Workforce Program that supports workforce training and collaboration with local businesses is projected to get cut by $135.6 million out of the roughly $250 million it typically receives. But crucial programs for low-income students and students with disabilities, including the Disabled Students Programs and Services Program, remain at current funding levels.

Asked whether the budget cuts precipitate layoffs or furloughs, Navarette said those are local decisions and it’s hard to generalize, but “these are not inconsequential cuts and tough decisions will have to be made.”

The system’s chancellor, Eloy Ortiz Oakley, said in a statement that the state must avoid the cuts “that turned more than 500,000 students away from our colleges in the Great Recession.”

But the past may not be prologue in predicting how this economic downturn will affect students seeking certificates and degrees.

Jason Constantouros, an analyst with the Legislative Analyst’s Office who specializes in higher education, said typically what happens with recessions is that as unemployment goes up, more people enroll in college to update their skills and increase their chances of getting hired. As colleges and universities take in more students, they also receive less support from the government. The results: a squeeze on campus resources, reduction in available classes, and fewer faculty and staff per student.

This recession, however, is driven by a pandemic, “and there’s no way to extrapolate how long the pandemic will last,” he said. The coronavirus is also changing campus behavior, having already moved most instruction online. And it’s likely to stay that way, creating uncertainty for colleges as they wait for students to decide whether they want to experience higher education online.

This week the CSU said that almost all of its courses will likely be virtual in the fall. The UC expects to decide about its fall plans in mid-June. Community colleges have until July to figure out if they’ll stay online. Several weeks ago, the system’s chancellor told colleges to prepare to remain online through the fall semester.

A big unknown is whether UC students who aren’t California residents will return to the system in the same numbers as before. Almost 20 percent of undergraduates are from out-of-state and pay much higher tuition than do in-state students. The fees they pay to attend the UC help subsidize the education of in-state students.

Tuition debate

A short term solution to California’s college budget cuts, said Kevin Cook, a higher-education finance expert at the Public Policy Institute of California, is for public universities to take advantage of low interest rates by refinancing current debt at a lower rate — thus freeing cash now to spend on students.

At this week’s CSU Board of Trustees meeting, members talked about using the system’s rainy-day fund, around $470 million, to plug budget gaps. The coronavirus pandemic has already set the system back by $337 million because of new costs and losses in revenue for the current spring term. During the meeting, CSU budget officials said it was too early to figure out how much of the roughly $300 million in federal aid the CSU received through the federal CARES Act for pandemic relief could address that shortfall.

Increasing tuition has also been an option in the past. Because the Cal Grant is tied to the tuition the UC and CSU set, low-income students who get the grant don’t feel the pinch. But middle-class families who don’t qualify got hammered in the last recession. Between 2008 and 2011, tuition at the CSU and UC doubled.

Several trustees at CSU’s meeting this week balked at tuition hikes this time. One was Peter J. Taylor, who was chief financial officer of the UC during the last recession. “I deeply regret the efforts I undertook to jack up tuition as a way to fill a budget hole,” he said of his time at the UC. Taylor then urged his colleagues to “uncover every rock possible” to avoid a tuition increase this time around.

“(In) this kind of economic environment, to go ahead and increase tuition is a disaster for all these people who are now going to be unemployed,” said trustee Jack McGrory. is a nonprofit, nonpartisan media venture explaining California policies and politics.