The California State University system will seek a state loan of $144 million that it\u2019ll have a year to repay at no interest, even though current projections show the system will have to add to its deficit to repay the debt.<\/p>\n
Cal State\u2019s chief financial officer says the loan will be used to offer one-year bonuses to faculty and staff. While salaries vary widely across the system, the extra $144 million is roughly a 3% increase in the total pay for Cal State\u2019s workers, including executives. State law says the loan needs to be repaid by next July.<\/p>\n
Despite months of hesitation, the system today took the first step to request the loan and will likely get the money in 60 days or less, said Cal State\u2019s interim chief financial officer, Patrick Lenz, in an interview. The process involves approval from state lawmakers, who are likely to support the move.<\/p>\n
State lawmakers made the loan available to Cal State after they cut state funding to the system by $144 million this year. Cal State has 22 campuses and enrolls 460,000 students.<\/p>\n
The system\u2019s largest union, the California Faculty Association of 29,000 workers, is cheering this decision but says more work is needed to bring back lecturers whose contracts were cancelled as many campuses contend with shrinking budgets. The union\u2019s collective bargaining agreement is expiring but negotiators from the union and Cal State leadership haven\u2019t met since April.<\/p>\n
\u201cWe will take this as a win, but we have so much work to do, and I do hope that this provides an opening for the management to come to the table with us and negotiate fairly,\u201d said Elaine Bernal, a lecturer at the Department of Chemistry and Biochemistry at Cal State Long Beach and senior member of the faculty association.<\/p>\n
\u201cThe one-time investment, great, but we really got to focus on long-term investment,\u201d Bernal said.<\/p>\n
The Legislature intends to increase state spending for Cal State in 2026-27 by just $101 million \u2014 far lower than previous promises<\/a> from Gov. Gavin Newsom of about $250 million \u2014 so the system will effectively be $43 million short once it repays the loan, Lenz said. The decision to take the loan came \u201cafter careful deliberation, conversations with the chancellor, conversations with our Board of Trustees,\u201d Lenz said.<\/p>\n Money is chronically tight at CSU. Since 2023 the system has battled ongoing deficits that have led to hundreds of degree and course cuts<\/a>, fewer lecturers and hiring freezes. Back then, the system said it was spending $1.5 billion less<\/a> than it should to adequately educate its students.<\/p>\n Over the past two years that figure has grown by several hundred million dollars<\/a> as costs rise for campus utilities, insurance, health benefits and more. The deficits exist even as the system in 2024 began increasing tuition annually; the added costs outweigh the new revenue from charging students more. However, most students don\u2019t pay tuition<\/a> because of state and system financial aid.<\/p>\n Despite those fiscal pressures and likely new expenses to replace the Trump administration\u2019s cuts<\/a> to federal education grants<\/a>, Lenz said system leaders want to spend the money on workers.<\/p>\n Unions wanted loan<\/p>\n The zero-interest loan has been the source of intrigue and scrutiny since July as unions representing Cal State workers have been pressuring the system to agree to borrow the money so campuses can offer pay increases for workers<\/a>. Unions and some lawmakers argued that the the system was fully funded because the state budget gave CSU the option to borrow the loan, which should trigger collective bargaining contract language that stipulated that ongoing raises would kick in if the system received an increase in state funding.<\/p>\n But Cal State officials say that even if they take the loan, it\u2019s not new or ongoing funding<\/a> \u2014 it\u2019s money they\u2019d have to repay after a year \u2014 so the system isn\u2019t obligated to increase wages like those contracts dictate.<\/p>\n Lenz reiterated that point during an interview, even after indicating the system will take out the loan.<\/p>\n \u201cClearly, anything that is one time is not ongoing,\u201d he said of the loan. So any raise \u201cwould be only for the 12 months of the budget year.\u201d But maybe the state will send more cash to the system than what lawmakers and Newsom signaled in the annual budget deal they solidified in June, Lenz said. He also suggested that CSU could negotiate more time to repay the loan.<\/p>\n \u201cThere\u2019s a long way to go in this process, and there\u2019s a lot of unknowns,\u201d he said.<\/p>\n The loan is \u201can unusual financial strategy\u201d, said Robert Kelchen, a professor of higher education budgets and finance at the University of Tennessee, Knoxville. Asked if this could be a model for other states, Kelchen said it might be for \u201cother blue states that are heavily unionized\u201d and are trying to secure labor peace with labor groups.<\/p>\n \u201cThat\u2019s really what this feels like,\u201d he said.<\/p>\n How CSU got here<\/p>\n That the loan even exists is itself an example of curious budgeting tactics by lawmakers and\u00a0 Newsom. Last year they passed a state budget that gave Cal State a moderate increase in state funding with a warning of huge cuts of $375 million this July \u2014 equal to about 8% of what the state spends supporting the CSU.<\/p>\n After a half-year of fierce advocacy from Cal State officials, students and workers, the final 2025-26 budget approved in June applied just a 3% cut to CSU, with a promise that the cut \u2014 $144 million \u2014 would be restored in the 2026-27 budget year that begins next July. To help Cal State manage its finances this fiscal year, the state said the system could borrow $144 million this year and repay it by the end of June 2026.<\/p>\n The loan option was extended to multiple state agencies, including the University of California.<\/p>\n System budget leaders, including Lenz, in July expressed wariness<\/a> over taking out the loan because if the state\u2019s budget picture remains shaky \u2014 it\u2019s already projecting billions of dollars in deficits \u2014 then lawmakers may decide to apply further cuts to the CSU. That means the system would be in a deeper deficit and be on the hook for a loan they couldn\u2019t repay.<\/p>\n The fiscal malaise could have been worse. In 2022, Newsom promised the CSU <\/a>and University of California five years of increasing budget support totaling more than $1 billion for each system in new, ongoing funding. But because of state budget constraints, that so-called \u201ccompac<\/a>t\u201d has only been partially funded.<\/p>\n