The Economic Impacts of Budget Cuts to the CSU and UC Systems

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This paper will focus on the economic impacts of the policy decision by California Governor Brown to decrease funding of the California State University and University of California systems by way of looking at the impact on the economy of less college graduates. I will do this by looking at two variables. I will first look at the multiplier effect of the state putting money into the California State University system and what will happen as a result of the divestment due to the budget cuts. I will then look at the decrease in the median income due to the fact that the budget cuts will cause a decrease in enrollment which means there will be fewer college graduates and college graduates earn more money than their non-graduate counterparts…show more content…
(California State Governor’s Office) According to a report presented to the Office of the Chancellor by IFC International for every one dollar spent by the state on the California State University system “the CSU generates $5.43 for California’s economy annually. When enhanced earnings by graduates are taken into account, the annual return rises to more than $23 for each $1 invested.” (ICF International) This, however, does not necessarily mean than the $542.4 million in cuts is multiplied by $23, resulting in a total decrease of $12.475 billion in spending. This is because the relationship isn’t necessarily completely linear. Since the decrease is only 8.5% then the relationship might still be linear, which would mean that there will be $12.475 billion in spending lost. The other reality might be that it is not linear, which would mean the total loss of spending would be less than $12.475 billion.
Another area I will look at for the California State University system’s budget cuts is the resulting enrollment cuts. With less money coming in from the state the universities have to save money by enrolling fewer students. However, the money cut from the CSU budget doesn’t have a direct relationship to a decrease in enrollment. The change in enrollment is determined by the universities and is filled every semester. Enrollment is scheduled to decrease in

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