1969 Budget Analysis: Capital Outlay

Capital Outlay CAP IT At. OUTLAY Summary 1968 Program The Budget Act of 1968 as signed by the Governor contained ap proximately $146,046,000 for capital outlay. Of this, $71,620,000 was from the General ]'und and the balance from (1) various special funds ($50,775,000), excluding water and highways, and (2) bond funds in the areas of recreation, parks and junior college state construction as sistance ($23,651,000). There are a number of observations pertinent to the amount and nature of this 1968 outlay total. First, it was the smallest capital outlay appropriation since the fiscal year 1962-63. Second, the amount of bond funds was relatively minor for the first time in ten years. Third, it contained an item of some $3,340,000 for purposes which had been treated as local assistance in previous budget acts. Fourth, overall it represented essentially a "pay-as-you-go" construction program. In addition to the $71,620,000 directly appropriated from the Gen eral Fund, it should be noted that of the special funds amount, $37,- 730,000 was from the Capital Outlay Fund for Public Higher Educa tion. This fund is fed by tidelands oil reveneus which otherwise would have accrued to the General Fund. Therefore, as a practical matter, approximately 75 percent of the total 1968 capital outlay appropria tion had its origin in the General Fund. The limited bond funds that were allocated by the 1968 Budget Act were largely directed to higher education (junior colleges). All of the balance of $3 million remaining in the Higher Education Bond Act Fund was allocated to augment projects previously funded from it for the purpose of financing increased costs attributable to a sharp rise in the construction cost index. In addition, some $15 million was allocated for junior college con struction assistance. These bond funds for higher education, when combined with appro priations from (1) the Capital Outlay Fund for Public Higher Educa tion and. (2) direct General Fund allocations, resulted in some 75 per cent of the total capital outlay appropriation being oriented to higher education. Of the remaining capital outlay monies, approximately 10 percent was directed toward state and local recreational programs while the balance of less than 15 percent went to relatively minor programs in agencies such as mental hygiene, corrections, youth authority, fish and game, motor vehicles, highway patrol, etc. Included in these minor pro grams was the $3,340,000 for purposes previously budgeted as local assistance which reflected the state's interest in local flood control pro grams to the extent of land purchases and easements and rights of way, the titles to which inured to the state. ' 967 Capital Outlay Summary-Continued The Effect of Inflation In the seven fiscal years 1962-63 through 1968-69, the rising cost of construction has made comparison of gross expenditures relatively meaningless. The 1962 Budget Act, for example, provided $169,325,000 for out lays, but during the 1962-63 fiscal year the "construction cost index" as determined by the Engineering News Record averaged 850. On the other hand, during the first half of the current fiscal year the index reached 1,200 and is rising at a relatively steep rate. The increase in the index over this seven-year period is therefore 350 points or 39 per cent. The total appropriation for each year includes not only construction but also equipment and land acquisition. Although the price fiuctuation for both land and equipment is frequently wider than the construction cost index, the percentage increase is approximately the same over a long period. On this basis, it is evident that what could be purchased during the 1962-63 fiscal year for $169,325,000 would have cost 39 percent more ($66 million) during the 1968-69 fiscal year for a total of over $235 million in relative value. Conversely, the $146 million pro vided by the 1968 Budget Act for construction and equipment would purchase values approximating what $104 million would have pur chased during the 1962-63 fiscal year. 1969 Program The 1969 Budget Bill now before the Legislature includes a total of $158,152,149 for capital outlay programs from all funding sources. 'This is significantly higher than that provided by the 1968 Budget Act. Again, the major source of financing is the General Fund together with funds which are related to or arise from it. Of the grand total proposed, the General Fund will directly provide $89,453,613 or 56.5 percent. While the Capital Outlay Fund for Public Higher Education will provide $10,001,300 or 6.3 percent. The balance of $58,697,236 or 37.1 percent includes $47,844,241 in bond funds for state aided junior college construction, and for park and recreational programs as well as for augmentation of higher education projects previously funded from bond funds. It also includes other various special fund agencies as previously identified. Higher education outlays totaling $108,159,925 or 68.4 percent of the capital outlay budget will be financed from the General Fund, the Capital Outlay Fund for Public Higher Education and the bond funds for junior colleges. As in p,rior years, education continues to represent the major element of the capital outlay budget. However, because the amount proposed for the two segments which are direct state responsi bilities, i.e., the university and the state colleges, is significantly less than requested by these two state agencies, every effort must be made to maximize the benefits of available funds in terms of academic quality and availability of space and facilities for each campus. 968 Capital Outlay Summary-Continued To that end we make several recommendations and suggestions in the specific analyses hereafter which fall in the following general cate gories: A. Intensified space utilization B. Design factors oriented towards cost reduction C. Construction and procedural factors oriented towards cost re duction Higher Education The growth problem of the two major segments of the state sup ported higher education in California is illustrated by Table 1, "En rollment-Capacity Comparisons" which covers four fiscal years in cluding the budget year under consideration. Table 1 Enrollment-Capacity Comparisons State Colleges 1 2 3 4 5 Enrollment P.T.E. Proposed 8 a.m.- 8 a.m.- Oumulative capital outlay Year 5 p.m. 10 p.m. capacity five-year plan Budget Act 1969 ______ _ 150,290 180,815 134,294 $116,585,300 $44,664,300 (38.3%) 1968 ______ _ 134,770 165,295 122,828 110,380,900 44,571,000 (40.4% ) 1967 ______ _ 126,110 144,120 107,534 88,841,000 61,499,000 (69.2%) 1966 ______ _ 114,100 130,468 104,699 68,670,600 54,760,435 (79.7%) . (12,000,000) University of California 1969 _______ 95,193 85,063 $96,657,000 $37,357,000 (38.6%) 1968 _____ -'_ 90,224 77,814 79,634,900 44,571,000 (56.0%) 1967 _______ 89,457 75,488 115,596,550 58,241,339 (50.4%) 1966 _______ 78,923 69,701 92,362,700 67,894,100 (73.0%) The state college enrollment figures shown in column 1 were ob tained from the five-year capital outlay program for 1969 through 1973 as prepared by the state college system under date of July, 1968. For the University of California, the enrollment figures were obtained from the document labeled, "Budget for Current Operations" pre pared by the University under date of November 21, 1968. The enrollment figures for the state colleges in column 2 were ob tained from supporting data prepared by the state college system in connection with its support program. The University provides no fig ures covering an expanded time period from 8 a.m. to 10 p.m. and the column is blank for that reason. Column 3 labeled "Cumulative Capacity" covers figures obtained from the five-year program of the state colleges and a similar five-year program from the University of California. The capacity is based on C.C.H.E. restudy standards which contemplate for the state colleges 25 hours per week for lower division laboratories and 20 hours per week for upper division laboratories. Lecture rooms are calculated at . 34 hours per week. For the University, the figures are 27 hours for lower division laboratories, 22 hours for upper division laboratories and 36 hours for lecture facilities. 969 Capital Outlay University of California-Continued Column 4 indicating "Proposed Capital Outlay" covers figures con tained in the five-year plans for each respective segment and repre sents programs and proposals approved by the State College Board of 'rrustees on the one hand and the Board of Regents on the other. Column 5 covers actual appropriations made in the prior years, and for the 1969-70 budget year the figures represents the amount included in the Budget Bill now before the Legislature. The percentage follow ing each figure is the relationship of the appropriated amount or in the case of the 1969 Budget Bill the budgeted amount to the proposals contained in the five-year plans. It will be noted that the percentage of funds made available has steadily decreased with respect to the pro posals of the two major agencies. The $12 million shown parenthetically for 1966 is for property acquisition for four new state colleges not contained in the trustees' five-year plan. The University's enrollment figures and cumulative capacity deal with the general campuses only and do not include the enrollments or capacities for the medical schools and the veterinary medical school at Davis.

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