California State University failed to disclose a more than $1.5 billion surplus to lawmakers and students during years of increases in tuition and state funding, state auditors reported Thursday.

The auditors also criticized CSU for building expensive parking facilities at four campuses, including San Diego State, saying the facilities did little to alleviate parking problems while causing students to pay higher fees.

The 64-page report issued by the California State Auditor shows that the surplus in the university’s operating fund has been growing since 2008, much of it funded by revenue from student tuition. Auditors found tuition revenue generated more than $23 billion, or 84 percent, of all the revenue deposited into the university’s outside account over a recent 10-year period.

“During the same decade that this surplus was growing, the annual tuition for students attending CSU campuses nearly doubled,” the audit said, and the surplus was never disclosed to students when discussing the need to raise tuition.


Annual tuition grew 90 percent, from $3,050 in 2008 to $5,750 in the 2017-2018 school year, data show.

State funding for the university also increased, thanks to voter-approved taxes to support education.

“CSU requested — and received — increased funding from the state a number of times,” the report said.

California State University, or CSU, is a public university system serving more than 480,000 students at 23 campuses throughout California. The university’s operating fund pays for expenses related to operations and instruction, such as academic salaries and benefits.


The audit report singles out the chancellor’s office for failing to include its surplus in key documents provided to lawmakers charged with drafting the state budget.

In one instance, the audit said, the chancellor’s office submitted a 2016 academic plan that projected tuition revenue and general fund appropriations for the next three years. It included a list of expenses that would appear to exhaust the projected sources of funding, the audit said.

CSU’s assistant vice chancellor for system budget said the academic plan included all the elements the state budget act required at the time.

But according to the audit, the plan did not include the $1.4 billion surplus the university had at the time, nor did it offer an estimate of how the surplus would grow over the next three years. Instead, the plan indicated CSU would not be able to pay for certain expenses if tuition remained the same or if the state provided less funding in the next budget, auditors wrote.


“As a result, legislators may not have been aware of critical information that was relevant to CSU’s funding requests,” the audit said. “Similarly, students lacked information that would have enabled them to take full advantage of the opportunity to provide input and ask questions about the need for increased tuition.”

When considering raising tuition for the 2017-2018 school year, the university consulted with the California State Student Association, or CCSA, an organization representing students that advocates for affordable education. Auditors said the university did not inform the group about the surplus.

“In fact, in the document the chancellor’s office prepared for the student association, it acknowledged only two alternatives to raising tuition: increasing state funding or reducing programs and services,” the report said.


CCSA president Mia Kagianas said Thursday that it’s disappointing and concerning that CSU did not disclose the reserve amounts to the student group.

“The audit findings reaffirm our students’ financial needs and basic needs issues that have been voiced for years in the CSU,” Kagianas said in an email. “Students deserve accessible information on the institution’s budget in decision making processes that directly impact their lives.”

State law typically requires entities such as CSU to deposit funds in accounts held by the Centralized State Treasury System, but CSU’s legal authority to use accounts outside the state treasury has expanded over time.

Beginning in 2006, legislators amended state law to allow CSU to deposit revenue from tuition and other fees into outside accounts. The report said this change allowed tuition revenue to be continuously available for CSU’s general purposes, rather than becoming available through the annual budget act.

In response to the audit, CSU chancellor Timothy White, said the report “severely mischaracterizes” the nature of funds invested by CSU and the manner in which the funds have been reported.

“In other words, it is inappropriate to characterize these reserves are either ‘discretionary’ or ‘surpluses,’” White said in a letter to the state auditor’s office. “In the same way a family utilizes a savings account for one-time expenses and uncertainties, these funds constitute an essential element of our system’s fiduciary responsibilities to manage the university and ensure continued operation in the face of economic uncertainty.”

White said the audit report also fails to mention that the university provided detailed letters at the request of state legislators in 2017 and 2018 that contained balances in accounts held outside the state treasury and these same balances were reported to the California State Controller’s Office.


“The point is all of CSU’s financial resources are available to state government officials and the public,” White said.

In the report, auditors acknowledged that the surplus can be considered a necessary reserve designated for specific purposes but, they said, the $1.5 billion in these outside accounts is available for CSU to spend at its own discretion, and the university has not adopted adequate policies to ensure it remains a reserve or is used appropriately.

A second part of the audit reviewed the focus on four CSU campuses to build parking structures to increase students’ access as opposed to implementing other transportation options.

The state auditor found the four campuses had raised student parking permit prices to as high as $236 per semester, largely to pay for the millions of dollars in annual debt payments they took on to finance the new parking facilities.

“These costly new parking facilities have had a minimal impact on parking capacity,” the audit said. “Moreover, the chancellor’s office has not ensured that campuses have consistently planned for or implemented options for alternate methods of transportation ... such as shuttles, carpools, and bicycles — before requesting to build new parking facilities, as CSU policy requires.”


The report said the legislature should require CSU to provide annual updates on the implementation of alternate transportation strategies and how those strategies have reduced parking demand on its campuses.

Auditors also recommended that the California legislature require the chancellor’s office to provide current balances and projections for CSU’s discretionary-spending surplus, as well as an estimate of how much tuition contributes to that surplus.

And, to improve transparency, the auditors said the chancellor’s office should publish information about its operations, surplus and tuition revenue annually, beginning in October.