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 and. I will look at the decrease in median income due to less college graduates as well multiplier effect of college graduates and the resulting loss of tax revenue due to this decrease.

The full impact of the loss of these graduates needs to be expressed because most of the change occurs from the chain of expenditures that results from college graduates having a higher median income than their non-graduate peers. This chain of spending that is the result from the state funding higher education is called the multiplier effect. This is an economic issue because there is a quantifiable change in the economy due to these budget cuts in the California State University system which means there is less money moving around and there will be fewer college graduates.

The budget proposed by Governor Jerry Brown for the fiscal year of 2011-2012 will have a decrease of 4.5% from the total funds and a decrease of 12.5% from the general fund to the California State University system, a total of $542.4 mill...

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...x opinions, in our state legislature to raise taxes or fees a two-thirds majority is required. While our state is fairly liberal when compared to other states in our nation, there aren’t enough liberal districts to support enough democrats to pass a tax under the current rules. Because of this the governor has no choice but to make deep and unpopular budget cuts to programs like the CSU system that are clearly important and significant to the well-being of our state.


1. ICF International. Working for California: The Impact of the California State University System. San Francisco, California. May 2010.

2. California State Governor’s Office. 2011-2012 State Budget. Sacramento, California. 2011

3. California Commission on Teacher Credentialing. Teacher Supply in California A Report to the Legislature Annual Report 2005-2006. Sacramento, California. 2005.
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