CSU’s operating fund designated balances and reserves pay for nonrecurring expenses to manage short-term obligations and commitments, provide funding for capital infrastructure repairs and maintenance and help ensure that operating costs can be paid during times of economic and budget uncertainty. Recently, CSU’s reserve policy was revised to encourage campuses to accumulate a minimum of one-quarter and a maximum of one-half of the annual operating budget. The policy also requires designation and reserve amounts to be established and reported annually by the campuses and the system office. These amounts are published on CSU’s financial transparency portal and reported annually to the Board of Trustees.
On June 30, 2019, one-time designated balances and reserves in the operating fund totaled $1.7 billion, accumulated primarily from tuition, fees, and other revenues in excess of annual expenses. Operating fund balances for short-term obligations, capital projects and catastrophic events as well as reserves for economic uncertainty are displayed in the chart in solid bars. The need is shown as a vertical line.
Balances designated for short-term obligations are for open contracts and purchase orders, near-term debt service payments, financial aid obligations and programs that are in development. Balances designated for short-term obligations are sufficient to cover expected needs and are typically used in the following fiscal year.
Balances designated for capital are for new capital projects and repair of current buildings, as well as planning costs and equipment acquisition associated with those buildings. Capital reserves fall well short of the expected need, which is at least 10 percent of the cost of academic projects approved in the most recent five-year capital plan. Over $751 million is required for academic projects approved in the 2019-20 through 2023-24 five-year capital program.
Balances are held to be used in the event of a natural disaster or other catastrophic event. Typically, these balances are used to pay for costs that are not covered by insurance. Balances designated for catastrophic events are sufficient to cover expected needs.
Reserves for economic uncertainty are held for costs that may occur due to short-term necessionary cycles or state budget fluctuations. Reserves are part of the university's prudent fiscal strategy and are intended to be used in the future as a one-time supplement to help manage the rapid decline in state resources. This allows time to adjust operating budgets appropriately to balance reductions and to minimize disruptions to our students’ education as much as possible. Reserves for economic uncertainty total less than one month of operating fund expenses, well below the need to maintain three to six months of operating expenses.