Reasons could include placement exams that don't accurately predict college-level performance, campuses admitting students who are not among the top third of high school graduates, inadequate high school coursework and a lack of financial incentives to improve outcomes, according to the nonpartisan Legislative Analyst's Office.
"We want to look at what is actually driving this, and that can drive policy," said Jameel Naqvi, a policy and fiscal analyst who prepared the report. "Is Cal State admitting the top 40% of high school students instead of the top third as they're supposed to? Do we need to strengthen requirements in high school and what would that cost? The Legislature should not focus on one effort but step back and take a look at the big picture."
The numbers of students ready to tackle college-level English and math have improved somewhat: In 2012, about 56% tested proficient, compared to 42% in 2009.
But that is still far from the 90% goal set by trustees in 1996.
Officials reported Wednesday that undergraduate applications for fall 2014 were the largest ever, topping 760,000.
The number reflects about 284,000 individual applicants, many of whom applied to more than one campus.
Five campuses -- Fullerton, Long Beach, Northridge, San Diego and San Luis Obispo -- each received more than 50,000 applications.
To help meet demand, Cal State is expanding a program for the spring 2014 term that allows students at any campus to take an online course offered at another campus, with the credits counted at the home campus.
About 40 courses, including astronomy, biology, economics, geography and philosophy, will be offered.
The Legislative Analyst's Office recommendations were part of an evaluation of Cal State's Early Start program, enacted in 2012 to better prepare students for college-level math and English before starting their first semester.
The program requires students who test below proficient in a placement exam to take remedial classes in the summer before their freshman year. They must complete remediation during their first year.
Because Cal State didn't provide data on student outcomes, analysts were unable to evaluate how well the program is working; whether, for example, students are completing remedial classes faster and graduating and completing their degrees more quickly.
The Legislative Analyst's Office is supposed to assess the program every two years until 2018. But the report suggested eliminating the reporting requirements to "stay focused on the overarching policy goal of improving college readiness rather than focusing only on a single remedial program."
Cal State spokesman Mike Uhlenkamp said the system will have more data on the Early Start program when the Board of Trustees meet in March. But he said there won't be results until the 2012 cohort of students begin graduating, at the earliest in 2016.
Uhlenkamp said most Cal State campuses adhere to the admission standard of accepting the top one-third of high school graduates as outlined in the state's Master Plan for Higher Education. A system-wide study would be costly, he said.
But the majority of the analyst's recommendations are sound, he said.
"We do think in general the state needs to take a look at the [remedial issue]; it's not a CSU problem but a problem for everyone," Uhlenkamp said.
The system has 23 campuses and enrolls about 437,000 students.