The plan comes after trustees hired the head of San Diego State from an East Coast school at $100,000 more than his predecessor and raised tuition 12 percent at the same time.
"Clearly, a portion of these tuition fee hikes are being used to subsidize that person's salary and during these lean budget times, it's simply the wrong thing to do," St. Sen. Ted Lieu, D-Torrance, said.
Lieu's bill limits the pay of campus presidents to $343,000 a year. By comparison, that is 150 percent of the salary paid to the chief justice of the California Supreme Court.
No raises or bonuses would be allowed if a tuition hike occurred within three years and internal CSU candidates must be given preference for the job.
CSU had no comment on the proposal because a new committee is investigating presidential pay and selection practices. But in the past, administrators said they need to pay well to be able to recruit the best.
The salary cap proposal is popular among students who have been protesting a string of tuition hikes over the years.
This year's $5,500 price tag at CSU has become too much for some.
"A lot of my friends who don't have financial aid or can't pay for it, they're seniors as well and they dropped out; it's sad," San Jose State senior Cassandra Sysouvanh said.
"You have to think about the student's perspective, what every family is going through too, not every family can afford to send their students to a CSU," Sacramento State freshman Nicholas Gilmore said.
The bill does not apply to the University of California system because the legislature has little control over that college system. UC President Mark Yudof announced this week $140 million in merit raises this week to keep faculty and non-union staff from leaving. Meanwhile, UC students are paying 10 percent more in tuition this fall.