[January 9, 2009]

Dear colleague:

I write to inform you about salary freezes and other compensation-related actions being implemented for certain UC employees.

As you know, the state is facing a serious financial crisis. When Governor Schwarzenegger released his state budget proposal for the 2009-10 fiscal year several weeks ago, it was deemed "the most challenging budget in the state's history", projecting a budget deficit now projected to reach more than $41 billion during the 2009-10 fiscal year unless action is taken. Among the various actions the state is enacting or planning to help deal with the budget crisis, Governor Schwarzenegger recently issued an executive order mandating furloughs and layoffs for state civil service employees.

Although the governor's order does not apply directly to UC, it urged that we, along with the California State University, the California Community Colleges, and other state entities, adopt similar measures to help achieve budget savings for the current and upcoming fiscal years. In recognition of our obligations as a public institution, I do believe we need to align ourselves with the state's efforts.

Accordingly, and after consultation with Regents, chancellors, Academic Senate leadership, and others, I am proposing to the Regents for approval next week the following actions:

1. Freezing the salaries of 285 top administrators and implementing significant restrictions to compensation for an expanded group of senior leadership, effective immediately and continuing through the 2009-10 fiscal year. The roughly 85 incumbents in the following senior-level executive positions will have their current compensation frozen, disallowing any consideration for merit, equity and retention increases:
   
   
   • president
   • chancellors
   • vice chancellors, vice presidents and above
   • medical center chief executive officers
   • chief investment officer/vice president for investments
   • senior vice president/chief compliance and audit officer
   • general counsel/vice president for legal affairs
   
   Any existing stipends will be continued for the period approved by the regents. If an individual is offered a new position (in any of those listed above) resulting in a higher grade with different or expanded responsibilities, a promotional increase may be considered on a case-by-case basis. If an individual temporarily assumes one of the positions listed above, a stipend, in addition to the base salary, may be considered on a case-by-case basis. Promotional increases and stipends will be subject to the president's review and regental approval. No further salary actions will be considered for this group.



2. For the roughly 200 remaining positions in the senior management group not specifically identified above, salaries will be frozen, disallowing any consideration for merit or equity increases. Consistent with the standards and guidance provided above, stipends or promotional increases may be considered on a case-by-case basis. If an individual in this group receives a bona fide offer of employment, a retention increase may be considered on a case-by-case basis, upon review of supporting documentation. Any recommendations for stipends, or promotion or retention increases for this group will be subject to review by the president and approval by the regents.
   
   These actions are in addition to the recent suspension of merit and equity increases for senior managers and senior professional staff.



3. In addition to the above, there will be restrictions on the university's systemwide employee recognition and development program, and similar campus-based bonus programs. Pending payments for senior management group members and others with annual salaries in excess of $205,000 will be cancelled. The proposal also significantly restricts any cash awards under this program for fiscal years 2008-09 and 2009-10 by limiting participation to only non-senior management staff whose annual salaries are less than $100,000, and limiting those awards to no more than $1,000 total in any year.

Only certain incentive plans, such as the Regentally-approved Clinical Enterprise Management Recognition Plan pertaining to key hospital and clinical leadership positions, will be continued. The Clinical Enterprise Management Recognition Plan is supported by hospital revenues and does not involve state funding, and it plays a very important role in ensuring improvements in patient care and safety, and other hospital priorities.

I am very sensitive to the impact of these kinds of actions on employees, and I regret the need for them very much -- our very dedicated and talented people are what make UC great and everyone deserves to be adequately compensated for their contributions. I also know much work has been done throughout the university, with more being planned, to achieve efficiencies and budget savings in an effort to help ensure our ability to withstand the significant financial difficulties we are facing. I appreciate deeply everyone's efforts.

At the same time, these are extremely difficult times, requiring very difficult decisions, and I believe these salary actions appropriately reflect and balance our obligation as a public institution and the gravity of the economic crisis confronting us.

If you have questions about how these actions apply to you individually, please feel free to contact your local Human Resources or Academic Personnel office, and as always, thank you for your dedication to the University and to the people of California.

Sincerely,

Mark G. Yudof
President

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