FOR IMMEDIATE RELEASE
Thursday, November 14, 2002
Media contact: Brad Hayward (510) 987-9200
REGENTS APPROVE BASIC BUDGET REQUEST FOR 2003-04;
CUTS REMAIN LIKELY BUT AWAIT FURTHER INFORMATION FROM STATE
The University of California Board of Regents approved a
basic budget for the 2003-04 fiscal year today (Nov. 14),
requesting state funding that fulfills the Partnership Agreement
with Gov. Gray Davis but also acknowledging that significant
budget cuts ultimately may be required.
A steep reduction in state revenues, due largely to a dropoff
in capital gains and stock options as a result of the stock
market decline, has left the state with a major fiscal challenge.
The 2002-03 state budget authorizes the governor to make $750
million in reductions to state operations in the current fiscal
year; those cuts have not yet been announced. In addition,
for the longer term, the state is estimated to be facing a
deficit of at least $10 billion each year, absent corrective
Specific proposals from the state for balancing the budget
may not be available until the governor releases his 2003-04
budget proposal in January. Therefore, the Regents discussed
general categories of options available to the university
as it seeks to fulfill its mission to the state while coping
with a potentially significant reduction of resources.
"I have great confidence in the long-term economic vitality
of California and, therefore, in the University's long-term
fiscal prospects," said UC President Richard C. Atkinson.
"However, we face a very challenging short-term budget
"In this constrained budget environment, I have two
priorities. First, we must maintain quality and access in
the core instructional programs. That means funding for enrollment
growth and funding to maintain the high-quality educational
experience that students expect of UC. Second, we must provide
salary increases for faculty and staff so that we do not fall
further behind the market. Competitive salaries are key to
quality -- we must prevent further salary erosion and also
begin to close the salary gap."
Larry Hershman, UC vice president for budget, said that over
the longer term, the university will continue to seek full
funding of the Partnership, an agreement between UC and the
Davis administration that calls for specific annual increases
in funding for the University, coupled with a commitment by
UC to make progress on a number of specific accountability
For the shorter term, Hershman outlined for the Regents a
series of options available to the University in a budget-cutting
environment. No decisions will be made until more information
about the state's budget priorities is known. The options
include (not in priority order):
- Delay restoration of Partnership funding that has been
reduced for instructional equipment, instructional technology,
libraries, and building maintenance
- Delay implementation of state funding for summer instruction
at some or all of the four remaining campuses
- Restore student fees to the level that existed prior to
the 10 percent undergraduate fee reduction of the late 1990s
- Consistent with the university's interest in a long-term
fee policy, implement student fee increases for undergraduate,
graduate, and professional school students, providing sufficient
financial aid to preserve access to the university
- Reduce funding for support programs, such as administration
and student services, recognizing the need to provide adequate
support for core teaching, research, and public service
- Reduce funding for public service programs, such as outreach
and Cooperative Extension, taking into consideration university
and state priorities
- Reduce funding for research, limiting such cuts to programs
that received major increases over the last several years
-- and protecting from further cuts those research programs
that were reduced 20 percent in the early 1990s and another
10 percent in 2002-03
"None of these options is attractive," Hershman
said. "We are going to work very hard in Sacramento to
make the case for the University's budget priorities and minimize
the need for cuts. But given the seriousness of the state's
fiscal challenge, we also need to consider carefully how the
University might best absorb a budget reduction while maintaining
the standards of quality that have always defined UC."
Hershman emphasized that, if a student fee increase is required,
one-third of the revenue from the increase would be returned
to financial aid in order to mitigate the impact on lower-income
students, and Cal Grants would also help reduce the impact.
He noted that mandatory systemwide student fees have not increased
in eight years -- they actually fell 10 percent in the late
1990s for resident undergraduates -- and that the university's
fees are now substantially below those of its comparison institutions.
However, the Regents will not be asked to make any decisions
on student fees until a future meeting.
In the absence of firm information from the state about the
extent of budget cutting that will be required, the budget
adopted by the Regents requests the basic level of Partnership
The budget requests state funding for enrollment growth of
8,000 students in 2003-04, a figure that includes the "overenrollment"
of at least 4,000 students in the current year (enrolled students
for whom the state is not providing funding). UC is in the
midst of a major enrollment expansion driven by growth in
California's college-age population.
The Regents' budget also requests funding for an average
4.5 percent salary increase for eligible faculty and staff,
along with funding for merit increases for eligible employees.
All salary increases are subject to collective bargaining
requirements, where applicable. Faculty salaries currently
trail those of UC's comparison institutions by approximately
7.5 percent, and budget reductions over the last decade have
left UC staff salaries similarly behind what the university
had hoped to provide. (Separately, the Regents approved a
one-time Capital Accumulation Provision credit for eligible
UC employees -- a form of deferred compensation provided through
the UC Retirement Plan to help make up for lower-than-expected
salary increases this year.)
The budget also includes a student fee increase of 6.5 percent
(approximately $225 over the course of a full year for resident
undergraduates) unless the state is able to provide equivalent
funding under the Partnership. The increase would apply to
both mandatory systemwide fees and professional school fees.
Hershman noted that the 6.5 percent figure is only a planning
figure at present and that the final figure may well differ
based on the state's budget plans.
Also included in the plan is a 4 percent increase in nonresident
tuition -- a $500 increase for nonresident undergraduates
and a $445 increase for nonresident graduate students. Nonresident
tuition is established consistent with state policy which
calls for out-of-state charges to be set by considering the
cost of instruction and the fees charged by UC's public comparison
The university's current state-funded operating budget is
approximately $3.15 billion.
The Regents also approved a $316 million capital improvements
budget for 2003-04 that would fund a number of projects throughout
the UC system to retrofit buildings against earthquakes, construct
new facilities for enrollment growth, and modernize outdated
infrastructure. State funding for these projects will be provided
by Proposition 47, a statewide general-obligation bond measure
for public education facilities that was approved by California
voters on Nov. 5.