BUDGET TIMELINE November: Regents adopt UC budget request for the coming year and send it to the state for consideration January: Governor introduces state budget proposal Spring: Legislature holds hearings on the budget; each house develops a budget proposal of its own May: State revenues are updated and governor issues the "May Revision" to his original budget proposal Mid-June: Legislature sends final budget to governor for action Late June: Governor signs budget July 1: New fiscal year begins Mid-July: Regents update original UC budget request to conform to final budget adopted by the state October 1: Traditional date for most salary increases to take effect

Dear UC Colleague: As you know by now, the State of California has entered a difficult budget period. State revenues are down substantially, and many areas of the government are bracing for spending reductions. The downturn is, of course, disappointing after California's economy experienced such solid growth during the late 1990s. As a state institution, the University of California will participate in the actions that must be taken to balance the state's budget. But we need to make every effort to do so in a way that preserves the quality of our institution. In order to ensure that you, as a member of the faculty and staff of the University of California, are kept up to date on the latest budget developments, I have initiated this electronic newsletter. It will be published on a periodic basis as events warrant. I hope it helps answer your questions about the state budget process and its impact on the UC system. The newsletter will also be available on the web at www.ucop.edu/news/budget/ Short-term fiscal problems aside, I continue to have the greatest confidence in the long-term strength and vitality of the University of California. We have weathered the ups and downs of many economic cycles, and we remain one of the top research universities in the world. I credit our faculty and staff - the people who do this institution's work - with that fine accomplishment. Thank you for your continued dedication and contributions to the University.  Richard C. Atkinson  President

Under the governor's proposal, UC's state-funded budget would total $3.4 billion in 2002-03, roughly the same as the original budget for the 2001-02 year. The proposal includes these major elements for the UC system:

• Salaries: Funding for an average merit increase of approximately 1.5 percent for eligible faculty and staff (final salary increases, of course, are subject to collective bargaining requirements where applicable). UC did not receive funding it sought for an additional 2 percent increase for faculty and staff and a further 2 percent increase for employees in positions where compensation levels lag the market. The University will be pressing for additional salary funding during budget negotiations this spring.
  
  
• Benefits: Funds to cover a 6.7 percent increase in the University's costs of providing health insurance to employees. UC had requested a 10 percent increase in order to keep employee contributions as low as possible, given the rising costs of health care coverage.
  
  
• Student enrollments: Funding for enrollment growth of 7,100 full-time-equivalent students, a 4.3 percent increase over the budgeted amount for 2001-02. This funding will allow the University to maintain its commitment of access for all UC-eligible students as the state's college-age population grows dramatically.
  
  
• Student fees: Mandatory systemwide student fees would remain level, making 2002-03 the eighth consecutive year without a fee increase. However, unlike previous budgets, the plan does not provide state funding to cover the University's loss of the additional fee revenue it needs to maintain support for existing fee-funded programs. The University will be discussing this need with the Legislature and governor during this spring's budget deliberations.
  
  
• Targeted program cuts: These include a $4 million reduction for the California Subject Matter Projects, which provide professional development for K-12 teachers; a $4.2 million reduction for the university's outreach programs to K-12 schools; and a $17 million elimination of "bonus" funding for financial aid that the state had allowed UC to keep when student fees were reduced in the late 1990s.

While the budget proposal does not fully live up to the Davis administration's "partnership agreement" with the University, the administration has indicated that it expects to resume its commitment to the partnership as soon as the state's fiscal situation improves. More details about the governor's budget can be found at www.ucop.edu/news/archives/2002/jan10art2.htm.

A subsequent report by the state Legislative Analyst's Office suggests, however, that the governor's budget would still leave the state with a $5 billion budget shortfall and that lawmakers in Sacramento will need to find additional savings to close the gap. Legislative hearings on the budget began in mid-March.

UC representatives will be working closely with the Legislature and the Davis administration over the course of the spring, making the case for continued strong investment in the University of California for the benefit of the state's educational and economic health. A final budget is usually approved by early summer.

Meanwhile, the Legislature and governor already have approved mid-year cuts in the 2001-02 budget to help close the state budget gap. The cuts made at UC were: $25 million of the $75 million the state provided to UC to cover increased energy costs; $6 million of the $57 million provided for the UC-led California Professional Development Institutes for K-12 teachers; $4.8 million of the $32 million provided to UC to expand K-12 schools' access to the next-generation Internet2; and a $5 million unallocated reduction.

Legislature Considers Bond Measure, Acceleration of UC Projects
Meanwhile, the state Assembly has approved the placement of bond measures for education facilities on the 2002 and 2004 ballots. At publication time, the state Senate had not yet acted on the proposal.

The bond measures would provide funding for facilities projects at all 10 UC campuses. These projects are critical to UC's ability to accommodate growing numbers of students, faculty and staff over the course of this decade; make seismic and other life-safety improvements to existing buildings; and renew outdated infrastructure on many campuses.

The bond legislation passed by the Assembly includes the acceleration of funding for seven UC facilities projects as part of a statewide economic stimulus package originally proposed by Gov. Davis. Lease-revenue bonds would fund the accelerated projects. A separate measure containing the governor's proposal to use lease-revenue bonds to accelerate funding for the four UC-based California Institutes for Science and Innovation is still being discussed by the Legislature.

View this document online at:
http://www.ucop.edu/news/budget/budget.html

FOR MORE INFORMATION ON:
BUDGET
   www.ucop.edu/news/budget
UC AND THE ENRON SITUATION
   www.ucop.edu/news/enron
BENEFITS INFORMATION
   www.ucop.edu/bencom
UPDATES ON UNION NEGOTIATIONS
   www.ucop.edu/humres/labor
NEWS ON OTHER UC SYSTEMWIDE ISSUES
   www.ucop.edu/news