July 1, 2003

MEMBERS OF THE UNIVERSITY OF CALIFORNIA COMMUNITY

As you surely know, the new fiscal year began today without a State budget in place. Because there has been a significant amount of news coverage regarding the effects on State agencies of not having a budget, I want to provide you with a quick summary of where the University of California stands.

The lack of a State budget is a serious concern to us, and the longer the State goes this summer without a budget, the more of a problem it becomes for the University. We certainly share the hope that a budget resolution can be reached as quickly as possible. Let me summarize the impact of the budget impasse on the University, as best we can now tell, in two principal areas:

Salaries: State Controller Steve Westly has issued a letter indicating that State employees, including UC employees, will continue to be paid their regular salaries for the first part of the summer. As a result, we currently expect our July 1 and August 1 payrolls to be processed normally. However, the controller indicated that in August or September, if the State still does not have a budget, his office will begin implementing a recent court decision that said State employees may only be paid the minimum wage while there is no budget. This change is not being implemented immediately because it requires a large number of State computer programming changes, the controller said. While it is unclear at the moment whether or how the University would be impacted by this court ruling, UC employees should be aware that they may potentially be subject to it. This means that, later this summer, salary payments for UC employees could be temporarily reduced until there is a state budget (at which time full salaries would be paid retroactively). Please be assured that the University will do everything it can to prevent this outcome and that we will share more information as it becomes available.

Payments to vendors: Controller Westly also indicated that he is not providing UC and other State agencies with funding for non-payroll expenses in the new fiscal year. During the first part of the new fiscal year, the University typically is paying bills incurred during the last part of the previous fiscal year. As a result, vendors should not worry about an immediate cut-off of payments. However, if the budget impasse lasts until the end of the summer, the lack of State funding for non-payroll expenses could become a serious issue. The Office of the President will monitor this issue closely and will be in touch with campuses as decisions in this area need to be made.

The University's State-funded budget for 2003-04 remains in a precarious position. In addition to the deep cuts that already have been approved, members of the Legislature are discussing even deeper cuts across State government, including at the University of California. Already, both houses of the Legislature have agreed on $80 million in additional cuts to UC, and there are Republican proposals to cut several hundred million dollars more from the University. We are continuing to make an aggressive case in Sacramento for the University's needs, but it is increasingly apparent that the next few years could be very difficult ones and that much more significant budget cutting may lie ahead. We will provide more updates about this year’s likely budget outcome as information becomes available.

Thank you for your patience, your understanding, and your good work for the people of California.

Sincerely,

Richard C. Atkinson
President