UC's 2002-03 State Budget Back to UCOP State Budget Home

Q&A for UC Staff and Faculty

Q. I’d like to better understand what’s going on with the state budget and what it means for UC. Where can I get information about this?

A. The budget updates and other information available at http://www.ucop.edu/news/budget/welcome.html offer a good overview of the current economic downturn and how it is affecting UC. As you’ll see, there are also links to additional sources of related information that you may find useful.

Q. What personnel-related actions is UC considering to cope with the budget crunch? For example, is UC considering some type of early retirement program? Is a reduction-in-time/pay program a possibility? Will there be layoffs?

A. Understandably, there is a lot of nervousness and curiosity about what the state budget crisis means for UC staff and faculty. The university is evaluating every potential personnel-related option that will help achieve budget savings while minimizing the impact on jobs. These options include hiring freezes, travel limitations, reduction-in-time/pay programs, and other similar initiatives. We will provide more information about the specific actions we will be taking just as quickly as possible.

The magnitude of the budget reductions means, unfortunately, that layoffs could be necessary in those areas where budgets are being cut. Again, we are evaluating a broad range of options for achieving budget savings and hope to minimize the impact on jobs.

Naturally, many staff and faculty continue to ask about an early retirement program. While early retirement programs will be evaluated along with other potential actions, any such program would most likely not be an across-the-board program due to the significant student growth we continue to experience. If some type of early retirement program is offered, it will likely be a focused program designed to target selected areas and specific budgetary objectives.

Q. Will the university provide any student fee assistance for UC employees who are parents of UC students?

A. The university previously has looked into the possibility of providing Educational Fee waivers to students who are dependents of UC employees, and the idea has broad appeal among faculty and staff. Since these programs cannot be funded from contract and grant funds (due to federal rules), they would need to be financially supported by state and other funds. UC estimates that such a program would cost between $5 million and $6 million per year and would benefit only about 2 percent of UC faculty and staff. Given current state funding limitations due to the budget deficit, such a program appears unlikely at present.

Q. I understand that the Regents recently approved another CAP to help offset low salary increases for faculty and staff. Could you clarify where these funds come from and how the program works?

A. The CAP is a mechanism that allows UC to take funds from the university's general retirement plan assets and set them aside for eligible employees in a special retirement account. The money earns interest and grows over time, and is then available to employees when they retire or leave the university. It's a way for UC to give employees some type of financial reward for their hard work and dedication during these times of disappointing state salary funding.

Some employees may wonder why UC just doesn't add this money to employees' annual salaries (versus a retirement account) and do this routinely whenever state salary funding is down. UC cannot legally take funds out of the retirement plan and use them for non-retirement purposes such as regular salary increases. This is why we have to create a special account for individuals within the retirement plan - to keep the money with the plan. Also, since this type of program consumes a portion of retirement funds, it must be carefully considered in relation to the overall health of the total plan assets. Fortunately, the stock market was very strong in the last half of 1990s and our retirement investments did well such that our plan assets are currently strong enough to support this type of program. More information on the CAP is available at http://atyourservice.ucop.edu/news/retirement/regents_approve_funds.html.

Q. What kind of salary increases are UC administrators receiving this year?

A. Senior managers at UC are receiving the same salary increases for 2002-03 - 1.5 percent - that other UC employees are receiving.

Q. What is the salary picture for next year?

A. The governor's 2003-04 state budget proposal contains no funding for faculty and staff salary increases at UC, nor for state employees generally. Competitive compensation is key to quality, and the university believes a merit program must continue to be a high priority. The university will be looking closely at its options as the budget process moves forward, and we remain hopeful that a recovering economy will begin to provide some fiscal relief later this spring.

Q. Why is the university continuing to construct new buildings when employee salaries are falling behind?

A. Facilities are funded differently than ongoing operations. Most facilities are not funded by the General Fund, the state fund that currently has a deficit estimated by the Department of Finance at $34.6 billion. Academic buildings, for instance, are largely financed by voter-approved bonds that cannot be used for other purposes; student recreation centers and similar projects are often funded through fees approved by students in campus referenda. Facilities projects are a source of construction jobs for California in the short term and, for the long term, are important to meeting the university's obligations in an era of major growth.

Q. Do the investment losses that UC has experienced with companies like Enron and Dynegy, as well as the continued stock market slump, threaten our retirement benefits?

A. The university's retirement benefits are not in jeopardy and the Retirement Plan remains very sound, as evidenced by the fact that the Plan continues to require no employee contribution. UC's Retirement Plan investments are broadly diversified, so that performance slowdowns in one area or particular investment cannot abruptly threaten the overall financial health of the Retirement Plan or the university's ability to pay retirement benefits.

Individual losses like WorldCom, Enron, and Dynegy represent very small portions of UC's total investment portfolio. Still, the university feels a very strong obligation to employees, retirees, the public, and the state to do everything possible to recover some of these losses. As you may know, UC has been named lead plaintiff in the Enron and Dynegy lawsuits and is aggressively pursuing settlement.

Additional information about UC Retirement Plan investment performance is available at www.ucop.edu/treasurer/. Additional information about the Enron and Dynegy lawsuits is available at www.ucop.edu/news/.

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Due to the volume of submissions, we can't promise an answer to every question - but the feedback is important, and we will do our best to answer some frequently asked questions in the next edition of the "Our University" newsletter and on this web page.





Updated February 6, 2003


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