Issue 2 — May 2002

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:
This second issue of our systemwide budget update for faculty and staff is devoted to the May Revision, the annual event in which the governor proposes a revised State budget for the coming year based on new revenue estimates.

Unfortunately, the story this year is not a very happy one. Facing a major State budget shortfall, the governor has proposed cuts to a wide range of State programs, including programs at the University of California. The proposed cuts at UC are distressing because they affect valuable programs that provide important services to the people of California. In many cases, UC faculty and staff have spent the last several years building these programs.

At the same time, we recognize that the State is facing an extremely difficult situation — trying to fill a budget gap representing more than one-fourth of the entire State budget. We know that the University must participate in the solution in some way. And in that context, we must acknowledge that the governor has avoided across-the-board cuts, protected our core instructional program, funded our basic student enrollments, and preserved funds for a modest salary increase for faculty and staff.

Budget discussions have now moved to the Legislature, where we expect much continuing debate over the issues raised in the governor's May Revision. We will be participating in those discussions to make the best possible case for the University's needs. While there are no easy choices for anyone participating in the budget process, we will continue to emphasize the many benefits the state realizes from a strong investment in the University's programs.

I hope you find the following update useful and informative.

Fiat Lux,

 Richard C. Atkinson

Governor's Revised Budget Proposes Targeted Cuts at UC

Gov. Gray Davis' May Revision to his 2002-03 budget proposal calls for broad reductions in state spending to address a shortfall of almost $24 billion in the state of California's nearly $80 billion General Fund budget.

The governor's office attributed the shortfall to "a combination of the national economic recession, a sluggish stock market, the economic aftershocks of the September 11 terrorist attack, and the collapse of the dot-com economy in California." Much of the drop in state revenue is specifically the result of a fall-off in capital gains and stock options, the governor's office said.

The May Revision proposed a variety of solutions for closing the gap, including $7.5 billion in spending reductions affecting numerous state programs.

The revised budget proposes substantial cuts at the University of California. However:

  • It avoids across-the-board cuts and reductions in the core instructional program.

  • And it maintains the governor's original proposal of funding for an average merit increase of approximately 1.5 percent for eligible faculty and staff, subject to applicable collective bargaining requirements.

The state Assembly and Senate are now reviewing the May Revision and making their own proposals for budget adjustments. Further changes to the university's budget are possible and even likely. A final budget traditionally is approved by both houses and signed by the governor by early summer.

The May Revision includes the following changes to the governor's January budget proposal:

  • A $5.4 million augmentation allowing UC to enroll 600 more students than assumed in the governor's January budget, resulting in total enrollment growth of 7,700 students next year. UC, seeking to maintain its commitments under the Master Plan for Higher Education, requested the additional funding after seeing high application volumes for fall 2002.

  • A $2.8 million augmentation for the rising cost of annuitant health benefits.

  • A $32 million, or 10 percent, cut in state funding for UC research programs. The governor's proposal would give the university the authority to reduce spending on individual state-funded research initiatives by between 6 percent and 30 percent.

  • A $28.4 million cut in state funding for K-12 outreach. This reduction, when coupled with a $4.2 million outreach cut proposed in January, would result in a 40 percent reduction in state funding for UC outreach programs in 2002-03. The May proposal includes:

    • Elimination of state funding for the School-University Partnerships program ($12 million);
    • Elimination of state funding for the UC College Prep Initiative, which offers online access to Advanced Placement courses ($8.4 million);
    • A $4.7 million cut to graduate and professional school outreach, in addition to a $500,000 cut proposed in January;
    • Elimination of state funding for the ArtsBridge outreach program ($750,000 in addition to a $750,000 cut proposed in January);
    • Elimination of state funding for UC ACCORD, an outreach-related research program ($500,000 in addition to a $300,000 cut proposed in January); and
    • Elimination of $1.9 million in special augmentation funding for outreach efforts specifically targeted at the Central Valley, though other outreach programs in the region would continue.

  • An $11.3 million reduction for the California Subject Matter Projects, which provide professional development for K-12 teachers. The reduction is in addition to a $4 million reduction proposed in January and would leave the program with $20 million in funding. On a related matter, the governor proposes to remove $50.9 million in state funding for the California Professional Development Institutes for K-12 teachers, believing that an equivalent or greater amount of federal and state funding in the K-12 budget is available for teacher professional development activities.

  • A one-time cut of $29 million from the university's $150 million budget for equipment, library materials, deferred maintenance, and instructional technology. The governor's proposal indicated that this funding would be restored in the 2003-04 fiscal year.

  • A $5.2 million reduction in funding provided to UC to help expand K-12 schools' access to the next-generation Internet2. The reduction, on top of a $4.8 million reduction earlier this year, would leave $22 million for the program.

Including some other technical changes, the May Revision proposes a net reduction of $162 million in the University of California's budget. The university's state-funded operating budget would total $3.2 billion in 2002-03.

In addition, a series of proposed cuts in the state's Medi-Cal programincluding co-payment increases, provider rate reductions, and cuts in reimbursements to hospitals serving a disproportionate share of low-income patients, among other thingsare expected to have a significant fiscal effect on UC medical centers.

The governor's May Revision is available online at

Highlights of Other News

  • Domestic-partner benefits extended: The UC Board of Regents has approved retirement benefits for UC employees with domestic partners, mirroring the retirement benefits currently offered to married UC employees. Qualified domestic partners of UC employees who are members of the UC Retirement Plan (UCRP) will now be able to receive pre-retirement or post-retirement survivor income if the UCRP member dies. For more information, see

  • Funding approved for facilities: Gov. Davis and the Legislature have placed bond measures for education facilities on the ballot in both 2002 and 2004. If approved, the bonds would provide UC with funding for a range of building projects at all campusesincluding seismic-retrofit projects; new construction to accommodate growing numbers of UC students, faculty and staff; and improvements to aging infrastructure. The governor and Legislature also have approved the final increment of state capital funding for the four UC-based California Institutes for Science and Innovation, which are pursuing scientific research in fields critical to the future of the California economy. For more on the bonds, visit And for more on the Institutes, see

Questions and Answers

Q. Will the new state budget result in layoffs at UC?
A. It does not appear there will be layoffs on an across-the-board basis. Because certain programs have been targeted for fairly deep cuts in the May Revision, however, it is possible that layoffs will occur in some of those individual programs. The university will make every effort to achieve budget reductions without layoffs, but they cannot be ruled out in those programs identified for major budget reductions. At this point, nothing is final
the budget-cutting proposals that have been made are still under discussion in Sacramento.

Q. Why isn't a student fee increase being considered?
Gov. Davis has consistently opposed a student fee increase for next year. For its part, UC is urging the state's leaders in government and higher education to develop a new, long-term policy that would guide the setting of student fees. Such a policy would bring more predictability to the process and allow students, parents, the university, and the state to budget their resources with less uncertainty from year to year. Discussions of such a policy are in their very early stages.

Q. Why isn't UC making better use of facilities in the summer to help close the budget gap?
Actually, we are. With state support, UC campuses have expanded their summer instructional offerings, and summer student fees have now been reduced to the equivalent of the rest of the year as a means of encouraging more students to attend. Many UC buildings also are used in the summer for conferences, camps, and other revenue-generating activities.

Got a question? Send it to Your submissions will be the source of the questions and answers appearing in the next edition of this newsletter.