also is available on the web at www.ucop.edu/news/budget/issue6.html.
6 January 2003
Regents adopt UC budget request for the coming year and send
it to the state for consideration
Special legislative session on the budget begins
Governor introduces state budget proposal for 2003-04
Legislature holds hearings on the budget; each house develops
a budget proposal of its own
State revenues are updated and governor issues the "May
Revision" to his original budget proposal
Legislature sends final budget to governor for action
June: Governor signs budget
1: New fiscal year begins
Regents update original UC budget request to conform to final
budget adopted by the state
you know, the State of California is facing an unprecedented
budget deficit estimated by the Department of Finance at nearly
$35 billion. To begin closing the gap, Governor Davis has
proposed a series of budget cuts in the current year. I am
writing now to update you on the latest news - the governor's
budget proposal for next year.
proposed 2003-04 budget, which the governor released on January
10, contains serious cuts for the University of California.
They are detailed below.
source of these cuts lies in the State's overwhelming deficit,
and in that context they are understandable. Nevertheless,
it is clear that if the cuts are approved, they will have
a major impact on many UC programs that provide tremendously
valuable services to the people of California. They also come
at a difficult time for our staff and faculty, who already
have been experiencing higher medical costs and low salary
wanted you to know about the governor's proposals as soon
as possible, and to hear about them directly from me. As you
read this material, however, I hope you will keep in mind
that we are still at the beginning of the State budget process
and that much can change between now and the final adoption
of a budget sometime this summer.
employees are anxious to learn what kinds of personnel programs
we will be pursuing to help achieve budget savings in the
coming year. We are deep in the process of evaluating options
in this area and expect to have more information soon. I appreciate
is unhappy news with which to start the new year. However,
as I have said before, the University of California is a strong
institution that has weathered many storms. My staff and I
will continue working hard in Sacramento on the University's
behalf. In the meantime, the committed, high-quality work
of our staff and faculty remains the University's greatest
cuts in the proposed 2003-04 budget
Gov. Gray Davis proposed a series of mid-year budget cuts across state
government, including at the University of California, to help close the
state's budget deficit. The Board of Regents has adopted those proposed
cuts for 2002-03, recognizing that the university has only half a year
to achieve the targeted savings and that any changes made by the Legislature
can be incorporated into the university's budget at a later date. Details
on the mid-year cuts are available at http://www.ucop.edu/news/archives/2002/dec16art1.htm.
governor has released his state budget proposal for 2003-04, which includes
$299 million in new funding cuts for the UC system and, when added to
the mid-year cuts, brings the university's total cuts over an 18-month
period to $373 million.
proposals, UC's state-funded budget falls nearly $1 billion below the
level the university had expected by this point under its Partnership
Agreement with the governor, an agreement that outlines the university's
basic funding requirements. Since the beginning of the 2001-02 year, UC
has taken $533.3 million in state funding cuts and has forgone an additional
$423.5 million in expected Partnership funding for faculty and staff salaries
and other cost increases, for a total shortfall of $956.8 million.
proposed state-funded budget is thus approximately $3 billion at a point
when, under the Partnership, it was expected to be roughly $4 billion.
million in newly proposed UC budget cuts for next year are in many of
the same areas that were targeted for $74 million in mid-year cuts this
year. None of the proposed cuts is final until a state budget is approved
by both the governor and Legislature.
the governor proposed the following:
and libraries: A mid-year reduction of $20 million grows by $16.5
million to a total reduction of $36.5 million in 2003-04. Each campus
and the Office of the President would have discretion to achieve its
portion of the cut in locally determined ways.
outreach: A $3.3 million mid-year cut grows by $30 million to a
total reduction of $33.3 million in 2003-04. This figure represents
a 50 percent reduction in remaining state funding for UC educational
outreach. "This is a particularly difficult cut because the University
has made a deep commitment to helping improve K-12 performance and expanding
access to a college education," President Atkinson said. "I
expect this proposal will be debated at length in the Legislature, and
we will be closely involved in the conversation."
An $18 million mid-year reduction in state-funded research programs
grows by $10.8 million to a total reduction of $28.8 million in 2003-04.
This amount reflects a reduction of 10 percent, on top of a 10 percent
across-the-board cut already enacted in the 2002-03 budget. It is not
specified how the new reduction would be achieved.
services: A mid-year reduction of $6.3 million grows by $19 million
to a total reduction of $25.3 million in 2003-04. This cut represents
an approximately 20 percent reduction in Registration Fee-funded programs.
Campuses would have local discretion in achieving this level of savings.
professional development: A $15 million cut to the California Subject
Matter Projects, which provide professional development for K-12 teachers
in California. The cut would leave the program with $5 million. The
governor proposes that the program use the remaining funding to offer
science education programs eligible for federal matching funds.
service: A $2.5 million mid-year cut for UC public service programs
grows by $12.5 million to a total reduction of $15 million in 2003-04.
Affected programs include Cooperative Extension, which has farm, 4-H,
and nutrition, family and consumer sciences advisers throughout the
Online: A $4 million mid-year reduction grows by $0.4 million to
a total reduction of $4.4 million in 2003-04. This cut reflects a 50
percent reduction in funding for the UC College Preparatory Initiative,
which provides online Advanced Placement coursework.
Internet: A mid-year reduction of $1.1 million remains at $1.1 million
for the 2003-04 fiscal year. This reduction affects the Digital California
Project, which brings the next-generation Internet2 to California public
fees: A reduction in state funding of $179.1 million for instructional
programs, which the governor assumes would be offset by student fee
increases (details below). Of this amount, $19 million represents a
mid-year cut in the 2002-03 budget that was filled by a student fee
increase beginning in the spring 2003 academic term.
reduction: An unspecified 2003-04 budget reduction of $34.8 million.
The university will be assessing options for allocating this cut in
the event it is approved.
on staff and faculty
in addition to the cuts described above, the governor's budget proposal
includes no funding for salary increases for UC faculty and staff in the
2003-04 fiscal year, nor for state employees generally.
lack of funding for salaries is another unfortunate element of the situation
we are facing," President Atkinson said. "Competitive compensation
is key to quality, and a merit program must continue to be a high priority
for the university. We will be looking closely at our 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."
of the budget reductions also means, unfortunately, that layoffs could
be necessary in some program areas targeted for cuts. However, the university
is evaluating a number of other potential personnel-related options, including
reduction-in-time/pay and other programs, to help achieve budget savings
with the least possible impact on jobs. More information will be provided
in the near future as decisions about these options are made.
on student fees
of the budget cuts, the governor is proposing a reduction in state funding
for the university's instructional budget, which he assumes would be offset
by a student fee increase.
mandatory systemwide student fees at UC have been increased $135 per quarter,
or $405 per year, beginning with the spring 2003 term, along with additional
increases for professional school students. Under the governor's budget
proposal, mandatory systemwide fees would increase by another $795 in
the 2003-04 year for resident undergraduates, $855 for resident graduate
academic students, and more for some professional school students.
As a result,
the total increase in mandatory systemwide and professional school fees
over the two years 2002-03 and 2003-04 would be 35 percent under the governor's
aid would be increased to shield low-income students from the systemwide
fee increase, substantially reducing the "sticker price" for
many students. Generally, students receiving Cal Grants or UC financial
aid grants would not be affected.
of Regents will not set 2003-04 student fee levels until later this spring.
expect that the Board of Regents will have a thorough discussion of student
fees and all of the governor's proposals for budget cuts," President
Atkinson said. "A fee increase is always difficult, and the current
economic climate makes this a particularly bad time for families to absorb
a further increase. At the same time, the governor's budget reflects the
staggering magnitude of the state's budget crisis and acknowledges the
need for a balanced package of solutions if we are to preserve access
and quality in the student instructional program, which is our highest
on UC student fees is available at www.ucop.edu/news/factsheets/2002/student_fees.pdf.
elements of the budget
to the cuts described above, the governor did propose increases in UC
funding for specific purposes in 2003-04, including:
growth: $117.2 million to fund enrollment growth of 8,000 students
in 2003-04 and 5,000 current UC students who have not been funded by
the state. This funding is intended to allow the university to continue
providing a place to all eligible students who seek a UC education,
consistent with the state's Master Plan for Higher Education.
Merced: $11.3 million in one-time start-up funds needed to open
the new Merced campus by 2004. UC Merced is a critical part of the university's
plan to accommodate major enrollment growth over the course of this
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.
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.
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.
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.
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.
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.
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
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