Issue 6 — January 2003 BUDGET TIMELINE November: Regents adopt UC budget request for the coming year and send it to the state for consideration December: Special legislative session on the budget begins January: Governor introduces state budget proposal for 2003-04 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

Dear UC Colleague: As 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. The proposed 2003-04 budget, which the governor released on January 10, contains serious cuts for the University of California. They are detailed below. The 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 increases. I 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. Many 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 your patience. This 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 asset.   Fiat Lux,  Richard C. Atkinson  President

Program cuts in the proposed 2003-04 budget

Last month, 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.

Now, the 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.

With these 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.

UC's proposed state-funded budget is thus approximately $3 billion at a point when, under the Partnership, it was expected to be roughly $4 billion.

The $299 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.

Specifically, the governor proposed the following:

• Administration 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.
  
  
• Educational 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."
  
  
• Research: 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.
  
  
• Student 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.
  
  
• Teacher 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.
  
  
• Public 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 state.
  
  
• AP 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.
  
  
• K-12 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 schools.
  
  
• Instruction/student 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.
  
  
• Unallocated 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.

Impact on staff and faculty

Unfortunately, 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.

"The 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."

The magnitude 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.

Impact on student fees

As part 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.

Already, 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 budget.

Financial 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.

The Board of Regents will not set 2003-04 student fee levels until later this spring.

"I 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 priority."

More information on UC student fees is available at www.ucop.edu/news/factsheets/2002/student_fees.pdf.

Other elements of the budget

In addition to the cuts described above, the governor did propose increases in UC funding for specific purposes in 2003-04, including:

• Enrollment 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.
  
  
• UC 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 decade.
  

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