Issue 9 – August 2003
This newsletter is available on the web at www.ucop.edu/news/budget/issue9.html.
a month’s delay, the Legislature has passed a 2003-04 state budget,
and the governor signed it on August 2nd. We can all be happy that the
stalemate was broken and compromise was reached. Unfortunately, however,
the final product is an extremely difficult budget for the University
It is a budget that cuts deeply into programs across
the University, delays the opening of UC Merced, provides no state funding
for employee salary increases, and forces us to both borrow money for
operational purposes and raise student fees substantially. It also means
that many UC programs will have to reduce their budgets, including some
In addition, the budget includes legislative intent language
stating that UC can expect no funding for student enrollment growth in
2004-05 – meaning that we face the prospect of turning away UC-eligible
students for the first time in memory. The state’s budget situation
now very clearly threatens the University of California’s historic
promise of access and quality.
UC representatives have worked tirelessly in Sacramento
throughout the year on behalf of the University and its budget needs.
The outcome certainly could have been worse; one legislative proposal
would have made $300 million in further cuts to UC beyond the cuts we
received. Many legislators in Sacramento told us how deeply they value
public higher education and how painful it was to vote for cuts.
Still, the outcome is extremely disappointing. And with
the state still facing a $7.9 billion structural budget deficit, next
year is likely to be just as challenging.
To the faculty and staff, let me emphasize what I have
said many times previously – that your impressive work, day in and
day out, is the best case that can be made for state investment in the
University of California. Your work makes a tremendous difference to the
people of California, and it also demonstrates to decision-makers how
valuable this institution is to the state and nation. Thank you for your
contributions, your perseverance, and your optimistic spirit.
Richard C. Atkinson
2003-04 state budget makes deep cuts to UC system
The 2003-04 state budget makes $410 million in state funding cuts to
UC programs – $299 million proposed by the governor and $111 million
added by the Legislature. All non-instructional programs are affected,
including administration, libraries, research, student services, teacher
professional development, Cooperative Extension, and many others. UC’s
K-12 outreach program alone will see a 50 percent reduction in its remaining
Because of cuts to the budget proposal for UC Merced, the new campus
will be unable to enroll undergraduates in 2004 as planned and will instead
aim for a 2005 opening.
Also as a result of the budget cuts, UC student fees will be increased
30 percent in 2003-04 – or $1,150 for resident undergraduates –
on top of a fee increase implemented in the spring 2003 term. In addition,
UC expects to borrow $47.5 million to cover operational expenses this
year, an amount that will be repaid over a five-year period through an
increase in nonresident tuition.
The budget does provide new money for student enrollment growth in 2003-04
(though the budget includes legislative intent language indicating that
no such funding will be provided in 2004-05). As a result, UC’s
net state-funded budget for 2003-04 will fall $248 million, or 8 percent,
from the final 2002-03 plan. Since 2001-02, the UC system’s net
state-funded budget has fallen $455 million, or 13.6 percent.
Much more detail about the 2003-04 state budget and its impact on UC
can be found in the University’s press release, available here.
top of page
Budget resolution means 2003-04 salaries unaffected by minimum wage issue
With the passage of a state budget, UC employees do not need to worry
about the issue of a minimum-wage salary scenario for state employees
When the new fiscal year began July 1 without a state budget, the state
controller announced that in late August or September, he would begin
implementing a recent court decision requiring that state employees be
paid no more than minimum wage when the state lacks a budget.
Since the controller included a reference to UC salaries, the University
initiated a legal review to determine if, in fact, UC employees would
or could be excluded from such a plan. However, the adoption of a state
budget makes the issue moot for this year. If similar situations arise
in the future, UC will determine appropriate action at that time.
top of page
Budget provides no state funding for employee salary increases
Despite our many conversations with state leaders about the need for
competitive salaries, the state budget contains no state funding for salary
increases for UC faculty and staff in the 2003-04 year. Still, we remain
committed to looking for ways to financially recognize our faculty and
staff, and we are continuing to search for options.
- Faculty Salaries: Because faculty and certain other
academic personnel undergo extensive peer reviews every three years
to determine merit and promotion status, a serious inequity would occur
for the one-third of these individuals scheduled for review this year
if their merit increases were not paid. In fact, the lack of payment
of faculty merit increases was the subject of litigation that the University
lost in the early 1990s. For these reasons, the one-third of eligible
UC faculty and other academics scheduled for merit reviews this year
will still receive merit increases. In lieu of state salary funding,
the University will now have to use money intended for other faculty
purposes, such as filling vacant faculty positions.
- Staff Salaries: The University recognizes that staff
salaries lag the market in some areas and that the lack of cost-of-living
increases poses a challenge for families facing many other economic
pressures. Despite the lack of state money for staff salary increases,
the University is intensively exploring options to help staff members
financially, with a special emphasis on assistance for the lower-paid
staff. For example, as we did last year we are looking for ways to absorb
for employees some of the rising costs of health care insurance, which
would reduce the net financial impact of rising premiums. UC has not
yet completed negotiations with health-care plans for next year, but
more information about how our faculty and staff will be affected will
be provided as it becomes available.
top of page
Questions and Answers
Q&A archive: Browse recent
questions and answers on UC employee issues.
Q. Why aren't all campuses or departments using START to
help with budget cuts?
A. The START (Staff and Academic Reduction in Time) program is one
tool that campuses or departments might use to cope with temporary
budget issues, depending on how the budget situation is impacting
them. As we are seeing, budget cuts are hitting campuses and individual
departments in many different ways, and START may not help, or be
appropriate for, every situation. For example, if a department is
facing permanent cuts, START may not be of any use since it provides
only temporary assistance. This is why participation in START was
left to the discretion of individual departments. If your area is
not offering START and you’d like more information as to why,
see your department manager or Human Resources department.
Q. UC has said that at least one of the reasons it is not
offering a VERIP right now is because of “the significant
student growth we continue to experience”. If the state budget
does not fund increased student growth, has the University’s
position changed on a VERIP offering?
A. No. Having enough faculty and staff to support our expected growth
is one, very important factor when considering a VERIP (Voluntary
Early Retirement Incentive Program). But there are other important
factors to consider as well, such as whether or not the UC Retirement
Plan can afford one; or the fact that leveraging UCRP assets might
result in other undesirable consequences, such as the need for employee
contributions. We have been fortunate that our UCRP investments
have done well enough to not only avoid the need for employee contributions
for the past decade, but also support several CAPs. But this doesn’t
mean UCRP can be tapped whenever we like. Our first obligation as
a fiduciary and employer is to make sure the Plan can pay retirement
benefits to UC retirees, and we must be extremely careful about
burdening UCRP with additional, long-term liabilities like VERIPs
and CAPs. Using UCRP assets to fund a program like a VERIP would
increase the possibility of needing to resume contributions, and
we are concerned about that kind of impact on employees during these
difficult times. Since we don’t know exactly what the current
budget situation means for our future growth, and because the economy
and markets have yet to fully recover, we are not currently working
on an early retirement program.
Got a budget question? Use this
form to submit it. Due to the volume of submissions, we can’t
provide an individual answer to every question —
but the feedback is important, and we will do our best to
answer some frequently asked questions in our next edition.
FOR MORE INFORMATION ON: