University of California, San Diego


July 30, 2001


SUBJECT:  2001-02 Governor's Budget - Salary Component

As you may be aware, Governor Gray Davis and the California Legislature recently adopted a state budget for the 2001-02 fiscal year. They have done so in a fiscal environment that is much less positive than had been experienced in recent years. The California economy produced significantly reduced state revenues, and many proposed increases in state spending were pulled back as the Governor and Legislature crafted a final budget. The University of California (UC) has not been exempt from these reductions.

This year's budget provides a modest increase for UC overall. It is disappointing that it does not provide the requested allocation for salary increases, especially given the progress that had begun to be made with regard to some market issues in the last several years.

The UC "partnership agreement" with Governor Davis calls for an annual 4 percent increase in the funds UC uses to cover fixed costs, including employee salary increases, increased health benefit costs, inflationary price hikes and other similar expenses. The University has received increases of this amount for the last several years. Unfortunately, due to the state's reduced resources, the final 2001-02 state budget reduces this figure from 4 percent to 2 percent. This means the pool of state funds available for certain increases, including salary and benefit cost increases, has been cut in half. The budget will, however, allow us to continue providing UC employees with access to high-quality health coverage at reasonable premiums, a continuing priority for the University.

It should be noted that throughout the budget process, the University, along with representatives of UC labor unions, lobbied hard for full funding of the partnership agreement. The position was advocated to state leaders that providing competitive compensation for faculty and staff is critical to maintaining UC's standards for quality programs and quality employment. It appears that state leaders believed that employees of UC and the California State University should be treated similarly to employees of other state entities, which will also be impacted by the state's reduced revenues.

UC leaders will continue to pursue with the Governor and the Legislature the goal of restoring the funds necessary to continue improving faculty and staff salaries. These funds are considered critical to our ability to continue recruiting and retaining the kind of talented and dedicated employees who play such an instrumental role in the University's success.

Although UC salary objectives have not been fully achieved, gains have been made on two critical fronts: First, UC has made measurable progress in recent years in bringing faculty compensation up to the average of our comparison institutions, a key to preserving the quality of our academic programs. Second, thanks to a special budget augmentation last year, the University also was able to provide additional funds beyond the normal salary program for many staff employees, with the majority of those funds going to employees at some of the lower salary levels. It was hoped that the momentum would be sustained this year by requesting a special augmentation of $24 million in state funds to continue adjusting those staff salaries that lag the marketplace, with the goal of ensuring that our compensation is competitive in the California labor market. Unfortunately, this funding was not provided.

The allocation of the funds for this year's salaries has not yet been determined, though as mentioned above, it must cover employee salary increases, as well as the increasing costs of providing health benefits to UC employees and other fixed costs. Any salary increases for exclusively represented employees are subject to collective bargaining. Negotiations with the health plans for 2002 rates are expected to be completed within the next several weeks. More information about next year's health plan rates and the specific distribution of salary funding will be provided as soon as it is available.

Thank you in advance for your understanding of the situation confronting us, and as always, thank you for your continued dedication to the UC and to UCSD.

                                                Rogers Davis
                                                Assistant Vice Chancellor -
                                                Human Resources