University of California, San Diego
May 30, 2003
SUBJECT: Budget Update from President Atkinson
For your information, an update from President Atkinson regarding the
2003/04 Governor's Budget is available at
Questions concerning this notice may be sent directly to the Office of the President via firstname.lastname@example.org or you may call Dawn Buttrell at extension 4-3482.
Issue 8 - May 2003
Dear UC Colleague:
Governor Davis has issued the May Revision to his State budget proposal, and it contains good news for the University of California: no further budget cuts beyond those proposed in January.
With the state facing a deficit now estimated as high as $38 billion, the fact that the governor did not propose additional cuts for UC signals his commitment to the University and his recognition of the deep impact our programs have on the economy and quality of life in California.
Unfortunately, the Legislature is seeking additional cuts in UC's budget. Budget subcommittees in the Senate and Assembly have approved $80 million in further cuts, on top of the $300 million in base budget cuts the governor included in his January budget. Some legislative proposals suggest up to $400 million in additional cuts. We are working vigorously in Sacramento to oppose these additional cuts, making clear the impact of the funding reductions we already will be taking.
The State budget process should begin to come to conclusion in the next few weeks, and I will keep you informed as developments occur. In the meantime, congratulations on your accomplishments over the course of this academic year, and thank you once again for the major contribution you are making to the State of California.
Richard C. Atkinson
May Revision proposes no new cuts - but Legislature does
Releasing the May Revision to his 2003-04 state budget proposal on May 14, Gov. Gray Davis proposed no additional cuts for the University of California beyond those proposed in January.
The governor's original January budget proposal still includes $300 million in base budget cuts for UC as part of a plan to address a state budget deficit originally estimated at $35 billion - and which the governor now puts at $38 billion. When cuts of the last two years are included and offsetting revenue from possible fee increases is accounted for, UC by next year will have taken $360 million in base budget cuts.
As is the case in most other state institutions, programs across the University of California are proposed for cuts in the 2003-04 budget, many in the range of 20 percent to 50 percent. Administration, libraries, research, student services, educational outreach, Cooperative Extension, and many other non-instructional programs are facing the prospect of significant cuts. (More detailed information about the governor's proposed budget cuts is available here.)
In addition to state budget cuts, UC is contending with more than $100 million in cost increases for which it is receiving no new state funding - including double-digit inflation in health benefit costs, significantly increased energy costs, and unfunded costs related to the maintenance of new space.
Furthermore, there now are proposals from the Legislature to cut the University of California's budget by an additional $80 million to $400 million beyond the governor's January proposals. The $80 million cut already has been incorporated into both the Senate and Assembly versions of the state budget. UC will seek to have the funding restored when budget representatives from the two houses meet in a conference committee.
"We are going to work hard to support the governor's budget, emphasizing that it offers a balanced approach despite the deep cuts it imposes," said Larry Hershman, UC vice president for budget. "The even further cuts contained in the proposals from the Legislature would do great harm to the University and could lead to additional student fee increases, constraints on new enrollments starting in 2004-05, or both. We will vigorously oppose these additional cuts."
In addition to the $80 million cut, the Senate version of the budget removes $4 million from the UC Merced budget and seeks to delay the opening of the campus for one year. UC will work to have that action reversed, arguing that the savings for the state are minimal and the need for the campus is great - both for the San Joaquin Valley and for UC's systemwide enrollment capacity.
Both houses also have restored all or part of the educational outreach funding that had been proposed for cuts. Final resolution of that issue will be discussed in the conference committee.
The budget still includes no state money for faculty and staff salary increases in 2003-04, though the University continues to emphasize to state decision-makers the danger of allowing UC salaries to fall behind market rates.
While managers throughout the UC system are freezing some vacant positions and cutting non-salary expenditures in order to minimize staffing reductions, helping us to avoid across-the-board layoffs, a number of individual programs specifically targeted for significant budget cuts are considering or experiencing layoffs. As was mentioned in the last issue, UC also is implementing a voluntary reduction-in-time program called START to help UC programs achieve budgetary savings in an attempt to avoid layoffs. The program also gives employees more flexibility in their working hours. Program details are available through your local department manager and Human Resources department, or online here.
Regents to consider student fee increase
As one part of the budget impact, mandatory systemwide student fees have been proposed to increase in 2003-04, including a $795 annual increase for resident undergraduates in addition to the $405 annualized increase adopted by the Board of Regents for the spring 2003 term. The total fee increase over the two fiscal years would amount to 35 percent.
However, these levels could still be adjusted higher if the Legislature adopts additional budget cuts for the University beyond those proposed by the governor. The Regents hope to have enough information about the state budget outcome to set fee levels by June or July.
Financial aid would rise to cover the fee increase for approximately 40 percent of all UC undergraduates. As a result, in general, financially needy students from families with annual incomes of $60,000 or less would not have to pay the fee increase, and financially needy students from families with annual incomes of up to $90,000 would receive a grant covering a portion of the fee increase.
More information about the student fee situation is available here, and a printable two-page summary can be found here. In addition, a new web site profiling UC students and how they pay for college is available here.
Regents hear update on condition of retirement funds
At this month's Board of Regents meeting, Regents were given an overview of the current status of the UC Retirement Plan (UCRP). The annual presentation, which reports on the assets and liabilities of the plan, is designed to keep Regents informed about the financial health of the University's retirement funds.
UC management reported that plan assets have been eroded in recent years by declining stock market returns. The report also noted that liabilities have increased due, in part, to programs like the Capital Accumulation Provisions (CAPs), which UC implemented the last two years in order to provide eligible faculty and staff with additional financial recognition in light of severely limited state funding for salary increases. The result has been a narrowing of the margin between the plan's assets and liabilities. Still, UCRP remains in relatively good shape overall (that is, assets still exceed liabilities by a safe margin) and, therefore, continues to not require employer or employee contributions.
New report details UC's impact on California
As the state makes its funding decisions for next year, a new report details the major impact of the University of California on our state's economy, health and community resources.
The report, titled "California's Future: It Starts Here," examines the benefits UC currently provides the people of California and how the University is shaping California's future. For instance:
* UC's impact on California's economy exceeded $14 billion last year and will amount to a cumulative $144 billion over the next 10 years. * Last year, UC was responsible for nearly 370,000 jobs - 2% of all employment in California - including its own full-time employees and more than a quarter-million jobs generated statewide indirectly through its expenditures. * It is estimated that UC will have a hand in creating more than 2.3 million new jobs over the next decade. * UC medical centers provide patient-care services valued at over $2 billion annually, accounting for more than 3.3 million clinic visits, over 239,000 emergency room visits, and over 120,000 inpatient admissions per year.
You can explore the report at this web site.
Questions and Answers
Q. Why isn't UC considering a Voluntary Early Retirement Incentive Program (VERIP) as a way to avoid layoffs? A. A systemwide VERIP does not appear to be appropriate right now for several reasons. First, UC continues to face unprecedented student enrollment growth, which, among other things, means that UC needs more - not fewer - faculty and staff, and UC is already facing significant challenges recruiting faculty. Second, a systemwide VERIP would represent a significant cost to the University's retirement plan, which, given the aforementioned decline in plan assets due to the sagging stock market, would need to be evaluated very carefully. UC leaders continue to work hard to preserve as much of the University's budget for 2003-04, and to try to develop other ways to help cope with budget pressures (such as START) in the hopes of being able to continue to avoid actions such as across-the-board layoffs or salary cuts.
Q. Where can I go for answers about the voluntary reduction-in-time program (START), such as how I enroll and whether my participation will affect my other benefits? A. A complete set of program materials with answers to these kinds of questions is available through your department manager or Human Resources office. This information is also available online here. Keep in mind that your individual department may or may not choose to participate in the program based upon how the budget situation is affecting your specific area. Consult your department manager.
Q. Are the national laboratories and medical centers also being affected by the budget situation, and are they also participating in START? A. The labs and medical centers do not rely on state funding in the same way that campuses do, and so the state's budget problems do not affect them in the same ways. However, all UC locations, including labs and medical centers, are being offered START. Again, participation will vary by department at each location according to local budget considerations.
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.
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