SUBJECT:

Higher Education Compact Agreement

The Office of the President today issued the following news release in response to the compact agreement between Governor Schwarzenegger, the University of California and the California State University. After several years of serious state budget reductions, beginning in fiscal year 2005/06, the compact with Governor Scwarzenegger offers much-needed fiscal stability for the UC system over the next several years. If you have questions concerning this notice, please contact Sylvia Lepe-Askari at extension 4-5357.

Margaret F. Pryatel Assistant Vice Chancellor Resource Management

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FOR IMMEDIATE RELEASE
Tuesday, May 11, 2004
Brad Hayward (510) 987-9091
brad.hayward@ucop.edu

GOV. SCHWARZENEGGER AND UC, CSU LEADERS ANNOUNCE
MULTI-YEAR COMPACT ADDRESSING FUNDING AND ACCOUNTABILITY

Gov. Arnold Schwarzenegger, UC President Robert Dynes, and CSU Chancellor Charles Reed today (May 11) announced agreement on a "compact" outlining their intentions for state funding levels and institutional accountability in the University of California and California State University systems over the next several years.

The agreement provides for annual growth in state funding for UC's basic budget and enrollment growth, beginning in the 2005-06 fiscal year, in exchange for UC's commitment to accountability in specified areas. The agreement extends through the 2010-11 fiscal year.

"After years of deep budget cuts with no end in sight, this compact brings the promise of renewed fiscal stability for public universities in California," Dynes said. "Under the compact, UC will receive funding to preserve its internationally acclaimed academic programs, to provide broad accessibility for promising California students, and to sustain its deep impact on the economy, health, and quality of life of California."

Dynes added: "I want to thank Gov. Schwarzenegger for his leadership, his support of higher education, and his recognition that these universities have a central role to play in creating the California of tomorrow. I also want to thank the many members of the Legislature who have been steadfast advocates for higher education, along with the many other people across the state who have helped make higher education a top item on the public agenda this year."

The UC system has sustained major state budget cuts during the last several years. Over a four-year period - including 2004-05 under the governor's January budget proposal - UC will have absorbed both a 16 percent state funding reduction and a 16 percent student enrollment increase. The result has been program cuts, fee increases, and less-competitive faculty and staff salaries.

Under the agreement with the governor, UC still will sustain significant budget cuts in the 2004-05 fiscal year as the state grapples with a large budget gap. However, the governor's May Revision budget will not propose cuts for UC any larger than those in his January budget. And over the following several years, under the compact, UC's state funding will resume growing.

"I applaud President Dynes and Chancellor Reed, and everyone involved, for helping to get us through the worst of our budget crisis," Gov. Schwarzenegger said. "Together, we have found a compromise that will protect the quality of our world-renowned higher education system. We have made a long-term commitment for greater investments in our schools and equipping California's workforce with the best and the brightest for years to come."

Among the compact's features: State funds will once again be provided for enrollment growth at UC, preserving a place for students who challenge themselves, excel, and meet the system's eligibility requirements. Student fees will be expected to rise to help pay for the institution's costs, but for the first time in recent memory, fee increases will be predictable so that students and their families can plan ahead. Funding will be provided beginning in 2005-06 to resume faculty and staff salary increases, which are key to maintaining institutional quality. And, UC will pursue numerous accountability measures demonstrating its efficiency, effectiveness, and value to the state.

"Economic growth, the health of our people, and our collective quality of life as Californians all depend in large part on the teaching and research being done in our universities. They are where ideas start, where new jobs start, where cures to disease start, and where better futures start," said Dynes, who joined Gov. Schwarzenegger and CSU Chancellor Reed at a Sacramento press conference today. "This compact provides the support that will allow our faculty, staff, and students to preserve and enhance that positive impact on the lives of all Californians."

CSU Chancellor Reed said: "Gov. Schwarzenegger is to be congratulated for his exceptionally strong commitment to higher education, particularly given that the state still is experiencing fiscal difficulties. He clearly knows CSU's and UC's impact on the state's economy, and recognizes that to keep the state strong, higher education must continue to produce graduates for the workforce and to provide research capabilities and community service that benefit the state and its residents."

The funding components of the compact are a floor, not a ceiling. The compact reflects the minimum level of state resources necessary to preserve quality and access in the two university systems. Additional funds can be made available when the state's resources allow.

Following the compact and the May Revision later this week, the UC Board of Regents will vote on a 2004-05 budget plan and 2004-05 fee levels at its May 19-20 meeting.

Major funding elements of the compact for UC include:

* Annual state funding growth of 3 percent for salary and other cost
   increases, growing to 4 percent annual growth in 2007-08.

* Funding for an additional 5,000 students each year starting in
   2005-06 - which, after the enrollment cuts in 2004-05, will put the
   University back on its original plan for accommodating enrollment growth
   over the course of this decade.

* A further 1 percent annual augmentation for core needs, such as
   instructional equipment, instructional technology, building maintenance,
   and library materials, beginning in the 2008-09 fiscal year.

* Undergraduate fee increases averaging 10 percent the next three years
   (14 percent in 2004-05; 8 percent in 2005-06 and 2006-07). Longer-term,
   fees would go up no more than 10 percent per year, with UC keeping the
   revenue rather than backfilling state cuts. (Under the compact, fee
   increases would be indexed to per-capita personal income growth, but the
   Board of Regents could increase fees by up to 10 percent a year in
   compelling fiscal circumstances.)

* A graduate fee increase of 20 percent in 2004-05, rather than the 40
   percent originally proposed. Fees would increase another 10 percent in
   both 2005-06 and 2006-07, and UC will develop a plan for graduate fee
   levels over the longer term. A plan also will be developed for
   professional school fees.

* UC will reserve between 20 percent and 33 percent of new fee revenue
   for financial aid in order to preserve accessibility for students of all
   financial backgrounds.

* Continued state support for the development of UC Merced.

* Agreement by UC to use non-state resources to provide $12 million in
   support for K-12 academic preparation (outreach) programs, with additional
   state support to be determined through the annual budget process.

* The Schwarzenegger Administration's support for future education bond
   measures providing UC with facilities funding comparable to that of
   Proposition 55.

   Major accountability elements of the compact for UC include:

* Meet the enrollment objectives of the Master Plan for Higher
   Education, assuming adequate state resources are provided.

* Report to the state annually on a variety of student and institutional
   outcomes, focusing on demonstration of student success and efficient use
   of resources.

* Preserve faculty workload policies comparable to those of other
   universities, and continue to make the highest priority ensuring that
   students have access to the classes they need to graduate in a timely
   manner.

* Expand efforts to improve the supply and quality of math and science
   teachers in California's public schools to further bolster the state's
   economic recovery.

* Strengthen programs encouraging students to participate in community
   service.

Further details on the compact are available at http://www.universityofcalifornia.edu/news/compact/welcome.html.