From: Rick Malaspina UNRRQM @ UCCVMA 

Subject: BUDGET RELEASE - ONE-TIME SALARY CUT PART OF BUDGET BALANCING PROPOSAL

The University of California Board of Regents will consider a proposal
Friday (March 19) that would make up next year's state budget shortfall of
$243 million through a combination of actions including a one-time 5
percent salary cut for faculty and staff, workforce reductions and a
student fee increase. 

The temporary 5 percent pay cut, which also applies to all executives,
would be the first time the University has had to cut salaries since
1933.

"A salary reduction is proposed reluctantly and only as a last resort
     because at this time we do not have viable alternatives," said UC President
Jack W. Peltason. "If reasonable alternatives can be developed, and if
     state funding is not further reduced for next year, a revised
     recommendation will be presented to the Regents." 

Peltason said among the areas to be explored will be such alternatives as
an accelerated third voluntary early retirement program, additional
layoffs, and refinancing of bonds. But given the requirement of presenting
the Legislature with a plan for dealing with the budget shortfall this
month, Peltason said the pay cut is being recommended. 

"This is intended as a one-time temporary measure only," he said, "It will
     allow time in which to develop longer-term approaches to the problem of
     diminishing resources. In the long run, the University of California must
     pay competitive salaries if excellence is to be preserved." To help offset
the pay cut, employees would receive an equivalent tax-deferred retirement
contribution which would be paid at the time they leave UC or retire,
similar to how the state is handling its employee salary reductions this
year. The deferred payment would come from the University retirement
system, not state funds. The salary reduction, which will save an estimated
$78.6 million, is the largest single element of the proposal. In addition,
cost of living raises for employees will be suspended for the third year in
a row. Eligible faculty would receive full- year merit pay increases for
exceptional performance and eligible staff half-year merits. Top executives
would receive no merit increase for the third year in a row. Some
employees, including teaching assistants and those in staff positions
designated for students, would be exempt from the pay cut. Employees
already on voluntary time reduction plans also would be exempt. The
proposed plan is subject to notice, consultation or meeting-and- conferring
as appropriate under labor agreements. Other elements of the proposal are
as follows: 

: Campus and Office of the President budgets would be cut another $35
million on top of the $345 million they have already been cut since the
state began reducing funding for the University in 1990-91. Previous cuts
have eliminated funding for over 5,000 jobs. This new round of cuts would
eliminate funding for another 1,000 positions. In applying the cuts, every
effort will be made to protect instructional programs.

The Office of the President will take the biggest cut in this latest
reduction. Its budget will be reduced by 10 percent or about $5 million.
In addition, a portion of the $35 million cut will be specifically
targeted to hospitals and clinical teaching programs. Moreover, Peltason
said he has appointed a committee of senior campus and Office of the
President administrators and faculty representatives to evaluate all
activities within the Office of the President with a goal of cutting
expenditures by another 10 percent in 1994-95. The committee's findings
will be independently evaluated by the faculty Academic Council to assess
whether any further economies can be achieved. The total process is
expected to result in the elimination of some functions and a reduction in
others. The Office of the President will also explore possibility of
moving to less expensive facilities when leases expire and to cut back on
lease space wherever possible. 

: Student fees are recommended to increase an additional $390 per year
next fall beyond the $605 already approved. This will raise the average
fees for resident undergraduate students in 1993-94 from the previously
approved $3,649 to $4,039 a year. With the proposed increase, fees will
have gone up about 150 percent in four years. At the same time, UC will
devote the highest percentage ever of a fee increase to financial aid.
One-third of the revenue from the new increase ($22 million) will be used
to maintain UC's commitment to cover the fee increase for needy students.
With the added financial aid, UC will have increased its aid to students
by about $107 million in four years. 

: Cuts will be made in a wide range of expenditures such as allocations
for library books and classroom equipment. Health benefits for employees
would be capped at the lowest cost plan with employees
picking up all the added cost for higher-priced options.

A third voluntary early retirement program is also being proposed to
help bridge the gap until longer term cost reduction programs can be put
in place. Details of the early retirement program will be developed
through an internal consultation process and a proposal will be
presented to the Regents for approval in the next few months. It is
envisioned that the early retirement plan would be put in place for
staff no later than Jan. 1, 1994 and for faculty no later than July 1,
1994. In planning for the long term, Peltason noted that the faculty
Academic Council has recommended accelerating the process for reviewing
academic programs. Some programs may be reduced, consolidated or
eliminated as a result, while others will be strengthened. The net
result, he said, should be substantial savings, but it will take four to
five years to completely implement because students already enrolled
must be allowed time to complete their degree work. 

Since 1990-91, state funding for the University has fallen nearly a
billion dollars below normal funding increases for inflation and
workload growth. Student fee increases have made up about 27 percent of
the shortfall with the remainder of the savings coming from workforce
reductions and salary freezes and the proposed cut in pay. Under the
governor's proposed budget for 1993-94, state funding for the University
will have decreased by nearly $400 million in three years. Next year's
proposed state funding for UC of $1.7 billion is less than what the
University received from the state in 1986- 87. In the intervening seven
years, inflation has increased by 32 percent and UC has enrolled 10,000
more students. ##