SUBJECT:

1994/95 Budget Information: Pres- Peltason's Remarks

For your information, below is a summary, released by the Office of
the President, of President Peltason's remarks to the Regents
related to the 1994/95 University of California budget.

Margaret F. Pryatel Assistant Vice Chancellor

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REGENTS' MEETING               PRESIDENT J. W. PELTASON
SAN FRANCISCO                PROVOST WALTER E. MASSEY
JULY 14-15, 1994

           University of California

          1994-95 BUDGET OUTCOME

            (PRESIDENT PELTASON)

_  I have some good news--and some bad news. I'll give you the
   good news first: We have a reasonable budget for the year.
   The bad news is, some of it may get taken away.

_  At a time of extraordinary fiscal difficulty, the Governor
   and Legislature worked out a two-year budget plan that
   retires the State's accumulated $2 billion deficit by the
   end of 1995-96. Education is given priority.

_  The University is provided a budget increase, instead of a
   decrease, for the first time in four years. The Governor and
   the Legislature approved a budget that is generally
   consistent with the plan approved by The Regents in January,
   and I am very appreciative of that fact.

_  While the State's budget plan is funded somewhat
   differently, its basic intent is the same and it supports
   roughly the same expenditures as The Regents plan.

_  All parties were able to work together in developing a
   compromise budget that would allow a reduction of next
   year's fee increase but also would accomplish The Regents'
   basic goals.

_  I am extremely pleased, also, that the Governor and
   Legislature approved funding for the first salary COLA for
   UC faculty and staff since 1990-91.

_  Despite all these pluses, the fact is, we do not really know
   how much State General Fund money we will receive in 1994-
   95--or in 1995-96.

_  While the State Budget Act provides a specified level of
   funding for the University, language in a trailer bill
   leaves us vulnerable to a mid-year budget reduction each
   year. Our State-funded budget could be significantly
   reduced at a time when we are already very far along in both
   the fiscal and the academic year, with students enrolled and
   classes underway.

_  Under the circumstances, I am recommending a cautious
   approach to 1994-95. We must do everything we can to avoid
   imposing further budget cuts on the campuses. University
   budgets have already been cut by $433 million over five
   years--including a $53 million cut in 1994-95 to restore base
   salary levels. An additional budget cut, to be made up in
   only the last few months of the year, could mean devastating
   layoffs.

_  I believe the only prudent course for now is to position
   ourselves so we are fully prepared to reduce fees and
   increase salaries, and then to implement those actions just
   as soon as we know that there will be no mid-year budget
   cut. We will know by November 15 whether there is any
   possibility of a cut.

_  We intend to proceed with the merit portion of our salary
   program in any event. The quality of this University is at
   stake after years of budget cuts and the merit salary
   program is a key element in maintaining quality.

_  At the November meeting, we will return to The Regents with
   an update on the State's fiscal situation. We hope that it
   will be a positive report, of course. If not--if it looks
   like there might be a mid-year cut, we will propose an
   alternative course of action.

_  Provost Massey will describe the 1994-95 budget outcome in
   more detail and also discuss our tentative plans for
   implementing the fee reduction and salary increases.