SUBJECT:

Regents Adopt Budget Proposal, Student Fees for 2005-06

For your information, the following is a press release from the Office of the President regarding the Regents' budget and fee vote.

If you have any questions concerning this notice, please contact Sylvia Lepe-Askari at 4-5357.

Margaret F. Pryatel Assistant Vice Chancellor Resource Management

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FOR IMMEDIATE RELEASE
Thursday, November 18, 2004
Ravi Poorsina (510) 587-6194
ravi.poorsina@ucop.edu
Brad Hayward (510) 987-9195
brad.hayward@ucop.edu

REGENTS ADOPT BUDGET PROPOSAL, STUDENT FEES FOR 2005-06

The University of California Board of Regents today (Nov. 18) adopted a state budget proposal for 2005-06 that would halt the cuts of the last several years and provide modest new funding for enrollment growth, student instructional programs, and faculty and staff compensation.

The board also set student fee levels for 2005-06, recognizing the need for additional funding to help rebuild the University's programs and acting to give maximum notice to students and their families. The fees include increases of 8 percent ($457) for resident undergraduates and 10 percent ($628) for resident graduate academic students over the full 2005-06 year.

The Regents' vote was 13-1.

The budget proposal and student fee levels reflect the "compact" reached by UC and Gov. Arnold Schwarzenegger earlier this year. This agreement sets out expectations for minimum state funding levels and for student fees over a multi-year period, along with accountability measures demonstrating UC's performance to the state. The compact is a planning framework; the Legislature and governor negotiate a final spending plan through the state budget process.

"I believe the University of California is critical to keeping California competitive in the 21st century," said UC President Robert C. Dynes. "The University's education, research, and public service programs make a vital contribution to the economy, health, and quality of life of California. And for California to stay competitive in the global economy over the coming years, we need those contributions by the University to not only be sustained, but to expand.

"This is not a budget that accomplishes everything we would like to, all at once. In this first year of the compact, we will largely be regaining our footing from the cuts of the last several years, not taking huge steps forward. But it is a budget that does take small steps in key areas, with greater investment in future years to enhance UC's contributions to the life of California."

Under the proposal adopted by the Regents, UC's state-funded budget in 2005-06 would be $2.835 billion, or 4.2 percent more than the $2.720 billion state-funded budget for 2004-05.

Larry Hershman, UC vice president for budget, told the Regents that California's increasingly knowledge-based economy requires the contributions of research universities if the state is to remain globally competitive. Employment and earning levels are directly correlated with education levels. And California's fastest growing occupational categories are professional and managerial jobs - the kind that require university training and often an advanced degree.

However, UC's share of the state general fund has fallen from 7 percent in 1970 to 3.5 percent today. Over the last four years alone, UC's state-funded budget has fallen 15 percent while its student enrollments have grown 19 percent. And while the state contributed approximately $15,000 to the cost of educating each UC general-campus student in 1985, that figure is now approximately $9,000 (in 2004-05 constant dollars). Beginning in 2005-06, though, the compact offers a halt to the cuts and a more stable base of funding with which to plan for the future.

The governor will issue his state budget proposal for 2005-06 in January, and the Legislature will hold hearings and make alternate budget proposals throughout the spring. By summer, the governor and Legislature will take action on a final budget, at which time the Regents will amend today's budget proposal to reflect the final agreement.

Below are major elements of the UC budget plan. Proposals for new spending are based on revenues from proposed additional state funding and from student fee increases.

· Enrollments: The budget includes funding for growth of 5,000 full-time-equivalent students. UC expects that this level of funding will allow every UC-eligible freshman applicant to be offered a place at the University. Of the 5,000 students, 1,000 will compose the entering class of UC Merced. Funding for 2,000 students will be directed to continue phasing in state support for summer instruction at the four campuses (UC Irvine, UC Riverside, UC San Diego, and UC Santa Cruz) not already receiving this funding.

· Instructional program: Over the last two years, the University has absorbed $70 million in unallocated reductions to instructional budgets. The 2005-06 budget includes $10 million as a modest first step in a multi-year effort to recover some of this lost ground. This initial installment of funding would be used to bolster the student-faculty ratio, improve instructional support, and acquire instructional technology.

· Maintenance of new space: Over the last two years, state budgets have not provided increases in funding to cover the maintenance of new buildings at UC. The 2005-06 budget includes $16 million for this purpose, which is important for new facilities to reach their potential in serving the state's research and instructional needs.

· UC Merced: The UC system's 10th campus will open in the San Joaquin Valley in fall 2005. As noted above, the campus will receive enrollment funding for 1,000 students the first year, consisting of freshmen, transfer students, and graduate students. In addition, $10 million in permanent funding for the campus will continue, and UC will request additional one-time funds, as in prior years, to assist with the start-up of the campus.

· Academic preparation: UC's academic preparation programs in the public schools, previously referred to as "outreach" programs, sustained a $4 million reduction in the 2004-05 budget after being threatened with a complete elimination of state funding. UC is requesting that the current level of funding for these programs be sustained.

· Faculty and staff compensation: State budgets have not provided funding for general salary increases the last two years, even as employees have been paying increasing amounts for health care coverage. This trend is a competitive threat to UC, and to California, because UC's faculty salaries are now estimated to be 8-10 percent behind those of comparable institutions, and a similar problem affects UC staff. The 2005-06 budget proposes funding for a 3 percent pool for salary increases, including a 1.5 percent general salary increase for all eligible employees, funding for faculty and other academic merit programs, and 1.5 percent for merit-based increases for eligible staff employees. Additional funding is proposed to help cover the cost of increasing employee health benefits and to address market-based and equity issues where newly hired faculty and staff are paid significantly more than current employees with similar experience and skills. These funding increases will not reverse UC's market lags and may not cover all increases in health care costs in 2005-06, but the funding will help prevent UC's competitive position from further worsening and will lay the groundwork for future improvement. (Note: The above figures are for purposes of general description. Specific compensation levels are subject to collective bargaining where applicable.)

· Student fees for California residents: Consistent with the compact, and to help UC recover from the budget cuts of the last several years, the Regents today approved mandatory systemwide fee increases in the amount of 8 percent ($457) for resident undergraduates and 10 percent ($628) for resident graduate academic students, beginning in the summer 2005 academic term. With these increases, mandatory systemwide fees will be $6,141 per year for resident undergraduates and $6,897 for resident graduate academic students. With the inclusion of campus-based miscellaneous fees, the average totals will be $6,769 for undergraduates and $8,556 for graduate students. These levels are about $1,000 (for undergraduates) and $2,300 (for graduates) below the estimated average of UC's four public comparison institutions.

· Financial aid: UC financial aid, in conjunction with Cal Grants, will be sufficient to cover the fee increase and some other increases in costs of attendance for undergraduates eligible for UC grant aid. UC financial aid also will be sufficient to cover the fee increase for eligible graduate students, including increases for those categories of students exempt from paying student fees, such as teaching assistants. To accomplish this, UC will reserve 25 percent of new undergraduate fee revenue for financial aid and 50 percent of new graduate student fee revenue.

· Nonresident tuition: Nonresident tuition for undergraduates will rise 5 percent ($828) in 2005-06. Nonresident students also pay other student fees; the total average charge for nonresident undergraduates in 2005-06 will be $24,589. However, because UC is facing a serious challenge in remaining competitive for the nation's and the world's most talented graduate students - who play a key role in UC's economic and research contributions to California - no increase in nonresident tuition was adopted for graduate and professional students in 2005-06.

· Professional schools: Under the Regents' action, professional school students will pay the same $628 increase in mandatory systemwide fees that graduate academic students will. In addition, fees for individual professional schools will be increased 3 percent. These professional fees will be newly extended to the Master of Public Health, Master of Public Policy, and Master of Pacific International Affairs degree programs. In addition, in order to provide sufficient financial aid and assist programs in enhancing quality, the Regents in 2004-05 gave the president the authority to raise fees at specific professional schools an additional 10 percent above the total of mandatory systemwide fees and professional school fees. For 2005-06, it is expected that the Regents at their January meeting may be asked to act on additional increases for specific professional schools, for the same purpose of providing sufficient financial aid and enhancing quality, not to exceed 15 percent of the new combined total of mandatory systemwide fees and professional fees. This approach recognizes that different professional schools are in different markets and have different needs.

Capital improvements budget: In addition to approving a 2005-06 operating budget, the Regents adopted a budget for capital improvements. It requests $355 million in state funding from a voter-approved general obligation bond measure in order to expand and upgrade academic facilities to support enrollment growth and to maintain progress on seismic and other life-safety improvements while also addressing essential infrastructure and building renewal needs.