SUBJECT:

UC Press Release on State’s Budget

On Friday, February 20, 2009, Governor Schwarzenegger signed the state budget for the rest of 2008-09 and the 2009-10 fiscal year. The budget contains $115 million in new cuts for the University of California system. By not funding other growing costs, the university’s total immediate state budget challenge increases to $450 million.

For your information, below is a press release from the Office of the President regarding the state budget. For the latest news and information regarding the budget and the campus’ response to the economic and budget crisis, visit the UC San Diego web site “Budget Line” at http://blink.ucsd.edu/Blink/External/Topics/Policy/0,1162,25436,00.html

If you have any questions concerning this notice, please contact Sylvia Lepe at extension 4-5357 or Blair Stephenson at 4-6590.

Gary C. Matthews Vice Chancellor Resource Management and Planning

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State Budget contains $115 million in new cuts for UC; stretches university’s total budget challenge to $450 million

The state budget adopted by the Legislature and Gov. Arnold Schwarzenegger for the rest of 2008-09 and the 2009-10 fiscal year contains $115 million in new permanent funding reductions for the University of California system and, by virtue of other growing costs not addressed in the budget, extends the university's total immediate state budget challenge to $450 million.

The final budget added a $50 million reduction in 2009-10 on top of the $65.5 million reduction the governor already had proposed as a mid-year cut for 2008- 09. These cuts are not targeted to specific programs. The additional $50 million reduction for 2009-10 could be rescinded later this spring, however, if the state receives sufficient funds from the federal economic recovery package. In this case, the reduction is one of several that would be "triggered" for restoration.

The final budget approved by the governor also replaces an additional $255 million one-time reduction in state General Funds for UC with an equivalent amount of funds from the federal economic recovery package, producing a revenue- neutral outcome for UC.

The total $450 million shortfall for UC consists of the $115 million in new cuts, $122 million in underfunded enrollments and $213 million in unfunded mandatory costs over the two-year period for utilities, employee health benefits and other inflationary costs.

Other major changes in the final budget include the elimination of $20 million the governor had proposed for re-starting employer contributions to the UC Retirement Plan, the deletion of funding to increase medical student enrollments in UC's PRIME program and nursing student enrollments, as well as the deletion of all UC capital facility projects' funding for 2009-10.

The funding for enrollment increases in the PRIME and nursing programs and for capital facility projects are on a list of items that may be reconsidered in subcommittee hearings this spring. The elimination of funding for UC's 2009-10 capital projects amounts to $448.6 million, and in some cases, will affect projects that are vital for enrollment growth and seismic replacement.

"We recognize the extraordinary fiscal challenges facing the state and are not surprised to be asked to take reductions as part of the solution," said UC President Mark G. Yudof. "I want to express my sincere appreciation to the governor for continuing to make UC a priority, as shown in his January budget, and in his subsequent special session budget recommendations. I also want to express my appreciation to the Legislature for avoiding even deeper cuts to the UC budget.

"But it is important to state clearly that the reductions contained in this budget will be felt by students, by faculty, by staff and ultimately by people across California who benefit in their daily lives from the university's work. Lower spending for higher education ultimately erodes student opportunity, innovation, health care and medical research, and economic growth for California. Recognizing the state's fiscal challenges, the UC system has been working to achieve administrative efficiencies on the campuses, has realized more than $30 million in savings at the Office of the President, has frozen high-level salaries, and has implemented restrictions on travel and non- essential spending.

"I will be working closely with the campuses to determine how best to absorb the new cuts in a way that protects the academic program and student services to the greatest extent possible. And the university will continue working in committed partnership with the state and with the other segments of public higher education to support the economic recovery of California."

In addition, Yudof said the university is gravely concerned about the budget's elimination of proposed state funding for the re-start of contributions to the UC Retirement Plan.

UC has saved the state over $2 billion in obligations to UC retirees during the 18 years in which the university suspended both employer and employee contributions to its retirement system. Today, however, the UC Retirement Plan is only 95 percent funded, and it has been estimated to fall to 60 percent within five years even with the reinstatement of contributions.

Yudof said the state has a responsibility to support employer contributions to UC's Retirement Plan, as it does for contributions to other defined benefit plans on behalf of California State University and community college employees.

"Ensuring the security of UC employees' retirement requires that this issue be revisited, and we will be focusing on this issue intently in the coming weeks and months," Yudof said.

The university does not yet have information on how the budget will affect student fee levels for fall 2009. The Regents will take up that subject at a meeting this spring; the timing has yet to be determined. UC will continue to administer a strong financial aid program mitigating the impacts of any fee increase, including implementation of the new Blue and Gold Opportunity Plan for students with financial need and household incomes below $60,000 per year. Information about that plan is at www.universityofcalifornia.edu/news/article/19471