UC's budget woes grow for 2003-04
Salary freeze, higher student fees among measures included in Gov. Davis' proposed budget

UC Office of the President

15 January 2003 | Last month, Gov. Gray Davis proposed a series of mid-year budget cuts across state government, including at the University of California, to help close the state's budget deficit. The Board of Regents has adopted those proposed cuts for 2002-03, recognizing that the university has only half a year to achieve the targeted savings, and that any changes made by the Legislature can be incorporated into the university?s budget at a later date.

Now the governor has released his state budget proposal for 2003-04, which includes $299 million in new funding cuts for the UC system. When added to the mid-year cuts, this new round brings the university?s total cuts over an 18-month period to $373 million.

With these proposals, UC's state-funded budget falls nearly $1 billion below the level the university had expected by this point under its Partnership Agreement with the governor, an agreement that outlines the university's basic funding requirements. Since the beginning of the 2001-02 year, UC has taken $533.3 million in state funding cuts and has forgone an additional $423.5 million in expected Partnership funding for faculty and staff salaries and other cost increases, for a total shortfall of $956.8 million.

UC's proposed state-funded budget is thus approximately $3 billion at a point when, under the Partnership, it was expected to be roughly $4 billion.

The $299 million in newly proposed UC budget cuts for next year are in many of the same areas that were targeted for $74 million in mid-year cuts this year. None of the proposed cuts is final until a state budget is approved by both the governor and Legislature.

The governor's specified reductions include:

* Administration and libraries: A mid-year reduction of $20 million grows by $16.5 million to a total reduction of $36.5 million in 2003-04.

* Educational outreach: A $3.3 million mid-year cut grows by $30 million to a total reduction of $33.3 million in 2003-04, representing a 50-percent reduction in remaining state funding for UC educational outreach.

* An $18-million mid-year reduction in state-funded research programs grows by $10.8 million to a total reduction of $28.8 million in 2003-04.

* Student services: A mid-year reduction of $6.3 million grows by $19 million to a total reduction of $25.3 million in 2003-04.

* A $15-million cut to the California Subject Matter Projects, which provide professional development for K-12 teachers. The cut would leave the program with $5 million.

* A $2.5-million mid-year cut for UC public-service programs grows by $12.5 million to a total reduction of $15 million in 2003-04.

* A reduction in state funding of $179.1 million for instructional programs, which the governor assumes would be offset by student fee increases (details below). Of this amount, $19 million represents a mid-year cut in the 2002-03 budget that was filled by a student fee increase beginning in the spring 2003 academic term.

* An unspecified 2003-04 budget reduction of $34.8 million. The university will be assessing options for allocating this cut in the event it is approved.

Impact on staff and faculty
The governor's budget proposal includes no funding for salary increases for UC faculty and staff in the 2003-04 fiscal year, nor for state employees generally.

"The lack of funding for salaries is another unfortunate element of the situation we are facing," UC President Richard Atkinson said. "Competitive compensation is key to quality, and a merit program must continue to be a high priority for the university."

The university is considering a range of personnel-related actions to cope with the budget crunch. The magnitude of the budget reductions means that layoffs could be necessary in those areas where budgets are being cut. The university is evaluating a range of personnel-related options that would help achieve budget savings while minimizing the impact on jobs, including hiring freezes, travel limitations, reduction-in-time/pay programs, and other similar initiatives.

Student-fee hikes
As part of the budget cuts, the governor is proposing a reduction in state funding for the university's instructional budget, which he assumes would be offset by a student-fee increase. The Board of Regents will not set 2003-04 student fee levels until later this spring.

Already, mandatory systemwide student fees at UC have been increased $135 per quarter, or $405 per year, beginning with the spring 2003 term, along with additional increases for professional school students. Under the governor?s budget proposal, mandatory systemwide fees would increase by another $795 in the 2003-04 year for resident undergraduates, $855 for resident graduate academic students, and more for some professional-school students. As a result, the total increase in mandatory systemwide and professional-school fees over two budget years would be 35 percent under the governor?s budget.

Financial aid would be increased to shield low-income students from the systemwide fee increase, substantially reducing the "sticker price" for many students. Generally, students receiving Cal Grants or UC financial aid grants would not be affected.

"I expect that the Board of Regents will have a thorough discussion of student fees and all of the governor's proposals for budget cuts," President Atkinson said. "The current economic climate makes this a particularly bad time for families to absorb a further increase. At the same time, the governor's budget reflects the staggering magnitude of the state's budget crisis and acknowledges the need for a balanced package of solutions if we are to preserve access and quality in the student instructional program, which is our highest priority."