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Chancellor asks campus to prepare for worsening budget picture

Temporary solution spares units from the brunt of a state-mandated midyear cut, but Birgeneau calls on campus to curb spending now and brace for the future

| 23 October 2008

With the global economy shaken and revenue and credit drying up for the struggling state of California, the University of California learned last week that it must take an additional, immediate $33.1 million budget cut as its portion of a statewide reduction mandated by Governor Schwarzenegger.

UC Berkeley's share of that total will be a $5 million midyear cut. Chancellor Birgeneau this week announced that he will take the cut via central-campus deficit financing. The solution is a temporary measure for this year, protecting campus units from absorbing an additional cut in funding as they struggle to implement cuts already in place for 2008-09.

The midyear move also buys the campus time to determine how best to take this and other permanent cuts that are expected to be necessary in 2009-10.

In a letter to campus leaders this week he urged faculty and staff to "take immediate steps to reduce campus spending" in areas that do not affect teaching. Noting that significant financial challenges are sure to continue for the state and UC in 2009-10, he called on campus employees to begin developing ideas to maintain excellence in teaching and research in the face of limited resources.

"The main message for all of us is that UC Berkeley will most likely face significant financial strains over the next 18 months," said Nathan Brostrom, vice chancellor for administration.

What do we know now about the budget outlook and how it affects Berkeley employees, in their jobs and in their own pocketbooks? Here are some answers:

Q. Why does the campus need to take a midyear budget cut?
A. This is a time of great economic uncertainty and, for the state of California, real financial pressures. On Sept. 23 the governor signed a state spending plan for the current fiscal year, but already it's clear that state revenues will be less than predicted, and so state expenses must again be cut. Statewide, at least $190 million in additional midyear reductions will be needed.

Q. How much extra will UC Berkeley have to cut this year?
A. UC President Mark Yudof last week told chancellors that UC's share of the midyear cut will be $33.1 million. For the Berkeley campus, this means we must take an immediate cut of $5 million, on top of the significant budget reductions that we're already implementing this year.

Q. Where will the $5 million cut be made at Berkeley?
A. To lessen the impact on campus units this year, Chancellor Birgeneau decided to take the midyear cut via central-campus deficit financing. This is a temporary solution for the current year; campus leaders will determine how best to distribute the cut for 2009-10.

Q. Is the financial outlook for UC expected to improve for 2009-10?
A. The state's financial troubles are serious, and it's likely California and UC will continue to face tough times in the next fiscal year.

Q. What should faculty and staff be doing now in light of the bleak budget news?
A. Start preparing now. Immediately identify opportunities to reduce spending in any ways that will not compromise teaching. Units need to save more money to reduce their reliance on central-campus funding. Just as important, every area of campus must start now to find ways to sustain excellence in teaching and research in the face of the significant financial challenges we could face in the 2009-10 budget cycle.

Q. The campus has absorbed cut after cut in recent years where should we be looking to save money?
A. Departments and units will have their own ideas, but here are some places to start:

  • Efficiencies: Evaluate all practices to streamline operations, improve productivity, and eliminate non-essential activities.
  • Non-faculty hiring: Where possible, leave unfilled non-faculty positions open and avoid creating new positions.
  • Travel: Curtail non-essential travel that is funded by campus sources, using video-conferencing and conference calls for most meetings. (Campus video conference facilities)
  • Consulting contracts: Avoid new consulting contracts unless they are essential to meeting previous commitments, and evaluate whether existing contracts could be discontinued.
  • Leased facilities: Reduce reliance on leased space, and specifically avoid leasing new space.
  • Equipment: Defer purchasing equipment that is not critical to academic programs.
  • Energy and utilities: Take every action possible to save energy and utility costs.
  • START: Where feasible, encourage eligible employees to volunteer to take advantage of the Staff and Academic Reduction in Time (START) program to reduce their working hours and corresponding pay to less than 100 percent.

Q. Is there any news on salary increases for UC employees?
A. In the final state budget for this year UC received no increased funding for core costs, including employee compensation. UC will not be able to offer salary increases to employees this year, and the university will need to defer progress on changes to the faculty salary scales for 2008-09. (Wages for union-represented employees are subject to collective bargaining.) Ladder-rank faculty members who are eligible for merits and promotion this year will receive their approved increases.

Q. Will UC employees also be hit with higher costs for benefits?
A. As announced last week, UC is contributing a one-time subsidy of $5.2 million to help offset the rising cost of medical insurance and keep employees' premium costs in check. For most employees and most plans, monthly costs will drop or go up only slightly when new rates take effect in January 2009, thanks to the UC contribution. Dental and vision benefits will continue to be free for employees, and fees such as co-pays will stay the same.

Q. Is UC continuing to offer its full range of benefits in 2009?
A. While many employers are saving money by eliminating or reducing benefits, UC is not. It will maintain its high level of benefits while minimizing cost increases for employees in 2009.

Q. How about the UC Retirement Plan (UCRP)? Will employees have to begin paying into the plan soon?
A. In November the Regents are scheduled to continue their discussions of UCRP and the likelihood that employee and employer contributions will resume next year. For 16 years neither UC nor its employees had to contribute to the well-funded plan, but UCRP is no longer fully funded. The amount and timing of resumed contributions is still under discussion, but they probably will be required starting as early as July 1, 2009.

Q. What's next in planning for the 2009-10 UC budget?
A. The Berkeley campus is working with the UC Office of the President to prepare the 2009-10 UC budget proposal, which the Regents will consider for approval in November. This starts the budget process for the coming fiscal year.

In addition, the campus is moving ahead on two fronts: continuing work toward a sustainable funding model for UC Berkeley, one that would be protected from the ups and downs of the state budget, and vigorously raising private support through the recently launched fundraising campaign. Both efforts will have long-term impact.

Q. Where is more budget information available?
A. Campus leaders will update faculty and staff regularly on the budget situation throughout the academic year via e-mails, the Berkeleyan, departmental communications, and the UC Budget Central website. Questions, concerns, or ideas about the campus budget may be e-mailed to budget@berkeley.edu.