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Myths and facts about UC Berkeley's budget

| 6 November 2009

Everyone knows the budget crisis is creating serious challenges for UC Berkeley. The first step in facing those challenges is to understand them, and that means separating myths from facts.

Below are a few of the more persistent myths about the campus budget.

Myth: UC Berkeley has a reserve fund of unrestricted assets that could be used to reduce the budget shortfall and end the need for student-fee hikes.

Fact: UC Berkeley's "unrestricted assets" are, in fact, thousands of funds and accounts committed to individual departments and control units for very specific purposes.

These assets are like money deposited in a personal checking account on the 15th of the month for the express purpose of paying the next month's rent or mortgage. Substantially all of UC Berkeley's unrestricted assets are similarly committed to pay for academic programs, research initiatives, capital projects, scholarships, and other vital purposes.

Despite the confusing accounting terminology, the campus does not have a reserve of "unrestricted" funds available to reduce the budget shortfall.

Myth: We could greatly reduce or eliminate the budget shortfall by cutting the salaries of high-level administrators.

Fact: High-level administrators' pay has, in fact, been cut by 10 percent as a result of UC systemwide furloughs — and had already been subject to a two-year freeze on senior managers' salaries.

UC Berkeley's senior administration accounts for just 40 of the campus's approximately 9,000-strong staff — less than 1 percent of its total staff salary expenditures. Even if the Chancellor, provost, and all vice chancellors, associate chancellors, vice provosts, and deans agreed to forgo their entire salaries, the savings would address just 6 percent of the budget shortfall.

Myth: Student fees are being increased so that the UC system can use them as collateral for loans.

Fact: The UC system's primary funding sources for debt repayment for general-revenue bonds are housing, parking, and other auxiliaries; reimbursements related to research grants and contracts; registration and student-approved non-educational fees; and miscellaneous fees, such as those paid to UC Extension.

Funds from increases in student education fees are not being used to secure bonds and other loans.

Myth: UC Berkeley wants to reduce the number of California residents it enrolls as freshmen because it wants to replace them with out-of-state students and international students who pay higher fees.

Fact: UC Berkeley is planning to reduce the number of new California residents it enrolls as freshmen because for years now, state funding allocated to cover the cost of educating UC students (costs include faculty salaries, classroom and lab equipment, academic department staffing, etc.) has not kept pace with enrollment numbers.

For example, for the current school year, UC Berkeley enrolled just under 25,000 undergraduate students who are California residents. However, we estimate that the actual funds allocated to UC Berkeley covered the cost of educating just 19,000 of these students. In the past, UC Berkeley picked up the cost to educate these almost 6,000 additional students not funded by the state. Given the current budget shortfall, however, we cannot continue to do so and thus are forced to reduce enrollment of new California-resident freshmen so that the numbers are closer to state funding levels.

International and out-of-state student enrollment will increase because these students pay the full cost of their education (they pay more than three times as much in fees as California residents) and increasing their numbers on campus from about 11 percent of the undergraduate population to 20 percent is expected to ultimately generate approximately $60 million a year, much of which would be applied to the budget shortfall.

Sources: Campus Budget Office, Office of the Vice Chancellor for Administration.