February 11, 2003
DEANS
VICE CHANCELLORS
VICE PROVOSTS
UNIVERSITY LIBRARIAN
Dear Colleagues:
Re: Governor's Proposed Budget and Impact to Campus
I want to share with you my initial assessment of the Governor's proposed budget and its implications for the Santa Cruz campus, and to present the campus's immediate and long-term response to this situation.
First, I want to thank you and your staff in advance for all the hard work that will be done during the rest of this academic year as we identify, debate, and reach agreement on strategies needed to accommodate significant funding reductions during a period of projected growth. As this process goes forward, Chancellor Greenwood and I remain committed to maintaining our long-term objectives and thus continue moving forward to reach our goals.
Based only on the Governor's budget, I anticipate that the campus needs to plan for reductions in state funding that could range from $14.5 to $16.5 million. The proposed reductions fall into three principle categories, which are: 1) designated cuts; 2) undesignated cuts; and 3) de facto cuts that accrue to unfunded campus obligations. The designated cuts are the largest proportion in the Governor's proposed budget and are targeted to specific areas of the budget - outreach, student services, administration, and research. The cognizant units are planning now for these. The magnitude of the second, undesignated cuts is presently unknown. They may ultimately be larger than the Governor's present proposal. In addition, the Governor's budget makes permanent the $1+ million one-time cut (included in the 2002-03 budget) for core needs. At the same time, the campus will need to generate savings in some areas of the budget to deal with the third, de facto group of cuts, to cover obligatory fixed costs that are not funded in the Governor's budget.
All of this is, of course, preliminary since I do not know what budget actions the Legislature will choose, or whether the Regents will ultimately opt to increase student fees to offset the proposed $180 million (system wide) unallocated cut to the core instructional budget. The following chart summarizes the Governor's proposed cuts for the UC System, along with the estimated impact on the Santa Cruz Campus:
|
|
Cuts Proposed in Governor's 2003-04 Budget |
|
|
Targeted Area |
UC System wide |
Estimated Impact At UCSC |
|
UC College Prep Program |
$4.4M |
$4.4M |
|
Research |
28.8M (10%) |
.5M |
|
Outreach |
33.3M (50%) |
1.5M |
|
Public Service |
15M (30%) |
.6M |
|
Administration (Institutional Support, Academic Support, and Academic Administration) |
36.5M |
2.8M |
|
Student Service Programs |
25.3M (20%) |
1.8M |
|
Core Needs (Instructional equipment, technology and library materials) |
29M |
1.1M |
|
Undesignated (related to instructional program) |
179.1M |
Dependent upon Regental Action on Fee Increase |
|
Undesignated |
34.8M |
1.7M |
|
K-12 Internet and California Subject Matter Projects |
16.1M |
unknown |
|
Total, Based on Governor's Proposal |
$402.3M |
$14.4M (estimate) |
Three Budget Reduction Actions: An institution as large and complex as the University of California needs to have an approach to addressing its budget needs that occurs on at least three levels. These include:
1) Systemwide strategies: We fully expect that The Regents and/or the Office of the President will take actions to address the budget shortfall. It is my understanding, and I quote from President Atkinson's January 2003 newsletter, that, "we are evaluating a broad range of options for achieving budget savings and hope to minimize the impact on jobs." As OP identifies options, they will be analyzed and vetted across the campuses.
I will continue to post news releases from OP on our campus budget update website to ensure that you have access to the most up-to-date information (http://www.ucsc.edu/news_events/budget_impact/)
2) Campuswide strategies: The campus has established an Executive Budget Committee and has initiated an aggressive effort to evaluate its programs, processes and practices, with the aim of identifying long- and short-term strategies that will both provide a path for eliminating non-essential costs from UCSC, and improve the efficiency and quality of campus services and operations. This undertaking is central and primary to the ultimate budget reduction plan the campus will pursue. Within the next few months, this evaluation will describe the best opportunities for reducing current expenses and increasing revenues. These long-term savings and increases in revenue will come primarily from large programmatic and systemic changes that may take up to three years to realize fully. While these changes are central to the campus strategy for dealing with the budget crisis, it is also known that the state budget cuts will require a reduction of our budget on July 1. Consequently, the immediate challenge before the campus is to put into place resource management measures, at a campuswide as well as at the divisional/unit level, that will yield the budgetary reductions called for at the end of the present fiscal year, and to do so in a way best allows the campus to transition in to a more efficient operating model at a reduced budget, to be determined by the outcome of the campuswide planning effort that is underway. This campuswide effort must remain our first priority for dealing with the upcoming cuts.
3) Divisional/unit-based strategies: We will not know for a number of weeks the extent and timing of savings opportunities that may be identified by the campuswide effort, nor will we fully understand the impact of any systemwide proposed budget savings and changes or actions that may be taken by the Legislature or the Governor. Consequently, it is imperative that we have contingency plans developed at the Division/Unit level. As noted above, the Executive Budget Committee proposals will require up to three years to yield their total budget savings, and that the July 1, 2003 State Budget will require the campus to reduce its budget at that time. The campus thus needs a shorter-term strategy to deal with the immediate cuts while allowing the EBC proposals the time needed for their full implementation. Based on all of these unknown factors, I need to understand how divisions would accommodate potential significant budget reductions so that, if necessary, decisions about the level of cuts to assign to them can be made. If such cuts become necessary, I will not assign them to divisions on a pro-rata basis, but rather on the basis of campus priorities and an understanding of how these cuts would affect the ability of each division to operate. I am asking, then, for each divisional unit, working with the staff of Planning and Budget, to provide the Executive Budget Committee with plans of possible one-time and permanent budget reductions. While divisions may not be required to achieve reductions at the levels I will be proposing, it is imperative that the campus has appropriate and well-considered contingency plans in place. This is intended to be complimentary, not contradictory to the campuswide process we are pursuing. I will follow this letter shortly with more detailed information concerning the levels of cuts for which you should be planning, the policy issues that need to be considered, and the process and timeline by which decisions regarding potential divisional budget cuts will be made.
The Governor's budget is the first step in what promises to be a lengthy process in Sacramento this year. And, although the Legislative Analyst and the Governor have offered different perspectives on the level of the deficit facing the state, the numbers are staggering and will result in painful reductions at our campus and for all agencies that receive funding from the state.
Sincerely,
John B. Simpson
Campus Provost and Executive Vice Chancellor
cc:
Academic Senate Chair Blumenthal
Chancellor Greenwood
CPB Chair Meister
Executive Budget Committee