November 19, 2001 Regents approve 2002-03 budget request; governor proposes mid-year budget cuts The University of California Board of Regents today (Nov. 15) approved a budget proposal for the 2002-03 fiscal year that, in a time of economic downturn, requests state funding to cover UC's minimum requirements for maintaining quality programs, ensuring student access, and keeping faculty and staff compensation as competitive as possible. Budget issues dominate an interview with UC President Richard Atkinson. View transcript. The budget proposal, which serves as the university's funding request to the state, is limited to seeking funding for the Partnership -- a set of agreements with the Davis administration that outlines funding expectations for the state and performance expectations for UC. The budget does not include additional initiatives above the Partnership, as in previous years. Due to the decline in the state's economic fortunes, budget reductions in the 2002-03 fiscal year may be necessary at UC. As a result, the budget proposal approved by the Regents is a basic budget from which reductions will likely be taken. The Legislative Analyst's Office this week projected a $12.4 billion state budget shortfall for California by the 2002-03 fiscal year, reflecting the sharpest decline in state revenues since World War II. The Board of Regents has begun discussing options to cope with possible cuts in the 2002-03 budget. UC administration officials have identified five general kinds of options if major cuts are needed: deferring state-supported summer instruction, limiting faculty and staff salary increases, constraining student enrollment growth, increasing student fees, and implementing targeted cuts for programs that have received substantial funding increases in recent years. No decisions have been made, but the Regents' discussions will help inform the Davis administration's decision making as Gov. Gray Davis prepares to unveil his proposed 2002-03 state budget in January. "Given the reality of the state's fiscal situation, we will have difficult choices to make in the year ahead," said UC President Richard C. Atkinson. "We must ensure that choices made in the near term are consistent with the goals we have set for the long term, and the most important of these goals is to maintain the quality and vitality of the university." Meanwhile, Gov. Davis this week proposed budget reductions in the current year across state government, including $86 million in savings at UC. The governor has requested that all state agencies take steps to begin implementing the cuts pending legislative action to formally approve them in January. The governor presented these mid-year budget reductions for UC: $25 million of the $75.6 million the state provided to UC this year to help cover increases in the university's energy costs. $6 million of the $56.9 million appropriated for the California Professional Development Institutes, which provide professional development for K-12 teachers. $5 million in one-time funding provided this year for clinical teaching support at the university's medical centers, neuropsychiatric institutes, and dental clinics. In addition, the governor proposed that $50 million of the $95 million allocated in the 2001-02 state budget for the California Institutes for Science and Innovation be provided through lease-revenue bonds rather than through the state General Fund. "It is, of course, disappointing to begin considering budget cuts at the university at a time when we are really just beginning to recover from the sharp cuts of the early 1990s," said Larry Hershman, UC vice president for budget. "However, we know the state is facing a serious fiscal situation, and we are committed to playing a part in the solution. We will do all that we can while preserving the quality of our core educational programs as much as possible." Despite the mid-year cuts and the likely need for additional cuts in 2002-03, the Regents approved a budget proposal that requests funding for the university's core needs, emphasizing that when the economy recovers, UC will seek funding for any items that cannot be funded now due to the state's fiscal challenges. The 2002-03 budget proposal includes: Funding to keep faculty and staff compensation as competitive as possible, including a 2 percent average general salary increase, merit increases averaging approximately 1.5 percent for eligible faculty and staff, and an additional 2 percent increase in the faculty and staff salary pool, to be distributed to employees in positions where compensation lags the market. (Salary increases are subject to collective bargaining requirements, where applicable.) A 10 percent increase in funds to help cover the rising cost of providing health insurance to the university's employees. Funding for enrollment growth of 7,100 full-time equivalent students in 2002-03, a 4.3 percent increase over 2001-02, to maintain the university's commitment to offer a place to all students who meet its eligibility requirements. An assumption that the state will continue the practice of the last seven consecutive years of providing state funding to avoid a student fee increase. One of the principles in the Partnership is that student fees will increase each year at the rate of increase in California per capita personal income--7.82 percent in 2000--or the state will provide the equivalent amount in funding. The budget proposal assumes the state will seek to do so again. However, depending on the severity of the budget cuts that may be necessary in 2002-03, the university's ability to avoid student fee increases may need to be re-evaluated. A 4 percent increase in nonresident tuition ($428), consistent with state policy that ties tuition for out-of-state students to the actual cost of instruction and to the nonresident charges imposed by UC's comparison institutions. Funding to continue phasing in state support for summer instruction, continue strengthening the quality of the undergraduate instructional program, provide expanded support for graduate education, and continue a multi-year program addressing ongoing budget shortfalls in building maintenance, instructional technology, and library materials. Were the budget proposal fully funded by the state, UC's state-funded operating budget would total $3.65 billion in 2002-03, an 8.7 percent increase over the current year. The Regents also adopted a capital improvements budget that is largely contingent upon voter passage of an education bond measure which is expected to be placed on the November 2002 ballot. The capital budget includes $334.5 million in campus projects to accommodate enrollment growth, provide seismic and life-safety improvements, modernize out-of-date facilities, and renew infrastructure that cannot accommodate present needs. It also includes $41.9 million for the next stage of development at UC Merced, the university's newest campus; and $95 million as the next installment of funding for the four California Institutes for Science and Innovation at UC campuses. "Just a year after California was enjoying near-record prosperity, we today face a major economic slowdown and the unresolved menace of international terrorism," Atkinson said. "Yet if there is one thing that the current climate of uncertainty and risk makes dramatically clear, it is that research universities are indispensable to solving the nation's most pressing problems, especially the threats of the new world in which we find ourselves. Investment in UC -- and in our industrious faculty, staff, and students--is an important step toward economic recovery."