January 12, 2004

Governor's budget proposal cuts UC system

By Brad Hayward
UC Office of the President

Gov. Arnold Schwarzenegger issued a 2004-05 state budget proposal today (Jan. 9) with $372 million in cuts for the University of California system.

The proposed cuts would reduce student enrollments, raise student fees, scale back student financial aid, reduce spending on faculty, eliminate K-12 outreach, and make deeper cuts to research, administration, and other programs.

The governor's proposals are part of a series of statewide cuts intended to help close a $14 billion state budget shortfall.

The proposals, for the fiscal year starting July 1, will need the Legislature's approval to take effect. Final decisions will not be made until this summer.

"The governor is making difficult choices, and asking many parts of state government to sacrifice, as the state confronts a massive budget deficit," said UC President Robert C. Dynes. "That is understandable. But it also should be understood that these cuts, coming on top of deep previous budget cuts, would have a very serious impact on the University of California and its tradition of providing a top-quality, accessible, affordable education for Californians.

"UC is recognized worldwide and in our own communities for the extraordinary opportunities it offers our state's young people and for the profound impact it has on California's economic growth and global competitiveness. It is an institution that helps our people achieve their hopes and dreams. The continuing trend of reduced state funding for UC makes me deeply concerned about our ability to deliver on the promise that the University of California has always represented for the people of California.

"I intend to work with the governor, the Legislature and the Board of Regents to minimize these cuts and their impact, to seek restoration of funding as the economy improves, and to preserve what the University of California has always meant for California."

The budget, and the university's response to it, will be discussed in more detail at next week's Board of Regents meeting.

The $372 million in program cuts represent the fourth consecutive year of such cuts to the UC system. The proposed budget for UC also includes $145 million in augmentations, largely consisting of restoration of $80.5 million in one-time cuts in the 2003-04 budget, funding for annuitant health benefits, and other items. As a result, UC's net state-funded operating budget in 2004-05 would be $2.67 billion, or 8 percent less than the current $2.9 billion.

Measured another way, the governor's budget, when combined with prior cuts, would leave the university with $530 million less in net state funding than it had in the 2000-01 fiscal year -- a decline in state support of more than 16 percent during a period when enrollments have grown by more than 15 percent. Already, every area of university spending has been cut, student fees have increased significantly, employee positions have been eliminated, and faculty and staff have been denied cost-of-living salary increases.

PROPOSED PROGRAM CUTS

Major elements of the governor's 2004-05 proposal include:

• Enrollments: UC's freshman enrollment in fall 2004 would be cut 10 percent, or approximately 3,200 students, below this year's level, saving $24.8 million. As a result, some freshman applicants who have met UC's academic eligibility requirements would not be granted admission to a UC campus this fall. The Schwarzenegger Administration is encouraging these students to attend community college through a Dual Admissions Program and proposes that their community college fees be waived. In addition, $1.6 million would be provided for UC counselors to work in the community colleges, helping students prepare to transfer to UC campuses and ultimately obtain a UC degree. UC will be reviewing the impact of the governor's budget on transfer enrollments.

• Faculty: A cut of 5 percent ($35.3 million) in spending on faculty. The Schwarzenegger Administration's intention is to increase the student-faculty ratio to 20.7 to 1; currently it is 19.7 to 1. If this cut stands, the university likely would give campuses discretion to make the cut in a manner that preserves instructional programs as best they can.

• Administration and libraries: A 7.5 percent cut to academic and administrative support, including libraries, on top of the cuts these areas already have taken. This is a $45.4 million reduction, in addition to a $36.5 million reduction that occurred this year.

•K-12 outreach: Elimination of all remaining state funding ($33.3 million) for UC's programs working with K-12 schools and students to improve academic performance and college preparation, particularly in educationally disadvantaged areas. These programs were cut 50 percent in the 2003-04 budget, and the Schwarzenegger Administration already has implemented a mid-year cut of $12.2 million to these programs.

• Research: A 5 percent ($11.6 million) reduction in state-funded research, on top of the 20 percent cut these programs have taken over the last two years. In addition, $4 million in funding for one specific research program, the Institute for Labor and Employment, would be eliminated entirely.

• UC Merced: The university's 10th campus would open to students in fall 2005. The proposed budget provides $10 million in onetime money to continue development of the campus (in addition to $10 million in permanent funding), whereas the campus estimated that $20 million in onetime funding was needed to maintain the original plan for opening; thus, significant modifications would be necessary. If the proposed level of funding stands, the university will need to examine the range and scope of academic programs and services available on opening day. The university will continue to hold the goals of serving Central Valley students and delivering the highest-quality academic programs within a modified campus plan. "UC Merced remains critical to expanding educational opportunity in the San Joaquin Valley and to UC's long-term ability to accommodate growing college demand statewide," Dynes said.

• K-12 Internet: Elimination of remaining funding ($14.3 million) for the Digital California Project, which brings the Internet2 to California public schools. The budget notes that K-12 schools could contribute voluntarily to continue the program.

• Salaries: There would be no state funding, once again, for cost-of-living increases for faculty and staff. Because competitive compensation is key to the recruitment and retention of faculty and staff, UC is very concerned about this continuing trend.

• Clinical enterprise: The effects of the governor's budget on UC's clinical enterprise have not yet been determined; UC will be analyzing this issue in the coming days.

STUDENT FEES AND FINANCIAL AID

The governor's budget proposes the following in the areas of student fees and financial aid:

• Financial aid. The budget proposes a major curtailment of financial aid for UC students. Whereas increased financial aid has helped UC students weather prior fee increases, the governor's current proposal is to reduce the proportion of new fee revenue that UC directs to financial aid from 33 percent to 20 percent. In addition, the governor's budget does not increase Cal Grants to cover the proposed fee increase at UC. These policy proposals are of significant concern to UC because they would have a significant effect on access of lower-income students to public higher education. If these proposals stand, UC would need to consider alternatives for preserving access for lower-income students, such as rescinding a program started just this year in which UC provides grant aid to many financially needy students with family incomes of between $60,000 and $90,000 per year.

• Resident undergraduate fees: A 10 percent increase. Mandatory systemwide fees would increase by $498 from the current $4,984 per year to $5,482 per year. With the inclusion of campus-based miscellaneous fees, the systemwide average for resident undergraduates would be $6,028 per year. The governor's budget also states the Schwarzenegger Administration's support for a long-term fee policy in which student fees would increase regularly in line with per-capita personal income, but not by more than 10 percent in a given year. The university believes such a policy should take account of overall state funding available for UC programs, however.

• Fee surcharge for extra units: The governor's budget proposes that undergraduates taking more than 110 percent of the credit hours required for graduation be charged at a higher fee rate, such as the nonresident rate or at the full cost of instruction. The budget suggests that such a policy be phased in and assumes $9 million in savings the first year.

• Resident academic graduate fees: A 40 percent increase. Mandatory systemwide fees would increase by $2,088 from the current $5,219 per year to $7,307 per year. With the inclusion of campus-based miscellaneous fees, the systemwide fee average for resident academic graduate students would be $8,931 per year. The governor's proposal also contains a long-term policy goal that academic graduate students ultimately pay 50 percent more in fees than undergraduates.

• Professional school fees. The governor's budget proposes that state support for the operation of most professional schools be reduced by an average of 25 percent, and that student fees fill the gap. Specific figures would vary, but for medicine, law and business administration, for instance, the fee increase would be roughly $5,000 -- without any provision for financial aid, which UC considers a high priority. The Schwarzenegger Administration exempted nursing from its proposal.

• Nonresident tuition: A 20 percent increase, or $2,746 for undergraduates and $2,449 for academic graduate students. Out-of-state students also pay mandatory systemwide fees and campus-based miscellaneous fees in addition to nonresident tuition; the average annual total under the governor's budget would increase to $24,672 for undergraduates and $23,968 for academic graduate students.

The UC Regents are not expected to set fall 2004 fee levels until later this winter or spring.

The governor's budget also contains a capital budget of $339 million in general-obligation bond funding for UC construction, earthquake retrofit and infrastructure renewal projects. These funds are contingent upon voter approval of Proposition 55, a statewide education bond measure on the March 2 ballot. There also is $55 million in lease-revenue bond funding for an agricultural genomics building at UC Riverside, funded through UC's sale of a parcel of land.

The governor's budget is available online at http://www.dof.ca.gov/HTML/BUD_DOCS/Bud_link.htm

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