Issue 3 — September 2002

Dear UC Colleague:
On September 5, Gov. Gray Davis signed the 2002-03 California State budget. However, unlike in most years, the signing of the budget has not brought the budget process to a close.

The spending plan adopted by the legislature authorizes the governor to make up to $750 million in further reductions to State operations, at his discretion. The budgets of individual State agencies may be cut up to 5 percent in order to achieve this level of savings.

We expect the University of California to be affected by these further reductions, though we do not know in what way. We also do not know when an announcement about further cuts will be made; the budget gives the governor until January 2003 to make these spending reductions.

As a result, much uncertainty surrounds the budget at this time. We have a 2002-03 spending plan that allows us to continue normal operations for the most part, making targeted cuts in a few areas specified in the budget. But we also recognize the possibility of further budget cuts that could be implemented during the middle of the fiscal year.

Moreover, there are estimates of annual State budget deficits in the range of $10 billion to $12 billion for the next several years. As a result, the Department of Finance has asked all State agencies to consider scenarios for accommodating a possible budget cut of up to 20 percent in the 2003-04 fiscal year.

It's clear that the State is facing a very difficult budgetary period ahead. Historically, the governor and legislature have invested generously in California public higher education, recognizing our major impact on the vitality and economic health of our state. We know their commitment remains - but we also know that State dollars are increasingly scarce. We are working hard with State finance officials to preserve as much of the University's funding as possible.

We will keep you informed of further developments as they occur. In the meantime, thank you for your continued dedication to the University, and for the excellent service you continue to provide the people of California. Your high-quality work is the best argument that can be made for continued strong State investment in the University of California.

Fiat Lux,

 Richard C. Atkinson



Governor signs 2002-03 budget; further cuts possible

The 2002-03 State budget signed by Gov. Gray Davis might best be considered a "temporary" spending plan until the governor decides how to make $750 million in additional reductions authorized in the Budget Act.

It is unclear when those further budget cuts will be made. The University expects to be impacted by the additional reductions, but their magnitude is unknown at this time. In addition, with major budget deficits projected for the years ahead, the State has asked its agencies to prepare plans for accommodating a possible budget cut of up to 20 percent in 2003-04.

UC is working hard to minimize any additional cuts, but it still appears that a great deal of uncertainty will continue to surround the budget for the next several months. Campuses are being encouraged to make very careful spending decisions, recognizing that UC's budget may be further reduced later in the year.

As passed by the legislature and signed by the governor, the Budget Act would provide UC with a $3.2 billion State-funded operating budget in 2002-03, 3 percent less than in 2001-02. The Budget Act includes the following reductions at the University of California:

  • Research: A 10 percent, or $32 million, across-the-board budget reduction for State-funded research programs.

  • Outreach: A net funding reduction of $7.6 million. The legislature provided funds to substantially scale back cuts that were proposed earlier in the budget process and, in fact, to expand some outreach programs. Those programs still receiving cuts in the final budget included School-University Partnerships, cut by $9 million to leave $3 million for the program; and ArtsBridge, cut by $1.2 million to leave $250,000 for the program.

  • Teacher professional development: Elimination of $56.9 million for the California Professional Development Institutes for K-12 teachers. UC is working to negotiate contracts with individual K-12 schools and school districts to continue the operation of these programs using other federal and State funds. Also, the budget includes a $15.3 million reduction for the California Subject Matter Projects, leaving $20 million in funding.

  • Core needs: A one-time reduction of $29 million for deferred maintenance, libraries, equipment, and instructional technology.

  • Internet2: A $10 million reduction for UC's initiative to expand Internet2 connections to California public schools, leaving $22 million for the program.

In addition, nonresident tuition will increase 10 percent for undergraduates and 4 percent for graduate students in the fall, with an additional 6 percent increase for nonresident undergraduates in the spring. These increases are intended to help preserve funding for the University's K-12 outreach programs and to help cover the rising costs of providing health care benefits to UC employees. (For more information on nonresident tuition, see:

The budget also includes new funding in the following areas. However, the budget does not guarantee any particular level of funding to the University for the full 2002-03 year, nor is any program exempt from further reductions, because the governor is still authorized to make substantial additional cuts to State operations this year:

  • Enrollment growth: Funding for an increase of 7,700 students, to maintain access for all UC-eligible students.

  • Salaries: Funding for an average 1.5 percent merit increase for eligible faculty and staff, subject to applicable collective bargaining requirements.

  • Summer instruction: State support for summer instruction at UC Davis, which would join UC Berkeley, UCLA, and UC Santa Barbara in receiving such funding.

  • UC Merced faculty: $4 million for faculty start-up costs at the University's 10th campus.

Questions and Answers

Q. Why does UC believe more budget cuts are possible this year?
A. The budget authorizes the governor to make up to $750 million in additional spending reductions to State operations this fiscal year, involving cuts of up to 5 percent to individual State agencies. When and how those cuts will be implemented is unclear at this time. The University will be making a strong effort to minimize additional cuts to its budget.

Q. How are employee health premiums affected by the budget?
The University has spent much of this year negotiating with health care companies for our 2003 medical plans. Health care costs are rising at an extraordinary rate on a national basis, and those cost increases are reflected in the bids UC has received for its medical plans next year. The State budget provides some assistance in covering these higher costs, but it by no means covers all of the increase. Details on the 2003 medical plans are not yet available, but in the meantime, more information can be found here:



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