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University of California Santa Barbara

Memos to Campus

Message from the Chancellor - Budget

August 26, 2004

TO THE CAMPUS COMMUNITY

Dear Colleagues:

All of us at UC Santa Barbara have found the budget challenges that we have been experiencing in recent years to be quite daunting. Yet through the dedicated and concerted efforts of all members of our campus community, we have made great strides, even in these difficult times, toward preserving UCSB’s excellence and maintaining our momentum. I recognize that these efforts have required hardship and sacrifice, and for that I would like to convey to you my sincere thanks and heartfelt gratitude.

While the financial difficulties are not yet over for UC or the State of California, we can look ahead to several years in which our budget prospects will indeed be much brighter. This is thanks to the May 2004 agreement reached with the governor by UC and the California State University. This multi-year compact holds the promise of renewed fiscal stability in the foreseeable future and gives us reason for genuine optimism. We very much appreciate President Bob Dynes’s leadership and the efforts of many others in achieving this important accord.

With the new compact we should see improvement starting in July 2005. Under the agreement with the governor, UC will still have significant budget cuts to make in fiscal 2004-05 as the state grapples with a large budget deficit. But, beginning in fiscal 2005-06, the compact will halt and begin to reverse the recent pattern of budget cuts to the University. The compact provides for salary increases, funding for enrollment growth, and offers predictability in student fees. This agreement represents a floor for UC support, not a ceiling. Additional funds can be made available when the state’s resources allow. (Attachment 1 identifies the key points contained in the compact.)

All of our budget decisions and our planning have been guided by the work of the Coordinating Committee on Budget Strategy, co-chaired by Executive Vice Chancellor Gene Lucas and the Vice Chair of the Academic Senate, Joel Michaelsen. (My memo, announcing the committee and including a list of its members, can be found on the budget update page of the UCSB web site, http://www.ucsb.edu/campus-topics/budget.) I would like to thank the co-chairs and the members of this committee for their diligence and dedication.

As part of its charge, the committee developed a set of budget principles to help guide the campus through this very difficult budget period. These principles (also available on the web site) underscore the need to preserve the quality of our teaching and research programs and access for our students. We also have sought to avoid personnel reductions whenever possible. Over the past few months, the committee has met with Vice Chancellors, Deans, Directors, and others representing all areas of the campus. Those meetings were extremely important and informative, giving the committee a clear picture of the impact of past and prospective budget cuts. On the basis of those meetings, and in conjunction with the planning principles, the


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August 26, 2004
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committee recommended budget reduction objectives for the current year, which we are adopting.

The final state budget for FY 2004-05 was signed just a few weeks ago. The budget reduces state funding for the University of California by 6%, but restores funding for student enrollments and outreach programs as well as providing merit funding for faculty. Given the recently approved budget, our campus is now planning for a total of $16.5 million in reductions this fiscal year. This includes one-time reductions of $2.6 million and ongoing (permanent) reductions of $13.9 million.

To put this into perspective, in the first year of budget cuts, fiscal 2002-03, we were able to provide centrally one-time funding of $4.9 million to mitigate the impact of mid-year reductions and allow departments ample time to plan. Last year, fiscal 2003-04, we initially planned for reductions of $13.4 million, 82.5% of which were assessed to control points. However, in the middle of the year, additional, one-time budget reductions of approximately $6.4 million were also required, which brought the total amount cut from last year’s budget to $19.8 million.

For the current fiscal year, 2004-05, approximately 50% ($8.3 million) of the total required target reduction of $16.5 million is being covered through assessments to control points, or organizational divisions. Decisions on budget reduction targets for individual departments and programs will be made by the appropriate academic, student affairs, or administrative unit.

The planned budget reductions for this year compared to previous years are as follows:




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The remaining 50% of this overall reduction, or $8.2 million, will be covered through assessments to specified areas such as the campus provision accounts, unallocated summer funds, housing, and overhead funds. In addition, I have committed to funding $1.5 million of the budget reduction through increased fundraising efforts.

Given the new compact with the governor, the likelihood of increased funding beginning in fiscal 2005-06, and based on the recommendation of the Coordinating Committee on Budget Strategy, a three-year plan has been developed to deal with the required permanent budget reductions. The plan allows greater use of one-time funds in the short-term and the phasing in of the permanent cuts over the next three years. This provides departments much greater flexibility in dealing with the required budget reductions and allows for new funding associated with the compact to be considered in budgetary planning. Departments should strive to take advantage of normal attrition, planned retirements, and voluntary reductions in time when budget reduction proposals are developed in order to avoid layoffs and furloughs.

I am extremely proud of how our campus has come together to face these challenges, and I again would like to thank all of my UCSB colleagues—on the staff, the faculty, and in the administration—as well as our students for your cooperation and dedication.

                                Sincerely,



                                Henry T. Yang

Attachment

 
                                                Attachment 1


KEY POINTS ABOUT THE COMPACT BETWEEN
GOVERNOR SCHWARZENEGGER, UC, AND CSU

(1)    Governor Arnold Schwarzenegger, UC President Robert Dynes, and CSU Chancellor Charles Reed have reached agreement on a “compact” outlining their intentions for state funding levels and institutional accountability in the University of California and California State University systems over the next several years.

(2)    The agreement provides for annual growth in state funding for UC’s basic budget and enrollment growth, beginning in 2005-06, in exchange for UC’s commitment to accountability in specified areas. The agreement extends through the 2010-11 fiscal year.

(3)    The compact is important because it carries the promise of renewed fiscal stability for the UC system. After several years of major budget cuts – reflecting a net 16% decline in state support over a four-year period – UC under the compact will receive funding to preserve its internationally acclaimed academic programs, to provide broad accessibility for promising California students, and to sustain its deep impact on the economy, health, and quality of life of California.

(4)    Among the compact’s features: There will be funding starting in 2005-06 to resume the growth of faculty and staff salaries, which is key to maintaining institutional quality. Student fees will be expected to rise on an annual basis to help pay for the institution’s costs, but for the first time in recent memory, fee increases will be predictable so that students and their families can plan ahead. And funds will be provided for enrollment growth at UC, preserving a place for students who challenge themselves, excel, and meet the system’s eligibility requirements.

(5)    The funding components of the compact are a floor, not a ceiling. The compact reflects the minimum level of state resources necessary to preserve quality and access at the University. Additional funds can be made available when the state’s resources allow.

(6)    All state budgets are a product of negotiation between the governor and Legislature. This compact is with the governor and will need the Legislature’s annual support. However, members of the Legislature have played a major role this year in placing public higher education at or near the top of the budget agenda in Sacramento and had much to do with creating the environment that made this compact possible.

(7)    Under the agreement with the governor, UC still will sustain significant budget cuts in the 2004-05 fiscal year as the state grapples with a large budget gap. However, the governor will not propose in his May Revision cuts for UC any larger than those in his January budget. The compact’s promise of recovery starting in 2005-06, and growing over the following years, is very much in the University’s long-term interest.

(8)    Major funding elements of the compact for UC include:

•    Annual funding growth of 3% for salary and other cost increases, growing to 4% annual growth in 2007-08.

•    Funding for an additional 5,000 students each year starting in 2005-06 – which, after the enrollment cuts in 2004-05, will put the University back on its original plan for accommodating enrollment growth over the course of this decade.

•    A further 1% annual augmentation for core needs, such as instructional equipment, instructional technology, building maintenance, and library materials, beginning in the 2008-09 fiscal year.

•    Undergraduate fee increases averaging 10% the next three years (14% in 2004-05; 8% in 2005-06 and 2006-07). Longer-term, fees would go up no more than 10% per year, with UC keeping the revenue to address institutional needs rather than backfilling state budget cuts. (Under the compact, fee increases would be indexed to per-capita personal income growth, but the Board of Regents could increase fees by up to 10% a year in compelling fiscal circumstances.)

•    A graduate fee increase of 20% in 2004-05, rather than the 40% originally proposed. Fees would increase another 10% in both 2005-06 and 2006-07, and UC will develop a plan for graduate fee levels over the longer term. A plan also will be developed for professional school fees.

•    UC will reserve between 20% and 33% of new fee revenue for financial aid in order to preserve accessibility for students of all financial backgrounds.

•    Continued state support for the development of UC Merced.

•    Agreement by UC to use non-state resources to provide $12 million in support for K-12 academic preparation (outreach) programs, with additional state support to be determined through the annual budget process.

•    The Schwarzenegger Adminstration’s support for future education bond measures providing UC with facilities funding comparable to that of Proposition 55.

(9)    Major accountability elements of the compact for UC include:

•    Meet the enrollment objectives of the Master Plan for Higher Education, assuming adequate state resources are provided.

•    Report to the state annually on a variety of student and institutional outcomes, focusing on demonstration of student success and efficient use of resources.

•    Preserve faculty workload policies comparable to those of other universities, and continue to make the highest priority ensuring that students have access to the classes they need to graduate in a timely manner.

•    Expand efforts to improve the supply and quality of math and science teachers in California’s public schools to further bolster the state’s economic recovery.

•    Strengthen programs encouraging students to participate in community service.

More information is at:
www.universityofcalifornia.edu/news/compact/welcome.html.