By Alec Rosenberg

The 2008-09 state budget funds the University of California at essentially the same level as in 2007-08, but the spending plan leaves UC with other long-term concerns.

The overdue budget, a compromise between Gov. Arnold Schwarzenegger and the Legislature, does include nearly $100 million to UC that was earlier cut from the university's budget but that the governor restored in his May Revision. However, the final budget does not provide support for the additional 5,000 students UC expects to enroll this year and leaves UC vulnerable for cuts in coming years.

“We are gratified that the governor and Legislature have brought this year’s state budget process to a conclusion,” said UC President Mark Yudof. “The final budget for UC is probably the best we could have achieved in a difficult fiscal environment, but it falls far short in terms of maintaining and enhancing our competitiveness in educational and research programs. We will need to do more with less.”

UC already has responded to the budget crisis by reducing administrative staff, cutting administrative spending by more than $20 million at the Office of the President alone and raising student fees 7.4 percent for the 2008-09 school year.

“While we appreciate the support for UC and not further cutting our budget this year, we are concerned that if the overall budget plan doesn’t permanently close the state’s structural deficit, we’ll be in a very difficult funding climate in 2009-10,” said Patrick Lenz, UC vice president for budget. “The best-case scenario is our revenue would stay flat in 2009-10 and the worst-case scenario is we could lose a significant amount of money.”

Meanwhile, UC, California State University and California Community Colleges leaders have jointly promoted the importance of investing in public higher education. For every $1 the state invests in a student’s higher education, the state’s economy receives a net return of $3.

“This is a critical crossroads for the university,” said Lenz, who previously held senior budget positions at CSU and the California Community Colleges. “Does the public want a University of California that is going to be a private institution, or are they really interested in putting more public resources into offering higher education opportunities for our students?”

UC expects to receive about half of the $400 million capital facilities budget it was seeking for this year, which could delay some projects. Meanwhile, utility and health benefit costs are rising and faculty and staff salaries lag the competition.

“We have some very pressing demands,” Lenz said. “We enrolled 5,000 more students than the state was willing to fund.” Providing student access and funding the university’s increasing health care and energy costs means campuses will have to come up with about $100 million to cover these costs, he said.

The answers aren’t easy.

“While we are well on our way to reducing administrative costs and achieving greater efficiencies, belt tightening alone will not be enough to meet the financial challenges ahead for the university,” Yudof said. “Increasing student populations, rising costs of health care, escalating competition to attract and retain world-class faculty, and the challenges of maintaining a fully funded retirement system all contribute to higher costs.  Simply maintaining the status quo in funding from the state will not enable us to meet these challenges for California over the longer term.”

By keeping the university’s funding flat relative to last year, the 2008-09 budget does not provide the normal state funding for employee compensation increases. The administration and Board of Regents are looking closely at this issue, as well as health insurance costs for 2009, and expect to clarify in the next few weeks what the final state budget dictates in terms of employee compensation and benefits.

“The university is under some difficult financial pressure,” Lenz said. “I think it’s a multiyear problem.”

Alec Rosenberg is an Our University staff contributor.