The University of California faces a serious fiscal challenge. Even with the state budget just adopted, we have a $450 million problem over two years, counting both the actual state budget cuts we have sustained and the unfunded cost increases we are seeing for enrollments, utilities, health benefits and similar costs.
As we confront all of these financial challenges, we must acknowledge that the university's greatest asset - its human capital -- comprises a significant amount of its budget. More than 70 percent of our core budget is devoted to faculty and employee salary and benefits.
The state of California has implemented furloughs for state employees; we have not thus far. But particularly with the new projections of state budget shortfalls, I believe we need to begin planning for the possibility of employee furloughs and/or temporary and permanent salary reductions as an additional element of the university's response to the state budget contraction.
To that end, I have asked Executive Vice President Katherine Lapp and interim Provost Lawrence Pitts to work with Human Resources, the General Counsel and the Academic Senate to develop such a contingency plan. My goal is to produce for consideration by the Regents in May a flexible Regental Standing Order that would serve as a broad legal framework to allow for both systemwide and campus-by-campus furloughs and salary reductions, should deteriorating financial conditions so require.
In my view, such an order should include two critical components -- first, a delineation of roles and responsibilities of the Regents, chancellors, the president and the divisional Academic Senates in determining whether to impose furloughs and salary reductions; and second, flexibility for each campus to implement these actions in ways appropriate to their unique circumstances, including the need to maintain clinical health enterprise operations, ensure public safety, and honor existing union contracts and government regulations.
Only when we have in place these decision-making processes and implicit recognition of the need for campus autonomy should we move forward with the actions necessary to respond to our changing fiscal situation.