Watch videos of UC President Mark G. Yudof's remarks:
Patrick Lenz, UC vice president for budget, told the Regents the university still faces a $535 million budget gap in 2009-10 that, without any additional revenue, could grow to more than $600 million in the next fiscal year.
This budget shortfall consists of $368 million in mandatory costs that the state was unable to fund and unprecedented state budget cuts of $814 million in 2008-09 and $637 million in 2009-10. The mandatory costs stem from unfunded enrollments, inflation, utility costs and health benefits cost increases, as well as collective bargaining agreements.
In light of the university's budget shortfall, and amid continuing concerns about the state's ability to properly fund the university — given a state budget deficit already projected to reach $7 billion to $8 billion for 2010-11 — UC's administration asked the Regents to consider enacting a mid-year fee increase in 2009-10 and fee increases for 2010-11, as part of a series of new and ongoing measures to close UC's budget gap.
A portion of the proposed fee increases would be set aside to enhance financial aid for low- and middle-income students.
"The state now funds each student by about half of what it did only two decades ago," said UC President Mark G. Yudof. "Students have been forced to pick up some of the difference, because when it comes to our core funding, there are only two primary sources — taxpayer dollars from the state and fees paid by students."
Addressing his remarks to students, Yudof said, "Students have been asked to do much, but if we can maintain our quality, our dedication to educational excellence, you also will continue to receive much. Your University of California degree will continue to have meaning."
Yudof went on to say that he understands a fee increase would be painful for students, but the actions currently taking place at the campuses — such as further cancellation of courses, increases in class size, reductions in student services and the departure of some of UC's stellar professors — also would hurt students and damage the university's quality.
Meanwhile, he said, campuses are in the process of:
- Reducing instructional budgets by $139 million
- Laying off 1,900 employees
- Eliminating 3,800 positions
- Deferring hiring of nearly 1,600 positions, many of them faculty
Given the severity of the actions already taken by the campuses, Lenz told the Regents it will be extremely difficult to close the university's budget shortfall and prevent further damage to its quality without additional revenue.
He stressed permanent measures must be taken during the course of the next 20 months to begin to stabilize the university's fiscal situation, including the possible implementation of a mid-year fee increase in 2009-10 and fee increases for 2010-11. While consideration of a fee increase is always a serious concern, he said revenue from an increase would mean fewer jobs eliminated, fewer cancelled classes and a lesser curtailment of student services than would otherwise be the case.
Proposed fee levels for 2009-10, 2010-11:
The proposal discussed by the Regents recommends the following mid-year fee increase in 2009-10 to take effect with the spring semester:
- $585 for resident undergraduates, and between $579 and $654 for resident graduate students
- For a full academic year, the fee increase for resident undergraduate students would be $1,170, and the increase for resident graduate students would range from $1,158 to $1,308
- $1,344 for resident undergraduates, and between $1,332 and $1,506 for resident graduate students.
The proposed fee levels for undergraduates and graduates are subject to further discussion and change before a final proposal is made to the Regents at the November meeting.
Financial aid to mitigate impact of fee increases
Lenz said that, consistent with UC practice, an amount equivalent to 33 percent of the revenue generated from the fee increase would be set aside to mitigate the impact of higher fees on undergraduate students with financial need. Similarly, 50 and 33 percent of revenue generated by an increase would be set aside to provide financial aid for graduate academic students and professional school students respectively.
These amounts, combined with 2009-10 increases in Cal Grants, federal Pell grants and federal tuition tax credits, will provide enough additional resources to cover the full amount of the fee increases already approved for 2009-10, along with the proposed 2009-10 mid-year increase for students with family incomes below $180,000.
For 2010-11, these new resources along with further expected increases in UC grants and Cal Grants should cover the additional 2010-11 fee increase for the 45% of students who receive these awards. Students with family incomes up to $70,000 per year typically qualify for Cal Grants and UC grants.
Other students with financial need will have half of the proposed 2010-11 fee increase covered if their parents' income falls below $120,000 — an increase in the cap from $100,000 in prior years. Middle-income families will also continue to benefit from expanded federal higher education tax credit eligibility in 2010.
The university also will continue the Blue and Gold Opportunity Plan that ensures gift aid will cover all mandatory fees for resident undergraduates with financial need whose family incomes are $60,000 or below.
Faculty, staff sharing the burden
In addition to the possible fee increase, Lenz pointed out that the following ongoing cost-saving measures are occurring systemwide and at the campuses:
- The furloughs/salary reductions plan for faculty and staff approved by the Regents in July took effect Sept. 1 and is expected to generate $184 million in savings.
- Members of the senior management group, including the president, agreed to reduce their salaries by 5 percent starting July 1, 2009. These reductions were increased to 10 percent under the furlough program, and a systemwide salary freeze has been imposed.
- Continued downsizing and restructuring of UCOP has produced more than $60 million in savings, and additional savings are expected.
- Certain bonus and incentive programs have been cancelled or deferred; the staff merit program for 2008-09 was eliminated and will not be implemented in 2009-10.
- Travel and other purchases have been significantly curtailed at the central offices and the campuses.
The Regents began discussion about a potential second year of reductions of California resident freshman enrollments for fall 2010.
For two consecutive years, the state has been unable to provide funding for enrollment growth at UC, and, although Regents curtailed freshman enrollment by 2,300 students this fall, UC continues to be over-enrolled by 14,000 students.
UC's plan to bring enrollments more in line with its resources would again reduce California resident freshman enrollments by 2,300 students in fall 2010, and slightly increase community college transfer students by 250. The Regents have stressed the need to widen the community college transfer route to UC because of its cost effectiveness, especially during an economic downturn.