By Donna Hemmila

Faced with a $1 billion budget gap, UC Regents today (Nov. 18) approved an 8 percent tuition and fee increase for 2011-12 and expanded financial aid for low- and middle-income California students.

Regents voted 15-5 to raise tuition and fees by $822 for all UC students in the 2011-12 academic year, bringing undergraduate cost to $11,124 (a systemwide average of $12,150 when individual campus fees are included).

At the same time, regents also expanded the UC Blue and Gold Opportunity Plan to cover all systemwide fees for financial-aid eligible California undergraduates with family incomes up to $80,000. This year the eligibility ceiling is $70,000. In addition, the university will provide financial aid-eligible California resident students with family incomes below $120,000 grants to cover the 2011 fee increase.

"There is no public university with the quality of research and faculty anywhere in the world," said UC President Mark Yudof. "It's worth what you pay to attend here. It's worth it if you go to a UC medical center."

Along with the increase, regents voted to change the name of the systemwide educational fee to tuition. The name change reflects the use of the revenue to fund instructional costs. All students will continue to pay a student services fee ($972 of the $11,124 cost in 2011-12) for mental health, career and educational counseling and various student life programs on the campus of attendance. Additional campus fees pay for transportation programs, athletics and other activity fees. The nonresident fees were renamed nonresident supplemental tuition and professional degree fees were renamed professional degree supplemental tuition.

Regents Odessa Johnson, Darek DeFreece, Charlene Zettel, Jesse Cheng and Abel Maldonado voted against the increase.

It is estimated that with the increases in financial aid, 55 percent of undergraduates will not pay the fee increase.

Regents also voted to raise professional school fees by up to 31 percent, depending on the campus and program. Regents Zettel, Cheng and Maldonado voted against the professional degree fee increase.

The fee increases are expected to generate $115.8 million annually for the university's operating budget after a portion of the increase is dedicated to financial aid.

"Our job is to face reality," said Regents Chairman Russell Gould, calling the budget, fee increases and proposed changes to the UC retiree benefits a balanced plan to deal with difficult financial challenges for both the university and the state, which has a forecasted $25.4 billion deficit.

"It's clear the regents had a tough decision to raise fees," Gould said following the vote. "The university is not out of the woods. We face the threat of mid-year state cuts and certainly cuts next year. The faculty, staff and students all have to work together for solutions."

The majority of regents said they were reluctant to approve the fee increases but supported the plan as necessary to maintain the university's high quality. Several called for more aggressive cost-cutting, exploration of alternative revenue sources and more support from the state.

The fee increases are part of a 2011-12 operating budget regents approved to stabilize the university's finances after three years of declining state support. While the Legislature and governor increased UC's budget for the current year, state support remains 10 percent below what it was in 2007-08. Even as state funds have declined, UC enrollment and operating costs have continued to climb.

The recent state funding cutbacks, increases in mandatory operating costs and unfunded high-priority university programs, such as health professional education and graduate student support, add up to more than a $1 billion funding gap, UC Vice President of Budget Patrick Lenz told the regents.

UC will ask the state to increase its 2011-12 budget by an additional $596.1 million over the 2010-11 fiscal year state general fund allocation of $2.91 billion. The UC budget also calls for administrative savings of $101.1 million to be achieved through operating efficiencies.

Regents will continue the policy of dedicating 33 percent of undergraduate fee increases and 50 percent of graduate fee increases to support student aid.

In addition, UC campuses have stepped up fundraising efforts for scholarships and graduate and professional school fellowships. Project You Can, launched in October 2009, is a systemwide campaign to raise $1 billion in private gifts over a four-year period.

Regents also discussed today a plan to rein in the rising costs of retiree health and pension benefits and will vote on revisions at a special meeting in December.

The university faces an unfunded pension and retiree health benefits liability of $21 billion. In May, both employee and employer pension contributions were restarted after a 20-year hiatus.

To further address the long-term cost of pension obligations, a new pension tier is proposed for employees hired after July 1, 2013. Under the proposal, the minimum retirement age would rise from 50 to 55. New employees would have to work until 65, rather than 60, to receive the maximum retirement benefits. The option of a lump-sum cash out would be eliminated. Participants in the new plan would contribute 7 percent of their annual pay with UC contributing 8.1 percent.

Current employees would not be affected by these changes, although they will pay more for their pension and health benefits.

Donna Hemmila is managing editor with the UC Office of the President Integrated Communications. For more information, visit the UC Newsroom or follow us on Twitter.