UC’S FISCAL SITUATION
Q. How can UC pay higher salaries for new senior positions – isn’t there a budget crunch?
A. Even with reduced State funds, UC has faced the challenge of maintaining the quality, accessibility, and competitiveness of the University. This has required making targeted, strategic investments to attract and retain the best people, including to accommodate growth in student enrollments. That is why the budget compact with the State is so important – it stops the worst of the cuts and gets the University back on more stable fiscal footing. It provides basic increases, starting this year, so that the UC system doesn’t fall any further behind.
The University has been working hard to prevent the worsening of market lags and to improve total compensation – at all levels of the institution to the best of its ability given the resource constraints of recent years. For instance:
- UC has introduced an income-indexed approach to health care premiums, in which those who earn less also pay less for their health care. There are now four bands of rates for health insurance premiums: for those with $40,000 annual earnings or less, $40,000-$80,000, $80,000-$120,000, and $120,000 and above. We quickly implemented this approach several years ago when we first began to see cuts to our State budget combined with skyrocketing health care costs, and we continue to use it.
- In 2002 and 2003, when State funding for general salary increases faltered, UC allocated additional retirement funds to each employee through a “Capital Accumulation Provision” account. In 2002, 3% of an employee’s covered compensation was credited to the employee’s retirement accounts, and in 2003 the figure was 5%. In effect, these are deferred retirement income programs funded by the UC retirement system – employees do not pay into them with any of their own money, and State funds were not used.
- Since 2003, UC has offered employees a new flex-time schedule in which an employee could, with supervisor approval, reduce his or her working hours and corresponding pay.
- Our compact with the governor specifically includes funds for general salary increases. This year, employees are receiving average 3.5% salary increases, and the University’s proposed budget for 2006-07 will include a proposal for an average 4% increase.
- The Regents in November will be acting on a proposal to establish a Regental objective of bringing all employees up to market-competitive compensation in the coming years.