As system-wide financial shortfalls continue to bewilder the University of California, administrative officials are contemplating the next step.
Facing an unprecedented budget deficit of approximately $800 million for the current and upcoming fiscal years, the UC Office of the President (UCOP) has been forced into a bind, balancing student fee hikes, system-wide pay reductions for employees, and campus specific budget cuts to make up the difference. With unpaid working days, percentage reductions in paychecks, or a combination of both on the table, its clear the UC will be forced to draw funds from its students and employees to pay operating expenses and lower its debt.
The current California budget crisis marks the fifth time in six consecutive years that the UC budget has been reduced system-wide, and the cuts have top campus administrators concerned about UCSB’s future. In a letter addressed to the UCSB community last week, Executive Vice Chancellor Gene Lucas said the university anticipates a budget reduction of $40 million for the 2009-10 academic year – the figure is two and a half times as large as the budget reduction just taken in 2008-09. “The magnitude of this budget cut on the heels of multiple years of budget reduction is so large that a system-wide salary reduction/furlough plan has been rendered necessary as one part of a multi-part solution to close the budgetary gap,” Lucas wrote.
Although this furlough plan has yet to be decided upon, the UC system will see either percentage reductions in employee salary or a number of unpaid days factored into the fiscal year for 2009-10. In lieu of the budget situation, UCSB Chancellor Henry Yang said the UC must consider a variety of cost saving options. “[The] UC needs to consult thoroughly and carefully consider every option, including enrollment, class size, programs, and services,” Yang said in an email.
In addition to the above methods, faculty hiring has been slowed by the budget situation in order to protect current UC employees. According to Yang, the campus was planning to conduct recruitment searches for about 60 faculty positions last academic year. As the budget situation began to deteriorate last fall and after appropriate consultation, UCSB was planning to spread these recruitments over a three-year period. “We are now thoroughly consulting with our Academic Senate, administrators, faculty colleagues, and the budget coordinating committee about reassessing our future faculty-hiring plans, based on the evolving budget situation,” Yang explained. “We are not considering layoffs of tenured and tenure-track faculty members.”
Yang said solutions to the ailing UC budget would not be easy, and closing the budget gap would require options avoided by the UC in the past. “Some programs already have been downsized or eliminated,” Yang said, referring to UCSB. “The University Extension program has been reduced by 50 percent, and the Osher Lifelong Learning Institute has been eliminated, as has the Office of International Research.”
The 2008-09 Budget Crisis in a Nutshell
The current state of the UC budget is an upshot of the national budget crisis. Coupled with California’s own financial problems, the financial shortfalls were so dramatic that it delayed the passing of the California state budget for nearly two months.
In late February of this year, the state Legislature and Gov. Arnold Schwarzenegger agreed on a final budget for the remainder of 2008-09 and 2009-10. The decision included $115 million in severed funds from the UC’s budget over the next two years. Due to the cuts, the UC’s total budget injury was elevated to a $450 million deficit – $115 million in new cuts, $122 million in under-funded enrollments over the next two years, and $213 million in unfunded utilities costs, employee health benefits, and other inflationary costs.
As budget problems persisted, the UCOP was forced to elevate its response to Sacramento’s constant barrage of the slender UC budget. In May, the UCOP announced a 5 percent pay cut for all senior UC leaders in lieu of additional budget cuts made by the State. In addition to Yudof, all Executive and Senior Vice Presidents, the General Council and Vice President-Legal Affairs, all Chancellors, and all Executive Vice Chancellors received pay cuts for the 2009-10 fiscal year.
Although recent measures such as Proposition 1A and 1E – which aimed to limit state spending and raise funds through the expansion of a “rainy day” fund and a reallocation of mental health funds – were in place during the California special election on May 19, the propositions ultimately failed, returning the state and UC budget to its current state of unrest.
Furlough/Salary Reduction Options
Currently, Yudof and the UCOP staff are considering three different options to aid in the budget crisis: Option 1, an 8 percent salary reduction plan; Option 2, a 21 unpaid days plan; and Option 3, a 12 unpaid days plan plus a 3.4 percent salary reduction plan.
Option 1 would reduce the salaries for all UC faculty and staff by 8 percent for the 2009-10 fiscal year – salaries for faculty and staff earning less than $46,000 would be reduced by 4% under this proposal. Unless specified by the UC Regents, the duration of the pay reduction period would begin August 1, 2009 through July 31, 2010. Officials say this plan would not only be easily implemented to the UC payroll, but would generate $193.5 million is UC General Fund savings.
Option 2 calls for a combination of certain unpaid holidays and scheduled furlough days, totaling 21 days, to meet an 8 percent pay deduction. For faculty and staff earning under $46,000, the plan would include 11 unpaid holidays and scheduled furloughs – accrued vacation and/or sick leave could not be applied to unpaid days. Unless specified by the UC Regents, the plan would begin August 1, 2009 and last through July 31, 2010. Although officials say this plan would generate $195.4 million in UC General Fund savings, the plan would create significant operational problems for UC campuses, and UC Medical Centers in particular.
Option 3 evokes a combination of the above two plans, coupling 12 unpaid holidays and scheduled furlough days with a 3.4 percent pay reduction – the combination would create the necessary 8 percent in pay deductions
For more information on the status of the UC budget crisis, visit the UCOP Newsroom.