May 21, 2012 | 07:54
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May 18, 2011
Administrators, regents discuss strategies for weathering financial storm
With the state budget still uncertain, the University of California Board of Regents today (May 18) discussed short- and long-term options for how UC will cope if state financial support for public higher education continues to wane.
Since January, the university has been developing strategies to absorb a $500 million cut in state funding for the fiscal year that begins July 1. Those cuts come on top of the exhaustive cost-saving measures the university has enacted over the last few years to cope with dwindling state support.
From the left, State Superintendent of Public Instruction Tom Torlakson, an ex-officio regent, UC President Mark Yudof and Russell Gould, chairman of the Board of Regents, listen to the discussion on potential strategies to stabilize UC's budget situation.
Gov. Jerry Brown presented Monday a revised budget that does not propose any additional cuts to UC. But it also does not give any clear indication as to when a voter initiative to extend tax increases might be on the ballot or what the consequences might be if the tax increases aren’t extended.
While there have been threats of additional cuts if the tax increases aren’t extended, the reality is that the budget situation for UC remains the same as it was in January when the governor announced his budget plan.
"For the time being, we’re maintaining our current trajectory to plan for a $96 million reduction," said Steve Olsen, UCLA vice chancellor of budget, finance and capital programs. The cut is UCLA’s share of the $500 million reduction proposed in January for UC. "We have sufficient cash reserves to operate in the 2011-12 fiscal year. We are still looking at a permanent shortfall of around $55 million in 2012-13. And that’s the problem we have to solve."
(UCLA’s budget plan was detailed in a Feb. 23 report to the UC Office of the President. Chancellor Gene Block outlined it in a March 7 message to the campus community.)
"Obviously, we don’t have final decisions yet from the Legislature or the governor," Olsen said. "When we do, we will adjust our planning as necessary and will be working closely with the Office of the President. In the meantime, I urge everyone on campus to be part of UCLA’s advocacy program to take our message to Sacramento."
At the regents’ meeting, Patrick Lenz, UC vice president of budget and capital resources, said that there is still a great deal of uncertainty about the final state budget and how UC will be affected.
If down the road the final state budget includes a cut larger than the currently proposed $500 million, Lenz told the regents, the university may need to consider increasing student fees to protect academic quality.
"We’ve got to assure faculty and students that we can protect the excellence of the university. … Any additional budget reduction is going to constitute us coming back to the regents with a plan B that is going to have to start looking at fee revenue," Lenz said, "despite the original intent not to pursue any [fee increases] greater than the 8 percent already approved by the regents in November."
Campuses are doing all they can to deal with the $500 million reduction contained in the January budget, he said. "We just don't have any more options available to us," he said, noting that UC's central office is planning to cut $80 million from its budget to help minimize budget impacts on the campuses.
As state support has fallen in recent years, UCLA has planned prudently and budgeted conservatively, creating reserves that have mitigated — but not altogether eliminated — the pain of absorbing funding cuts and paying rising mandatory costs.
To help adjust to new funding realities, UCLA is engaged in a campuswide, comprehensive, long-term process to increase efficiency and save money, cut costs and generate new revenue by restructuring its administrative operations and academic programs.
In the last three years, UC has resorted to furloughs, layoffs, student fee increases and program reductions, and also launched an aggressive effort to find operational efficiencies. The Working Smarter initiative expects to reduce UC costs by $500 million over the next five years.
But even with all those measures, UC's operational expenses are projected to outstrip revenues in the coming years. So President Mark G. Yudof and other senior administrative leaders are trying to develop a five-year plan to return fiscal stability to the university. During the regents’ meeting, Yudof walked them through a set of values and goals that he said would inform the process.
First and foremost, the university must preserve excellence in instruction, research and public service, he said, which it cannot do without continuing to attract and retain top-flight faculty.
"We have to maintain this world-class faculty," Yudof said. "We have to keep them here and recruit others of the same quality."
UC also must work to keep its doors open to all qualified California students, he said, including finding ways to extend financial aid to middle-income families if fees continue to rise.
"It's very hard to keep the university on an even keel when the financial stability isn't there," Yudof said. "We need to make long-term commitments to our students, our faculty, our staff. And we need to do all we can to keep our doors wide open to the students of California."
A return to reliable state funding could be one solution. The other levers that could affect UC's financial outlook are tuition and fees; enrollment levels; and changes to UC's staffing, programs and services, he said.
Nathan Brostrom, executive vice president for business operations, presented four hypothetical examples for how varying levels of future state support could affect tuition and enrollment levels if UC receives the $2.5 billion 2011-12 funding currently proposed by Gov. Brown.
Under the most optimistic scenario, if the state increases funding by 8 percent in fiscal year 2012-13, UC would need tuition increases of 8 percent each year through 2015-16 to cover UC's rising costs and support projected enrollment growth of 1 percent per year.
At the opposite end of the spectrum, if California cuts funding by 2 percent a year beginning in 2012-13, it would require capping enrollment at current levels and increasing tuition annually by 20 percent to cover all of UC's projected costs.
In short, for every additional dollar the state cuts UC, it would take the rough equivalent of a dollar in student fees to make up the loss, Brostrom said.
Judy Sakaki, vice president for student affairs, told regents that as UC contemplated the possibility of future fee increases, it was developing ways to ensure that UC remained affordable to both low- and middle-income families.
UC financial aid programs currently cover all tuition and fees for eligible students with family incomes below $80,000. Under new proposals, that ceiling would be raised to $90,000, while half of all tuition and fees would be covered for students whose family incomes are between $90,000 and $120,000.
"We must send a clear message that tuition should not be a barrier to low- and middle-income families," Sakaki said.
The regents did not act on the financial aid proposal, for which they will be resented a formal plan at a later meeting, possibly in the fall. The regents are expected to take action on the UC budget for fiscal 2011-12 at their meeting in mid-July.
