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Regents approve 2007-08 budget proposal
Includes five percent pool for salary increases, in line with the compact between UC and the governor, and $60 million to support restart of contributions to system's pension fund

| 29 November 2006

The University of California Board of Regents on Nov. 16 approved a 2007-08 budget proposal that includes new funding for student enrollment growth at both the undergraduate and graduate levels, expansion of research in fields critical to California's competitiveness, restoration of prior cuts to the instructional program, and salary increases for faculty and staff.

"This is a budget that continues to provide access to the University of California for all eligible students and also makes strategic investments to strengthen our contribution to the state's economy, health, and quality of life," said UC President Robert Dynes. "Universities need to be in the business not just of research and development, but research, development, and delivery that translates knowledge into societal benefit. This budget invests in efforts to continue expanding the university's ability to deliver new contributions to the people of California."

The budget includes no action on student fees for 2007-08. The state provided a "buyout" of student fees in 2006-07, and it is not yet known whether the state will have sufficient resources to do so again next year. As a result, the regents will withhold action on student fees until after the governor's state-budget proposal is issued in January.

Under the university's budget plan, UC's state-funded budget for the fiscal year beginning July 1, 2007, would total $3.324 billion, an increase of $247.9 million (8.1 percent) above the 2006-07 level. State funding and student fees pay for the core educational program at UC; however, the university's total budget from all sources for all activities, excluding the UC-managed national laboratories, is expected to be $17 billion in 2007-08.

The regents' budget plan serves as a budget request to the state. Regents at their meeting indicated they will continue reviewing the university's budget priorities in the coming months.

Highlights of the budget

The budget plan is based on the university's "compact" with the governor, an agreement that outlines state funding expectations and UC accountability expectations over a multi-year period. Below are highlights of the 2007-08 budget plan. These items would be funded both from state resources and from other revenue to the university, including student-fee revenue:

Enrollment growth: Funding for a 2.5 percent enrollment increase, or 5,340 full-time-equivalent students. This funding would allow the university to keep up with undergraduate-enrollment growth driven by continued growth in California's college-age population, as well as to continue increasing graduate and health-sciences enrollments that historically have not kept pace with the state's needs.

Student instruction: The budget proposes $10 million to help restore instructional budget cuts made in the first part of the decade. This is the third increment of funding over a three-year period directed toward improving the faculty-student ratio at UC.

Faculty and staff compensation: A 5 percent pool is included for employee-compensation increases, including merit-based and equity-based salary increases, health-and- welfare benefit-cost increases, and related cost increases. (Distribution of salary funding is subject to collective bargaining requirements where applicable.) This increase is intended to begin closing the market pay gap affecting many UC faculty and staff.

Retirement contributions: The budget requests $60 million in state funding for the first phase of reinstating employer contributions to the UC Retirement Plan. Employer and employee contributions to the retirement plan have not been required since the early 1990s due to the performance of the investment portfolio. However, it has been determined that the plan will become underfunded within the next several years unless contributions are resumed. The regents have voted to resume employer and employee contributions beginning in July 2007. Collective bargaining is underway with UC's unions regarding the employee contributions; in the first year, UC is proposing that paycheck deductions that now go to each employee's Defined Contribution Plan be redirected to the UC Retirement Plan, resulting in no reduction in take-home pay. More details are at www.universityofcalifornia.edu/news/ucrpfuture. [Editor's note: Readers may also wish to review the Berkeleyan's recent examination of the UC Retirement Plan's fiscal health, at newscenter.berkeley.edu/goto/UCRP.]

Graduate-student support: The budget includes several strategies for increasing support for graduate academic students, which has been identified by the regents as a key challenge facing the university. One initiative is to provide additional funding for graduate-student support on a matching basis to campuses, based on their success at utilizing the Strategic Sourcing Initiative to achieve savings through purchasing efficiencies and other strategies. A second initiative is a request that campuses use at least 50 to 60 percent of the funds contained in the $15 million research initiative (described below) to help support graduate students as research assistants. A third initiative is a continued freeze on nonresident tuition for graduate students, described further below.

Research initiative: The budget includes a $15 million research initiative, which would be funded above the compact minimum. This initiative would both partially restore recent budget cuts to core research programs, such as agricultural research and the Scripps Institution of Oceanography, and provide new funding for research initiatives important to the state's economic growth and job creation, including operating support for the California Institutes for Science and Innovation. This initiative also could be a source of funding for new competitive research projects important to the state.

Academic preparation: The budget continues current state and UC funding levels for student academic preparation and educational-partnership programs, which work to improve the academic performance and college preparation of K-12 students.

UC Merced: The budget continues allotment of $14 million in one-time funding needed for start-up costs as UC Merced increases enrollments.

Fees and financial aid

The budget does not include a proposal for student fees. The regents will await the governor's January state budget proposal before taking action on student fees; the budget as adopted by the regents assumes $71 million in funding from either student-fee income or state revenue.

Currently, mandatory systemwide fees are $6,141 annually for resident undergraduates and $6,897 for resident graduate academic students. With the inclusion of campus-based miscellaneous fees, the total annual-fee average is $6,852 for resident undergraduates and $8,938 for resident graduate academic students.

If a fee increase occurs in 2007-08, it would be the university's intention to provide for 33 percent of the undergraduate-fee income to be returned to financial aid, with special emphasis on providing assistance to needy middle-income students who traditionally have not qualified for grant aid. There would be a 45 percent return-to-aid for graduate academic students, recognizing the need to provide competitive graduate support and to cover collective-bargaining agreements for teaching assistants; and a 33 percent return-to-aid for professional-school students.

The budget does include a 5 percent ($900) increase in nonresident tuition for undergraduates only. Nonresident tuition would be frozen for graduate academic students for the third year in a row, as part of the university's effort to remain attractive to the most talented graduate students from across the nation and around the world. Currently in 2006-07, with the inclusion of mandatory systemwide fees that nonresidents must also pay, the average total nonresident student charges are $25,536 for undergraduates and $23,899 for graduate academic students.

Capital budget

The regents also approved a 2007-08 budget for state-funded capital improvements, including projects to improve the earthquake safety of UC buildings, construct new facilities to accommodate enrollment growth, renew outdated infrastructure, and expand the PRograms in Medical Education (PRIME) being developed on several campuses to improve the delivery of health care to underserved Californians, including through the expansion of telemedicine.

The capital budget includes $317 million for general capital outlay and $140 million for projects associated with expansion of the medical-school programs, both from general-obligation bonds approved by the voters in Proposition 1D, along with $30 million in state lease-revenue bonds for the Helios project at Lawrence Berkeley National Laboratory.

The budget presentation made to the regents is available at www.universityofcalifornia.edu/regents/regmeet/nov06/502.pdf.