Birgeneau, Breslauer lay out budget situation, options to address shortfalls
8 March 2009
Dear Campus Colleagues:
Last December we wrote to inform you of the preparations that we were making to face the extraordinary budgetary challenges confronting the university. We set out for you the overall approach that we would take to ready us for the challenging times ahead, one premised on protecting and preserving the excellence of Berkeley, within the context of inevitably reduced state funding. We had predicted that 2009-10 would be a much more difficult year than the current one, in which we are already making significant reductions. This prediction has now become an unavoidable reality.
The severity of the economic turmoil that began in October has deepened into prolonged recession and, like all other universities, we must make the difficult choices required of us to be responsible stewards of our resources. Our vision laid out in "Access and Excellence" will continue to provide the framework that will guide our ambitions for this great university and its long-term future among the top echelon of the world's finest universities. Our philosophy has not changed even though in the ensuing months our financial situation has worsened. Our priorities remain the same: maintain our comprehensive excellence, assure access and affordability for students, sustain a robust undergraduate curriculum, and make sound choices in a difficult time for our employees.
The situation that we face is one that is being shared by universities across the nation, both public and private. First and foremost, we are all committed to sustaining need-based financial aid for our students and helping those students whose circumstances have suddenly changed as a result of the economic crisis. Public universities are losing massive amounts of state funding while private universities are suffering enormous losses of endowment income. We believe that, along with our private peers, we will reach a new equilibrium with fewer resources for the next several years. Our challenge is to emerge from this recession with a stronger foundation on which to build for future generations.
The California Legislature has passed a budget to address the state's $42 billion deficit, which now gives us more information for planning. As we move through an already difficult fiscal year and look to the next, we are now predicting a shortfall of $60-70 million for UC Berkeley for 2009-10. About half of this deficit is the result of the withdrawal of state funding and half from increased obligatory expenses for which there has been no additional funding. The latter includes utilities, negotiated salaries and faculty merits, and health and medical benefits costs including the anticipated restart of pension contributions. Unfortunately, the deficit could still grow, and most likely will, as the state's response to its financial crisis unfolds.
We continue to examine how we can increase our revenues and reduce our expenses. We have already begun taking a number of important measures to reduce expenses by slowing the rate of faculty hiring and providing incentives for faculty retirement. Excellent work is taking place on many fronts across campus to implement new, more cost-effective ways to do business. We applaud and appreciate all of you who are preparing Berkeley to meet the growing financial challenges.
We have asked the campus to plan for an 8% permanent budget reduction. We will not implement this as an across-the-board reduction and will review budget plans and distribute the cuts in a targeted way. We believe that it is better to make some difficult choices now than to continue with a year-over-year series of smaller budget cuts. This will allow us to develop a stable financial plan and transition to a lowered funding base at which we can remain in equilibrium until new resources again become available.
Reducing the size and cost of our campus workforce will be a necessary part of addressing the budget situation. Our goal is to preserve existing staff positions wherever possible, and we hope to accomplish as much as possible through attrition and voluntary means, although some units will have no other option but to implement permanent staff layoffs.
Today we are announcing two programs designed to assist units in reducing workforce expenses. These include a staff hiring freeze to take effect immediately and an expansion of the START program which allows staff to reduce voluntarily their percentage worktime from between 5% to 50%. The details of these programs are described in an accompanying memorandum from Vice-Chancellor Administration Nathan Brostrom. We are also in discussion with the UC Office of the President regarding a Voluntary Separation Option and will provide details of this program as soon as they are available.
Many of you are wondering about furloughs. The question of furloughs for 2009-10 for both faculty and staff is being explored with the UC Office of the President and we will not know about the feasibility of this option for some time yet. If furloughs become an option for the coming year, our senior administration, including Deans, would be part of any furlough program. It has already been announced that there will be no salary increases for senior administrators in 2009-10, just as there were none in 2008-09.
Clearly, a reduction in our workforce will require that we consider how we can reduce our workload. A number of strategies are being implemented for easing workload pressures as we streamline our business processes, and more will be developed as we proceed to upgrade some of our information systems over the next two years. Information about workforce reduction programs and measures being implemented to reduce workload pressures will also be included in Vice-Chancellor Brostrom's letter.
As we look at these cost-saving measures, we are also committed to raising revenues. The Campaign for Berkeley has reached more than $1.4 billion of its $3 billion goal. We have built a strong infrastructure to support the campaign and are confident that with the support of our alumni, friends and benefactors we will achieve our philanthropic goals.
Our research funding has continued to grow and is now well over half a billion dollars annually. We are extremely well positioned to take advantage of the additional funding the stimulus package is making available to the federal granting agencies - $10.4 billion increase for NIH and $3 billion for NSF - in the federal stimulus bill. Our research leadership in energy and the environment is consonant with the new directions being set in the Department of Energy. Interim Vice-Chancellor for Research Robert Price and our government relations staff are working with our research community to be ready to pursue these new funding sources quickly and aggressively.
We have a number of projects that are shovel-ready to take advantage of funding that will come to the State from the American Recovery and Reinvestment Act.
We want to assure you that we are diligently planning to meet our fiscal challenges. These are exceedingly difficult times that call for measures that will affect us all. Many of us have partners and family members who are being affected by job losses and other measures that are being implemented throughout the State to deal with the recession. Many of you are anxious about your own situations. We will be doing everything we can to support our campus community members during these difficult times.
The UC Berkeley community has always risen to difficult challenges. We are self-motivated, creative, innovative and entrepreneurial. We are a testament to the public spirit and vision of the people of California who created this great institution 141 years ago. With your help, we will meet these challenges and continue to fulfill our mission for research, education and public service while building a stronger university for the future.
This message and updated information about the budget and the various workforce programs we are implementing will be available on our Budget Central website.
We ask that supervisors please print out this message for those staff who do not use computers.
Robert J. Birgeneau
George W. Breslauer
Executive Vice-Chancellor and Provost