Regents told state expects $8-10 billion shortfall
Budget office suggests areas for cost savings in next UC fiscal year

By Cathy Cockrell, Public Affairs

24 October 2001 |

Editor's note: The following is a corrected version of the article that appeared in the Oct. 25 Berkeleyan print edition.

The state of California’s shifting fortunes spell lean times and tough choices for the university, the top UC budget official told the Board of Regents last week, and cost saving areas will likely include salaries and enrollment growth.

“In my 34 years (at UC), the beginning of every decade turns out to be a financial disaster,” Vice President for Budget Larry Hershman told the regents. This decade is no exception, he said.

While the long-term economic outlook for the state is good, the state faces cuts of $8 billion to $10 billion for its 2002-03 budget, Hershman said. Its problems will be “of another order” if the state’s plans for recouping energy expenses fail to pan out or if voters reject the educational bond measure expected to be on the November 2002 ballot.

The exact cuts that UC faces won’t be known until early next year. However, few areas of the UC budget will be exempt from scrutiny — except security, which will get additional funding.

The Office of the President is considering a number of areas for cost savings: salaries, summer sessions, student fees, enrollment and special programs, including outreach.
On salaries, Hershman told the regents it doesn’t make sense to withhold faculty merit increases. “If we do this for the faculty, we need to do this for the staff,” he added.

Berkeley, UCLA and UC Santa Barbara have summer session programs, which they are expanding to help absorb Tidal Wave II enrollment increases. The university has been planning to bring summer instruction to the rest of the campuses.

“I am not optimistic that we’re going to be able to do that,” Hershman said. “The Department of Finance is asking us to wait one year.”

Fee hikes are another unpopular possibility. Hershman reported that UC fees are significantly lower than those of peer institutions. There have been no systemwide fee increases for seven consecutive years, he noted, although there was a 10 percent tuition cut for undergraduates and a 5 percent reduction for graduate students during that time.

One option is to “undo” the recent reductions.

“Fee increases have to be on the table,” remarked Regent Ward Connerly. “The only question is how much.”

Hershman cautioned, however, that any fee increase would have to be worked out carefully in consultation with the state. “If we increase student fees and just get a bigger budget cut, it doesn’t help us or the students and their families,” he noted.

UC took $400 million in budget cuts in the early 1990s but didn’t cut enrollment, Hershman noted. Teacher/student ratios suffered as a result. This time, he said, “I do not think it’s a good strategy to keep increasing enrollment.”

The budget office is also considering targeted cuts to such programs as outreach and professional development institutes. “These are all terrific programs,” noted Hershman. “But maybe we can’t afford to keep these at the same funding level.”

The proposed 2002-03 budget will be presented to the Regents for approval in November. The governor presents his budget proposal in early 2002 and his revised budget in May. Historically, the revised May budget is leaner than earlier versions.
“We are between a rock and a hard place,” commented Regent Peter Preuss, urging that cuts not compromise “the infrastructure of the university.”

Said Regent Judith Hopkinson: “Which one of these nasty things do we want to do first?”


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