As the State’s economic recovery remained slow, the
Display XXI-10: Provisions of the Compact with Governor Schwarzenegger, 2005-06 through 2010-11
Base budget adjustments of 3% in 2005-06 and 2006-07 and 4% for 2007-08 through 2010-11 Additional 1% base budget adjustments for annual
shortfalls in core areas beginning in 2008-09 and continuing through 2010-11
Marginal cost funding for enrollment growth of 2.5% per year
Student fee increases of 14% in 2004-05 and 2005-06 for undergraduates, and 20% in 2004-05 and 10% in 2005-06 for graduate students, followed by fee increases consistent with Governor’s proposed long- term student fee policy beginning in 2007-08 Annual adjustments for debt service, employer
retirement contributions, and annuitant health benefits One-time funds and new initiatives when the State’s
fiscal situation allowed
At least $345 million of capital outlay annually Governor’s proposed solution to the overall deficit included major budget reductions in most areas of the budget, heavy borrowing, and several one-time actions that would only delay further cuts into future years. The University was gravely concerned about the future of the institution and the potential long-term effect on quality of the academic enterprise as the State fought its way out of its economic crisis. Governor Schwarzenegger was equally concerned about the University’s future and asked his administration to work with the University and with the California State University on a new long-term funding agreement for the four-year institutions.
A new higher education Compact was announced by Governor Schwarzenegger in May 2004, shown in detail in Display XXI-10. Negotiation of the Compact with Governor Schwarzenegger helped stem the tide of budget cuts that had prevailed for four years.
According to the Compact, beginning in 2007-08, the University was to develop its budget plan each year based on the assumption that fees would be increased consistent with the Governor’s proposed long-term student fee policy, which said that that student fee increases should be equivalent to the rise in California per capita personal income or up to 10% in years in which the University determined that providing sufficient funding for programs and preserving academic quality would require more than
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the per capita increase rate. Revenue from student fees would remain with the University and would not be used to offset reductions in State support. The Compact also called for UC to develop a long-term plan for increasing
professional school fees that considered average fees at other public comparison institutions, the average cost of instruction, the total cost of attendance, market factors, the need to preserve and enhance the quality of the
professional programs, the State’s need for more graduates in a particular discipline, and the financial aid requirements of professional school students. Revenue from
professional school fees would remain with UC and would not be returned to the State.
As with the first iteration of the Compact under Governor Wilson, the new Compact included accountability measures relating to issues that traditionally had been high priorities for the State, including maintaining access and quality; implementing predictable and moderate fee increases; enhancing community college transfer and articulation; maintaining persistence, graduation, and time-to-degree rates; assisting the state in addressing the shortage in science and math K-12 teachers; returning to paying competitive salaries and closing long-term funding gaps in core areas of the budget; and maximizing funds from the federal government and other non-State sources. The University was to report to the Administration and the Legislature on its progress in these areas each year. With the 2005-06 budget, the Compact represented a true turning point. The first three years of the Compact were very good for the University, as shown in Display XXI-11. In each year, the State provided a normal workload budget and UC began to address major shortfalls that had occurred in the recent fiscal crisis.
Over that three-year period, base budget adjustments helped support salary cost-of-living, market-based, and equity salary adjustments; merit salary increases; health and welfare benefit cost increases; and non-salary price increases. Enrollment workload funding was provided to support significant enrollment growth. In addition, the marginal cost of instruction methodology was revised in 2006-07 to more appropriately recognize the actual cost of hiring faculty and to include a component for maintenance
Display XXI-11: Major State Funding Changes under the Compact, 2005-06 through 2007-08 (Dollars In
Thousands)
2005-06 STATE FUNDING Compact Funding
Base Budget Adjustment (3%) $76,124
Annuitant Health and Dental Benefits $521
Enrollment Growth $37,940
Reductions
One-time enrollment shortfall ($3,764)
Other Initiatives
Labor Institutes ($3,800)
Science and Math Initiative $750
UC Merced (One-Time) $14,000
COSMOS ($1)
Total State Funding = $2.839 billion
2006-07 STATE FUNDING Compact Funding
Base Budget Adjustment (3%) $80,489
Enrollment Growth $50,980
Nursing Enrollment Growth $963
PRIME (MD) Enrollment Growth $180
Buyout of 8-10% Student Fee Increases $75,015 Other Initiatives
Student Academic Preparation $17,300
Science and Math Initiative $375
CA Community College Transfer $2,000
Labor Institutes $6,000
Substance Abuse Research $4,000
UC Merced (One-Time) $14,000
Total State Funding = $3.069 billion
2007-08 STATE FUNDING Compact Funding
Base Budget Adjustment (4%) $116,734
Annuitant Health and Dental Benefits $10,458
Enrollment Growth $52,930
Nursing Enrollment Growth $757
PRIME (MD) Enrollment Growth $570
Reductions
UC-Mexico Research ($500)
Other Initiatives
UC Merced (One-Time) $14,000
COSMOS $500
Total State Funding = $3.257 billion
of new space, which had not been adequately funded by the State in recent years. In each of the three years, UC was also able to direct $10 million for a multi-year plan to
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restore $70 million of unallocated reductions that had originally been targeted at instructional programs. Thus, $30 million was put toward this goal. The State also funded several initiatives during this period, including the Science and Math Initiative, the labor and employment institutes, and the Gallo Substance Abuse Program.
Funding for student academic preparation programs was a major issue in the budget process for all three years. In each year, the Governor’s January budget proposed eliminating State funds for this program, leaving only the University’s $12 million in support for student academic preparation as called for in the Compact. In the end, the final budget act each year restored the State support, and in 2006-07 included an augmentation of $2 million for community college academic preparation programs. In 2007-08, the University’s budget included $500,000 to support an increase for the California State Summer School for Mathematics and Science (COSMOS), an intensive academic four-week residential program for talented and motivated high school students.
Also in 2007-08, the Governor’s January budget had proposed elimination of State funds for labor and
employment research; however, the Legislature augmented the University’s budget by $6 million to restore funding for labor research to its original level when the program was initiated in 2000-01.
In 2005-06 and 2007-08, fee increases were implemented, but in 2006-07 the State provided funding to avoid planned increases in student fees.
There were several initiatives the University had proposed in 2007-08 that were not funded in the final budget. The University had requested that employer and employee contributions to the UC Retirement Plan be reinstated (at an estimated cost of $60 million during the first year); however, the final budget did not include these funds. Also in 2007-08, the January Governor’s budget proposed increasing core support for the four California Institutes for Science and Innovation by a total of $15 million to ensure that each Institute had a minimum level of support with which to operate, which in turn would serve as seed money to continue to attract funds from industry and governmental sources. Finally, for several years, the State budget had
contained language authorizing the University to use operating funds (up to $7 million) to support renovations needed for the University’s educational facility in Mexico City, Casa de California; however, it was agreed by the Governor and the Legislature that no State funds would be used for this facility going forward.
UC’s State-funded budget rose 5% in 2005-06, 8.2% in 2006-07, and 5.9% in 2007-08, rising from $2.8 billion in 2005-06 to $3.26 billion in 2007-08.
2008-09 THROUGH 2011-12: A SECOND STATE