Good and bad news on the budget

By Cynthia Lee

Chances are good that UC will be looking at a $10-million cut in its $3-billion state-funded budget for 2008-09 instead of the more devastating $108-million cut proposed last January. Both subcommittees of the State Assembly and Senate recently backed a recommendation the governor made in his May revised budget plan to lessen the pain on UC campuses by restoring $98.5 million of the $108-million cut he initially proposed.

"This is clearly a very positive sign and a fairly strong indication that that funding will survive the budget process this year," Vice Chancellor Steve Olsen told the Legislative Assembly of the UCLA Academic Senate June 9, although he warned there is always the threat of 11th-hour revisions, as there have been in the past. The State Legislature is still divided over how best to resolve the deficit. And no level of funding can be guaranteed until the budget is passed and signed by the governor.

If the $98.5 million is restored and added to UC's general funds and student fee increases, its general fund revenues would rise above this year's level by $100.6 million.

The bad news is that UC must cover $195.5 million in new mandatory expenses. The costliest item, at $96.9 million, is compensation and benefit increases that UC must pay. UC needs state funds to cover faculty merit raises for next year, three months of wage increases already given faculty and staff under the 2007-08 compensation package, and projected increases in the cost of employee health benefits.

Student enrollment growth, which the governor decided not to fund, will cost UC $78.7 million. Another mandatory expense is the increased cost of energy and other utilities, estimated at $40 million. "These are state-supportable costs, and the university has not received any funding over the past several years to defray these increased costs," Olsen said.

To pay these expenses will effectively require the campuses to make budget cuts. If every department and school at UCLA were to bear the same across-the-board budget cut, it would amount to a 4% cut. "But this will not be applied across the board," said Olsen, who has advised campus leaders to prepare for cuts ranging from 5% to 10%.

In addition to mandatory expenses, there are $148.8 million in non-mandatory costs for high-priority items that are also not being funded by the state. The regents can decide to hold off on paying these costs, Olsen explained. Included are $93.8 million for cost-of-living adjustments for faculty and staff for 2008-09, and $20 million to cover the second installment in a four-year faculty salary plan to pay competitive wages.

Olsen has been meeting with all the vice chancellors and deans over the last several months to discuss how budget cuts can be implemented to minimize damage to the academic program. Decisions will be made by July, regardless of where the state is in the budget process, he said.

In the meantime, Administrative Vice Chancellor Sam Morabito is leading a system-wide effort to identify a number of options for reducing administrative costs and improving the overall efficiency of the campuses.