The University Budget Debora Obley Associate Vice President Budget and Capital Resources Office of the President November 2011

Today’s Discussion Systemwide Budget Process Impact of the Current Budget Crisis Key Budget Issues Funding Streams Initiative 2

Budget Office Mission Budget Development Budget Negotiation Budget Management 3

Budget Development Governor’s Budget Regents Approve Budget Request January Negotiations with Department of Finance Year 1 UC Drafts Budget Request July Internal Consultation 4

Budget Negotiation Governor’s Budget Legislative Analyst Recommendations Regents Approve Budget Request January Subcommittee Hearings President Meets with Department of Finance Year 1 Conference Committee UC Drafts Budget Request July Senate and Assembly Approve Budget Bill Internal Consultation Governor’s Vetoes and Signature 5

President’s Preliminary Allocations Budget Management January Year 1 President’s Preliminary Allocations July Start of Fiscal Year 6

President’s Final Allocations Budget Management January Year 2 Campuses Expend Funds July President’s Final Allocations Fiscal Close 7

Accountability Reporting Development of New Budget Budget Management January Accountability Reporting Year 3 Development of New Budget July Fiscal Close 8

Internal Budget Consultation Regents Bimonthly meetings Individual consultation President Vice Presidents Faculty Academic Council UC Planning and Budget Committee Committee on Faculty Welfare Campus Leadership Council of Chancellors Campus EVCs/Provosts Budget Vice Chancellors Other Vice Chancellors Students UC Student Association Meetings with President Quarterly student meetings 9

The 2011-12 Budget Request (MILLIONS OF DOLLARS) Enrollment growth and instructional programs Compensation and non-salary items Post-employment benefits Savings, alternative revenues, and restorations Financial aid Total increase in expenditures $36.6 $197.2 $92.8 $85.0 TBD $411.6 10

2011-12 Sources of Funds - $22.5B (MILLIONS OF DOLLARS) 11

Recent History 2005-06 through 2007-08: 2008-09 and beyond: 3% base budget increases during 2005-06 and 2006-07 and 4% during 2007-08 Enrollment growth of ~5,000 students annually (2.5%) Additional funding to avoid student fee increases in 2006-07 2008-09 and beyond: State fiscal crisis results in unprecedented cuts for UC ARRA funding provides temporary relief in some years 12

2011-12 Budget (MILLIONS OF DOLLARS) 48.5% 13

2015-16 Budget (MILLIONS OF DOLLARS) Budget Gap: $1.5 billion 14

Change in Funding per Student Per-student Average Expenditures for Education, Adjusted for Inflation 15

Key Budget Issues Competitiveness of faculty and staff salaries Retirement contributions and retiree health Enrollment growth and graduate enrollment Student fees and student financial support Capital outlay 16

Faculty Salaries Lag the Market Faculty Salaries as a Percentage of Market Variance among campuses. Some are at market. Not hiring in order to pay salaries for those here. Very difficult to rebuild. 17

Staff Salaries Also Lag the Market Increases in Funding for Staff Salaries Compared to Market 18

Retirement Contributions No contributions for 19 years Funded status of plan has declined to 83% No funding yet provided by the State 2010-11 2011-12 2012-13 2013-14* Employer 4% 7% 10% 12% Employee 2% 3.5% 5% 6.5% * proposed 19

Retiree Health Benefits Pay-as-you-go system Rising numbers of retirees Rising health care costs Unfunded liability: $14.6 billion State has contributed to support costs in recent years 20

State-supported Enrollment Most recent campus estimates for 2011-12 put UC at 9,900 California residents for whom the State has never provided marginal cost funding. Total overenrollment is approximately 13,000; and including the cuts UC has faced over the last several years, the University estimates it is enrolling approximately 24,000 students not supported by the State. 21

Graduate Enrollment Proportion 22

Fee Comparisons 2011-12 University of California And Public Comparison Institution Fees 23

Gift Aid Reaching $2.35 Billion 24

2009-10 Undergraduate Pell Grant Recipients UC Remains Accessible 2009-10 Undergraduate Pell Grant Recipients 25

Capital Outlay Past priorities: Future priorities: New facilities for enrollment growth Seismic upgrades Future priorities: Facilities modernization Program improvements Continuing seismic upgrades 26

2011-21 Capital Project Objectives Growth-Related Projects 27

Funding Streams Initiative

Why did we implement the Funding Streams Initiative? Promote transparency and simplicity Incentivize campuses to maximize revenue Address campus concerns about Educational Fee, Indirect Cost Recovery, and other fund source distribution

Distribution of Core Funds Revenue by Source Location State General Funds Tuition and Fee Revenue Educational Fee Registration Fee Professional School Fees Summer Session Fees Nonresident Tuition* Application Fees* Research-related and Other Revenues Indirect Cost Recovery* Patent Revenue* Interest Income on General Funds* Net State funding calculated as follows: Total Core Funds Budget Estimated Tuition and Fee Revenue Research-related and Other Revenue Net State Funding

Distribution of Core Funds Revenue by Source Location State General Funds Tuition and Fee Revenue Educational Fee Registration Fee Professional School Fees Summer Session Fees Nonresident Tuition* Application Fees* Research-related and Other Revenues Indirect Cost Recovery* Patent Revenue* Interest Income on General Funds* Net State funding calculated as follows: Total Core Funds Budget Estimated Tuition and Fee Revenue Research-related and Other Revenue Net State Funding

General Campus Core Funds Budgets per Student Estimate based on CPEC methodology: General Campus Instruction and Research General Campus Academic Support General Campus shares of support activities Student Services prorated based on General Campus enrollment Other activities prorated based on General Campus I&R and Academic Support budgets Excludes financial aid Variation across campuses is the result of: Changes in State funding over time Historical allocation methods Graduate student proportions Other factors

Re-distribution of Educational Fee Increase Revenue Note: No new funding was provided to systemwide activities during 2008-09. All revenue was returned to campuses. In other years, the share returned to campuses has been lower.

Funding Streams Principles All funds generated on a campus stay on a campus The only exception is undergraduate financial aid Funds previously supporting UCOP returned to campuses UCOP is now funded on a flat tax

UCOP Assessment – 1.6% for 2011-12 Assessment supports $277.7 million for: General Administration Central Services Central Academic Programs Systemwide Initiatives