university of california update on the 2008-09 and...
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UNIVERSITY OF CALIFORNIA
Update on the 2008-09 and 2009-10 UC Budgets,Preliminary Discussion of the 2010-11 UC Budget, and
Proposed 2009-10 Mid-year and 2010-11 Student Fee IncreasesPatrick J. Lenz
Vice President for Budget and Capital ResourcesSeptember 16, 2009
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UC Budget Issues and Recommendations
• Overview on State Fiscal Condition
• Update on the 2008-09 and 2009-10 UC Budgets
• Preliminary Discussion of the 2010-11 UC Budget
• Proposed 2009-10 Mid-year and 2010-11 Student Fee Increases and Financial Aid
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State Budget Actions
Process Budget Gap• January State Budget $42.0 B
– Initial Budget Gap• February Special Session $36.0 B
– $6 B May Election failed voter approval• May Revise $24.0 B
– State Budget Gap increases• Enacted State Budget $60.0 B
– Budget Solutions
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State Fiscal Condition and Future Budget Gap
• Budget Cuts $31.0 B• Taxes $12.6 B• Federal Stimulus (ARRA) $ 8.0 B• Other $ 8.4 B
• Total $60.0 B• 2010-11 Budget Gap $7 to $8 B
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2008-09 UC Budget Actions
• September 2008 Budget Act $3,250.3 B• 2008 Budget Act (One-Time) ($33.1 M) $3,217.2 B• Special Session (Ongoing) ($65.5 M) $3,151.7 B• May 14, Revise (One-time) ($510.0 M) $2,641.7 B• May 26, Reduction (One-time) ($207.5 M) $2,434.2 B• Final Budget Act Adjustment $2.0 M $2,436.2 B
(Ongoing)• Total ($814.1 M)
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2008-09 UC Budget
$716 M ARRA
Funding
$814.1 MState
General Fund Reduction
$84.9 M Fee Revenue
$227.5 M Mandatory
Costs
$240.7 M UC Budget Cuts
$0
$250
$500
$750
$1,000
$1,041.6 million $1,041.6 million
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2009-10 UC Budget Actions
• January 10, Governor’s Budget $3,250.3 B
• Special Session (Ongoing Cut) ($65.5 M) $3,184.8 B
• Special Session (Trigger, One-Time) ($50.0 M) $3,134.8 B
• Special Session (Veto, One-Time) ($255.0 M) $2,879.8 B
• May 14, Revise (Unallocated) ($50.0 M) $2,829.8 B
• May 14, Revise (Academic Preparation) ($31.3 M) $2,798.5 B
• May 26, Budget Reduction ($167.5 M) $2,631.0 B
• Conference Committee Action ($17.8 M) $2,613.2 B
• Total ($637.1 M)
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2009-10 UC Budget
$75 M Debt Restructuring
$637.1 MState General
Fund Reduction
$184 M Salary
Reduction Plan
$368 M Mandatory
Costs
$210.8 M Approved Fee
Revenue
$535.2 M UC Budget Cuts
$0
$250
$500
$750
$1,000 $1,005.1 million $1,005.1 million
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2010-11 UC Budget and Future Funding Issues
• Restoration of One-Time Cuts $305.0 M
• Enrollment Reduction ($22.6 M)
• Salary Reduction Plan $184.0 M
• UC Retirement Plan $108.9 M
• Other New Mandatory Costs $129.4 M
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2009-10 UC Budget Actions
• January 10, Governor’s Budget $3,250.3 B
• Special Session (Ongoing Cut) ($65.5 M) $3,184.8 B
• Special Session (Trigger, One-Time) ($50.0 M) $3,134.8 B
• Special Session (Veto, One-Time) ($255.0 M) $2,879.8 B
• May 14, Revise (Unallocated) ($50.0 M) $2,829.8 B
• May 14, Revise (Academic Preparation) ($31.3 M) $2,798.5 B
• May 26, Budget Reduction ($167.5 M) $2,631.0 B
• Conference Committee Action ($17.8 M) $2,613.2 B
• Subtotal ($637.1 M)
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State-Funded Enrollment
• In 2008-09, UC was over-enrolled by 11,700 students• Four-year plan to reduce total enrollments by 8,000 –
10,000 students• For 2009-10, first-time freshmen were reduced by 2,300 to
slow enrollment growth and CCC transfers increased by 500 • Even so, projected over-enrollment will still grow to nearly
14,000 students in 2009-10• 2010-11 recommendation:
– Reduce first-time freshman by another 2,300 – Increase CCC transfers by another 250
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State-Funded Enrollment
180,000
190,000
200,000
210,000
04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15
State-Funded Target Actual
Projected - Current Trajectory Projected - Proposed Additional Reduction
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Salary Reduction Plan
• Approved by the Regents in July• Implemented September 1, 2009• In effect until August 31, 2010• Recognized statewide for thoughtful protection
of lower paid employees• Will generate savings of $184 million in 2009-10
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UC Retirement Plan
• In January, Governor included $20 million in 2009-10 state budget proposal, subsequently eliminated in the Special Session
• In February, Regents approved April 15, 2010 implementation date
• Annualized 2010-11 State share: $96 million
• Total core funds cost to UC: $108.9 million
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Campus Mandatory Costs
• Academic Merit Increases $29.5 M• Employee Health Benefits $34.1 M• Retiree Health Benefits $10.0 M• Purchased Utilities $13.0 M• Non-salary Price Increases $24.6 M
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2010-11 UC Potential Budget Reductions and Funding Issues
$75 M Debt Restructuring
$637.1 MState General Fund
Reductions
$210.8 M Approved Fee
Revenue
$368 M Continuing
Mandatory Costs
$305 M State General Fund
Restoration
$218.3 M Additional 2010-11 Mandatory Costs $632.6 M
UC Budget Funding Gap
$0
$250
$500
$750
$1,000
$1,250$1,223.4 million $1,223.4 million
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Addressing the Budget Gap
• 2010-11 UC Budget Gap $632.6 M• Equivalent to:
– Eliminating State support for 2 medium-sized campuses
– Reducing enrollment by 57,500 students– Closing UC libraries and public service
programs– Terminating 8,300 employees– Eliminating all core-funded student financial aid
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UC Administrative Efficiencies and Other Actions
• Strategic Sourcing $154.0 M• UCOP Restructuring $62.2 M• Energy Savings Program $18.0 M• Other Actions:
– Senior management salary freeze– 5% senior administrator pay reductions on July 1, 2009– Cancellation or deferral of bonus and many incentive
programs– Suspension of staff merit awards – Restrictions on hiring, travel, and purchasing
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Campus Budget Actions
• Greater impact on administrative versus academic programs
• Administrative restructuring and consolidations• Positions eliminated, hiring deferred, and layoffs• Service reductions• Increasingly using “one-time” campus reserves• Class sections reduced or eliminated, class
sizes increased
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Campus Budget Actions
2009-10 (Projected)
2008-09 (Actual)
951 additional
633Deferred Hiring
1,919 additional
1,951Positions Eliminated
1,006 additional
884Employee Layoffs
$139.2 M$56.4 MInstructional Budget Reductions
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“Unrestricted” Net Assets• UC does not have billions of dollars in uncommitted funds that it can use to
make up for massive reductions in state support. • UC’s June 2008 financial statements reference $5.3 billion in "unrestricted net
assets" — terminology required to be used under GASB requirements. • The definition of “unrestricted” must be used for any funds that are not subject
to externally imposed restrictions. “Unrestricted assets” does not mean uncommitted assets.
• Funds are kept in over 76,000 funds and accounts that each individual campus controls for very specific uses including:
– endowments– capital project funding– medical centers– operating funds to support academic programs and research initiatives on a multiple-
year basis– liening funds for authorized equipment purchases and services that have not been
expended by the end of the fiscal year
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“Unrestricted” Net Assets• The next issuance of our audited financial statements summarizing
our financial condition as of June 30, 2009 will show a substantial drop in our unrestricted net assets to an amount below $4 billion.
• Some of this drop is attributable to the growth in our unfunded retiree health care obligations and investment losses.
• The financial statements will show a decrease in operating cash balances at our campuses. These accounts are used by campuses to meet a variety of expenses throughout the year for core instructional needs.
• The substantial budget cuts from the State – including those in the middle-and-end of the 2008-09 fiscal year – hit our campus programs so late that all available funds had to be tapped to help bridge over to the current fiscal year.
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Preview of Unrestricted Net Assets for FY 2008-09
Total to be reported: Below $4 billion, down from $5.3 billion
Highlights:*• Capital Projects $ 946 M• Medical Centers $ 512 M• Endowment Income/FFEs $1,199 M• Debt Service Funds $ 35 M• Misc. Student Fee & Auxiliary Payments $ 699 M* amounts are approximates
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2009-10 Mid-Year and 2010-11Student Fee Recommendations
• Mid-Year Student Fees
• 2010-11 Student Fees
• Financial Aid Opportunities
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Mid-Year Student Fee Increases
$75.1 M$42.2 M$117.3 M2009-10
Net RevenueStudent Financial Aid
Total Revenue
$8,301$579$7,722Graduate Professional
$9,390$654$8,736Graduate Academic
$8,373$585$7,778Undergraduate
Proposed FeeProposed Increase*
Current Fee
*Annualized fee increases would be $1,170, $1,308, and $1,158 for resident undergraduates, graduate academics and graduate professional students, respectively.
*During 2010-11, annualized fee increases would generate $253.8 million in total revenue, of which $91.0 million would be set aside for financial aid, providing $162.8 million in net revenue to help address budget issues.
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2010-11 Proposed Fee Increases
$10,212$1,332$8,880Graduate Professional
Mandatory Fees:
$900$900$0Undergraduate Business / Engineering Fee
$4,200 -$30,979
$200 -$5,174
$4,000 -$26,283
Professional Degree Fees
$11,550$1,506$10,044Graduate Academic
$10,302$1,344$8,948Undergraduate
Proposed 2010-11 Fee
Proposed Increase
2009-10 Fees
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2010-11 New Fee Revenue
$187.1 M$104.6 M$291.7 MMandatory Fees
$10.0 M$4.9 M$14.9 MUndergraduate Business / Engineering Fee
$18.2 M$9.0 M$27.2 MProfessional Degree Fees
Net RevenueStudent Financial Aid
Total Revenue
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Financial Aid for UC Undergraduates
• Financial aid and tax credits provided more than $1.7 billion to UC undergraduates in 2008-09
• 55% of undergraduates received $1 billion in grants and scholarships with an average award of $11,100
• One-third of undergraduates are low-income, Pell Grant recipients, more than any other comparable research university
Display 10
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Financial Aid Enhancements: 2009-10
• Augmentations to Cal Grants and UC grants to cover fee increases of lower-income students
• Pell Grant expansion raising maximum award by $619, from $4,731 to $5,350
• Tuition tax credit expansion raising maximum credit and raising income ceiling
• Introduction of Blue and Gold Opportunity Plan ensuring systemwide fees coverage
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Estimated Financial Aid and Systemwide FeesAverage Per Undergraduate by Parent Income, 2008-09 through 2010-11
Net Fee CostsTax CreditsGrants &
Scholarships
$4,8
57
$4,6
75
$6,1
69
$5,8
54
$5,5
63 $7,3
63
$6,4
64
$7,7
11 $9,6
40
$1,800 $1,509 $2,159
$0
$4,000
$8,000
$12,000
$16,000
$20,000
2008 2009 2010 2008 2009 2010 2008 2009 2010 2008 2009 2010 2008 2009 2010
Below $60K $60K to $90K $90K to $120K
$120K to $180K
Above $180K
$7,126 $7,126 $7,126 $7,126 $7,126
$8,373 $8,373 $8,373 $8,373 $8,373
$10,302 $10,302 $10,302 $10,302 $10,302
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Estimated Change in Undergraduate Net Fee Costs2009-10 and 2010-11, relative to 2008-09
$1,3
12
$1,5
09
$3,1
76
($291) ($291)
$359
($182)
$1,2
47
-$1,000
$0
$1,000
$2,000
$3,000
$4,000
2009 2010 2009 2010 2009 2010 2009 2010 2009 2010
Cha
nge
From
200
8-09
Net
Fee
s
$0 $0
Below $60K
$60K to $90K
$90K to $120K
$120K to $180K
Above $180K
Parent Income
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Estimated Change in Net Cost of Attendance2009-10 and 2010-11, relative to 2008-09
Parent Income
$2,7
18
$2,9
40
$4,6
15
$1,8
57
$309
($248)
$395
$1,7
42
$308
$271
-$1,000
$0
$1,000
$2,000
$3,000
$4,000
$5,000
2009 2010 2009 2010 2009 2010 2009 2010 2009 2010
Cha
nge
From
200
8-09
Net
Cos
t of A
ttend
ance
Below $60K
$60K to $90K
$90K to $120K
$120K to $180K
Above $180K
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Proposed Student Fee Revenue
• 2009-10 Mid-year Fee (Annualized) $162.8 M• 2010-11 Fee Recommendation $215.3 M• Total $378.1 M
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2010-11 UC Potential Budget Reductions and Funding Issues
$75 M Debt Restructuring
$637.1 MState General Fund
Reductions
$210.8 M Approved Fee
Revenue
$368 M Continuing
Mandatory Costs
$305 M State General Fund
Restoration
$218.3 M Additional 2010-11 Mandatory Costs $632.6 M
UC Budget Funding Gap
$0
$250
$500
$750
$1,000
$1,250$1,223.4 million $1,223.4 million