Campus units were directed this week to plan for a 1.7 percent, one-time reduction in their 2002-03 state-funded budgets to help offset an expected $9 million shortfall in energy funding.

"Our campus has some unique and substantial challenges related to the funding of energy," Provost and Executive Vice Chancellor Virginia Hinshaw wrote in a memo to deans, vice chancellors and vice provosts. "Unfortunately, some very favorable energy pricing opportunities enjoyed by the campus in past years are no longer available to us in the wake of the state's energy crisis. Therefore, even as natural gas prices trend lower, our deficit will persist at a significant level."

The Office of the President will try to cover some of the energy deficit, but the extent of its assistance won't be known until after the new budget year begins on July 1. In the interim, Hinshaw says it's prudent for the campus to plan to absorb the full shortfall with this one-time, across-the-board cut.

In January, Hinshaw suspended an earlier call for units to develop preliminary plans for cutting 8 percent from their 2002-03 general fund and student fee budgets after the release of Gov. Gray Davis' proposed budget. Davis' recommended funding for UC did not justify the continued consideration of an 8 percent permanent reduction, Hinshaw said.

This week, Hinshaw urged the campus to cut energy costs through additional conservation measures.

"Each of us should review our daily campus routines and consider ways of reducing energy consumption," Hinshaw said. "I recognize that conservation will not entirely solve our energy budget shortfall. However, we should all do what we can - every dollar the campus saves by employing measures that improve energy efficiency is a dollar that can be used to address other pressing priorities."

In this week's budget memo, Hinshaw also advises regarding:

• Preliminary allocation of faculty growth positions. Hinshaw says she has begun discussions with deans and plans to make preliminary allocations for 2002-03 no later than July 31.
• Academic support allocations. Hinshaw says she's inclined to follow the usual annual allocation process, "despite the backdrop of an across-the-board budget cut," because the formula that guides these allocations addresses varying instruction and research workload growth among units.
• Vice chancellor/vice provost block grants. Since these annual allocations tend to be across the board and would serve simply to offset the 1.7 percent reduction, Hinshaw says she's likely not to make them.

"Instead, I believe it would be better to provide strategic allocations to units upon which enrollment growth pressures have their greatest effect and units pursuing administrative initiatives that provide critical support to the academic mission or relief of staff workload." She said she will consult soon with vice chancellors and vice provosts.

• Biennial budget process. This process will be suspended for 2002-03, with time and energy better spent on seeking extramural funding and developing campus cost-saving measures, Hinshaw says. "The best we will be able to do in 2002-03 is partially address enrollment-driven workload increases and continue funding commitments to initiatives already under way."
• Prudent financial management. Hin-shaw advises unit heads to "put more than the usual emphasis on prudent financial management. We cannot afford to respond to the state's budget crisis by creating a crisis of our own through deficit spending."
• Campus capital budget. The governor's "quite favorable" proposals for campus capital projects are moving forward in the Legislature, Hinshaw notes. In particular, the governor has approved the full $66 million cost of constructing the Veterinary Medicine 3A project in a special "economic stimulus package" bill. "This is welcome news, because it means that funding for the project is accelerated, allowing the campus to move more quickly to replace outdated facilities in Haring Hall and the Surge Complex."

Hinshaw said she'll provide budget planning information for 2003-04 in late May or early June, as well as guidance in response to any changes in the university's 2002-03 budget that may result from the state budget's May revision.

For the latest budget news, continue to check www.news.ucdavis.edu/budget/.