With the Legislature in special session right now, dealing with the state’s persistent multibillion-dollar budget crisis, and Gov.-elect Brown’s 2011-12 budget due out by Jan. 10 — you will forgive UC Davis officials if they sound less than certain about the campus’s financial situation.

Because, whatever may happen at the Capitol this month, and whatever Brown may propose in January, could take the steam out of what, at this very moment, does not look so bad. Well, not counting the $222 million that the state shorted UC Davis in the last three fiscal years, 2008-09 to 2010-11 — a 38 percent reduction in general funds to the campus.

This year’s budget, more than three months late when Gov. Schwarzenegger signed it in October, included the “restoration” of $199 million that had been cut from the state’s prior year allocation to UC. Out of that money, UC Davis received $30 million.

“Most people like to think of ‘restoration’ as getting something back,” said Associate Vice Chancellor Kelly Ratliff, chief budget planner for UC Davis.

In fact, during the 2010-11 fiscal year, UC Davis is not getting anything back — not the 50 faculty positions that have been lost, not the positions lost to layoffs (40 through Oct. 31, compared with about 110 through the same period last year), not the programs that have been shut down.

The “restoration” Ratliff said, “is helping us get to a stable place” — including an initial budget plan for next year that could spare the academic and administrative units from further cuts.

Or, as stable a place as it can be at a time when the Legislature, Schwarzenegger and the governor-elect are dealing with a deficit that state officials estimate will reach $25.4 billion over the next year and a half.

“So we must plan for another year of inadequate state funding,” Provost and Executive Vice Chancellor Enrique Lavernia and his successor, Ralph Hexter, wrote in a budget letter that went out this week.

Hexter is due to become provost on Jan. 1, coming here from Hampshire College, where he has served as president since 2005. Before that he was an administrator at UC Berkeley.

Read the Campus Budget and Strategic Planning Update at budgetnews.ucdavis.edu (look under "The latest budget news").

$32 million in fixed-cost increases

The budget letter cements the reductions that the academic and administrative units have been carrying out since last February, under terms of last year’s budget letter. It called for reductions of $40.6 million, as well as the allocation of $20.1 million in one-time transition money to help academic units spread their faculty reductions over three years.

As for the state’s $30 million “restoration,” it is almost enough to pay for the campus’s $32.3 million in fixed-cost increases, mostly for benefits and the employer’s contribution to the UC Retirement Plan.

On the revenue side, UC Davis is bringing in an additional $31.9 million in student fee increases, plus summer session and nonresident tuition.

The campus also benefits from $15 million in one-time federal stimulus money, and $19.5 million in one-time savings (reduced hiring, canceled projects, debt restructuring and the last three months of the 2009-10 furlough program).

Bottom line: The budget actually shows a $15.8 million surplus, which would boost the reserve fund to, well, $15.8 million.

“But, remember, the state is looking at a $25.4 billion deficit through 2011-12, and that extra $30 million we got this year, it could very well go away,” Ratliff said.

Similarly, Lavernia and Hexter sound a cautious note in their budget letter for 2011-12. “For initial planning purposes, we will assume that state funding will remain flat (i.e., no new allocations and no new cuts),” they wrote.

At the same time, the campus will again face fixed-cost increases: $29 million, including an additional $10 million for the employer’s contribution to the retirement plan and $6 million for benefits.

The Board of Regents already has approved fee increases for 2011-12, and this will bring an additional $18 million to the campus, but still the campus will come up short.

And, to avoid academic and administrative cuts, the campus will draw down its reserve to $2.8 million.

Of course, if the state pulls back any of the money already budgeted for 2010-11 or reduces UC’s funding for 2011-12, then “we will have to revise our plans,” Lavernia and Hexter wrote in their budget letter.

“Further, we are committed to making progress towards our Vision of Excellence,” they said. “Therefore, strategic choices will be made to ensure our resources are deployed to maximize our progress and success.”

Organizational Excellence

While budget planning moves forward for 2011-12, the campus is making progress on several permanent budget fixes, notably the Organizational Excellence initiative and its shared service center project. The university is estimating a net savings of $39.4 million over the first six years, 2010-11 through 2015-16, after deducting for transition costs of $18.6 million, and annual savings of $9 million to $13 million starting in 2016-17.

The campus also continues to make progress on cutting energy costs, by conserving and retrofitting. The campus projects a savings of $800,000 this year on electricity alone, and average annual savings of $4.8 million on all utility costs when the projects are completed.

Lavernia and Hexter, meanwhile, have instructed all of the deans to continue working on their academic plans — updating them to reflect “the current fiscal realities and the near-term, reduction of faculty positions.”

The updated plans are due to the new provost by June 30.

“The planning efforts that each of you are leading are fundamental to ensuring our ability to make progress towards our Vision of Excellence,” Hexter and Lavernia wrote.

In addition, schools, college, divisions and central administrative units are developing multiyear resource plans — again with an eye toward the Vision of Excellence. These plans also are due by June 30.

‘Incentive-based budget model’

Lavernia and Hexter announced that the campus next month will begin a three-year effort, from design to implementation, “to reframe the budget process.

“The goal is to have an incentive-based budget model that maximizes flexibility in concert with strong accountability,” they said.

The UC Office of the President is revising the systemwide budget model, targeting its implementation for July 1, 2011. UC Davis will need to make changes, to fit in with the new systemwide model — but UC Davis will not do so until July 1, 2012, so as to fully consider local policy and fiscal issues.

Chancellor Linda P.B. Katehi, meanwhile, has established a budget subcommittee within her cabinet, and created a Budget Task Force of faculty, staff and students — 13 members in all.

“In recent years, we have used existing groups (administration, Academic Senate, Academic Federation, students and staff) and ad-hoc committees to increase participation in budget discussions and share information,” Katehi said in her charge letter to the people whom she invited to serve on the task force.

Katehi said the task force will no doubt improve the overall budget process, as members “develop a higher level of expertise about the budget and partner with us to generate ideas and effectively communicate” to the rest of the campus.

She has asked the task force to:

• Advise about budget principles and long-term strategic objectives.

• Develop and frame key messages and communication strategies about the budget.

• Partner with campus leaders to communicate about the budget.

• Advise about options, choices and trade-offs that should be considered in the budget process.

Task force membership

Timothy Albertson, division chief, Pulmonary and Critical Care Medicine, UC Davis Health System

Donald Bers, chair, Department of Pharmacology, UC Davis Health System

James Chalfant, past chair, Planning and Budget Committee, Academic senate

Richard Hom, chair, Sacramento campus Staff Assembly

Rob Kerner, vice chair, Davis campus Staff Assembly

Tracy Ligtenberg, management services officer, Department of Languages and Literature

Mark Ling, editor, The California Aggie

Rosemary Martin-Ocampo, chair, Administrative Management Group

Ann Orel, chair, Planning and Budget Committee, Academic senate

Brian Riley, president, Graduate Student Association

Jules Vieaux, student, School of Medicine

Daniel Wilson, chair, Academic Federation

Jack Zwald, president, ASUCD

On the Web

Campus Budget and Strategic Planning Update: budgetnews.ucdavis.edu (look under "The latest budget news")