With deepening state budget cuts a likelihood this year and next, UC President Richard Atkinson warned last week that the result may be higher student fee increases and constraints on student enrollments. He also issued a letter to the UC system about how the current Legislative budget impasse could impact salaries in the coming months.

In a letter to the regents, Atkinson outlined a proposal for absorbing additional budget cuts in the 2003-04 fiscal year, which began July 1 without an approved state budget. The proposal involves both borrowing money and raising student fees in order to avoid further program cuts that would harm the quality of the student educational experience at UC.

For 2004-05, Atkinson warned, deeper budget cuts from the Legislature may well leave UC with no alternative but to begin cutting back on student enrollment growth. Such enrollment constraints are not possible for the 2003-04 academic year because all new students have already been admitted for the year.

But continuing budget cuts could mean that UC would be forced to scale back its enrollment growth plans by at least 5,000 students beginning in the 2004-05 year, he said.

Atkinson also noted that deep budget cuts of the kind being discussed by Assembly and Senate Republicans could lead to even higher fee increases and, next year, deeper enrollment cuts.

"UC has taken major budget cuts, and we now have cut as deep as we can without harming the quality of the student educational experience -- the very thing for which students come to this university," Atkinson said. "Unfortunately, the state continues to propose deeper and deeper budget cuts as it confronts its most serious fiscal crisis ever.

By 2003-04, on a state-funded budget of about $3 billion, UC will have taken $360 million in base budget cuts to existing programs, based on the proposals in the Governor's Budget. All non-instructional programs are taking significant cuts, including administration, libraries, research, outreach, student services and Cooperative Extension, and employee layoffs are being planned or implemented in most of these areas.

In addition to absorbing state budget cuts, UC is contending with about $100 million in cost increases for which it is receiving no new funding. These include health benefits, energy, maintenance of new space, and a variety of other inflationary costs.

John Meyer, vice chancellor for Resource Management and Planning at UC Davis, agrees with Atkinson's appraisal of the budget situation. "As painful as increased student fees and limited enrollment growth may be, we have no choice but to maintain the university's quality. Unless adequate resources are provided, quality will inevitably be eroded," Meyer said.

At Dateline's press time, a budget had not yet been approved by the Legislature, throwing into question whether State Controller Steve Westly would implement a recent court decision that says state employees may only be paid minimum wage while there is no budget. Also in question is whether the ruling applies to UC employees, Atkinson said, noting that the change will not be implemented immediately because it requires a large number of state computer programming changes. "This means that, later this summer, salary payments for UC employees could be temporarily reduced until there is a state budget at which time full salaries would be paid retroactively," he said.

Meyer doesn't believe that will happen, though. "I'm very optimistic that the state budget will be resolved before any minimum-wage payment measures would be imposed," he said.

Both Assembly and Senate versions of the budget have proposed an additional $80.5 million one-time reduction to UC's budget. In addition, Assembly Democrats recently issued new budget proposals that would cut UC by a further $45 million; Assembly Republicans have issued a plan that would mean at least $400 million in cuts for UC.

Atkinson's proposals for 2003-04:

• UC would borrow approximately $40 million to $50 million to close part of the $80.5 million gap. This debt financing would be repaid over a multi-year period through a 6 percent increase in nonresident tuition, on top of the currently planned 4 percent increase.

• To close the rest of the gap, mandatory systemwide student fees would be increased 25 percent above the current fee level, which reflects the $405 annualized increase that was adopted beginning with the spring 2003 term. For resident undergraduates, the additional 25 percent would raise fees $960, or $165 more than the $795 increase that was assumed in the Governor's Budget. Mandatory systemwide fees for resident undergraduates would total $4,794 per year. Graduate and professional school fees also would be raised 25 percent.

• The president would be given regental authority to raise fees up to 30 percent if necessary, depending on the outcome of the state budget and the possibility of additional budget cuts. Such authority would include a requirement that the president consult with the chair of the board and the chair of its Finance Committee before implementing the higher fee level, producing a total mandatory systemwide fee level of $4,984 per year for resident undergraduates.

The regents will be asked to vote on the fee proposals at their July 16-17 meeting. Atkinson said he suggested the fee increases with the greatest regret, but out of a desire to avoid damaging the core quality of UC's educational program. He said even a 30 percent increase would leave resident fees more than $1,200 below the average of UC's comparison institutions.

Under any fee scenario, UC will continue its commitment to financial aid. In general, financially needy students with family incomes of $60,000 or less would have the fee increase fully covered. For financially needy students with family incomes of $60,000-$90,000, a UC fee grant would cover about half the increase.

But for 2004-05, Atkinson warned, continuing budget cuts may well mean that UC will have to begin constraining enrollments.

"If the $80.5 million reduction is not restored in the 2004-05 budget or if we take other additional budget cuts, we may have no alternative but to, no later than January 2004, institute enrollment constraints for the fall 2004 entering class," Atkinson said.

The Office of the President has not issued details on how a reduction of new enrollments would be implemented. But Atkinson said enrolling 5,000 fewer freshmen and transfer students in 2004-05 than the university has been planning would save $45 million in state funds.

Editor's note: A fact sheet on fees is available at http://www.ucop.edu/news/factsheets/2003/ student_fees.pdf.

-- Dateline staff report