Gov. Arnold Schwarzenegger, UC Pres-ident Robert Dynes, and CSU Chancellor Charles Reed on Tuesday announced agreement on a higher education "compact" outlining their intentions for state funding levels and institutional accountability over the next several years.

The agreement provides for annual growth in state funding for UC's basic budget and enrollment growth, beginning in the 2005-06 fiscal year, in exchange for UC's commitment to accountability in specified areas. The agreement extends through the 2010-11 fiscal year.

"After years of deep budget cuts with no end in sight, this compact brings the promise of renewed fiscal stability for public universities in California," Dynes said. "Under the compact, UC will receive funding to preserve its internationally acclaimed academic programs, to provide broad accessibility for promising California students, and to sustain its deep impact on the economy, health, and quality of life of California."

The compact will once again provide state funds for enrollment growth at UC, preserving a place for students who challenge themselves, excel, and meet the system's eligibility requirements. Student fees will be expected to rise to help pay for the institution's costs, but for the first time in recent memory, fee increases will be predictable so that students and their families can plan ahead. Funding will be provided beginning in 2005-06 to accommodate faculty and staff salary increases, which are key to maintaining institutional quality. And, UC will pursue numerous accountability measures demonstrating its efficiency, effectiveness, and value to the state.

UC Davis Provost Virginia Hinshaw, who served on a systemwide workgroup that helped shape the compact, applauded the final product as "a signal that people in Sacramento understand that UC is very good for the state."

"The governor recognizes that we are a critical part of the economic recovery of California," Hinshaw said. "Our research contributions generate jobs, and we provide the educated workforce that the state needs. Research universities like UC Davis are long-term investments, and we need financial stability to flourish."

The UC system has sustained major state budget cuts during the last several years. Over a four-year period -- including 2004-05 under the governor's January budget proposal -- UC will have absorbed both a 16 percent state funding reduction and a 16 percent student enrollment increase. The result has been program cuts, fee increases, and less-competitive faculty and staff salaries.

Under the agreement with the governor, UC still will sustain significant budget cuts in the 2004-05 fiscal year as the state grapples with a large budget gap. However, the governor's May budget revision will not propose cuts for UC any larger than those in his January budget. And during the following several years, under the compact, UC's state funding will resume growing.

"Together, we have found a compromise that will protect the quality of our world-renowned higher education system," Gov. Schwarzenegger said. "We have made a long-term commitment for greater investments in our schools and equipping California's workforce with the best and the brightest for years to come."

Some remaining issues that are not addressed in the compact include fee increases for professional school students, which still need to be determined by UC. Also uncertain is funding for K-12 outreach. The compact provides for some non-state funding to continue basic programs, but ongoing state funding will still need to be determined by the Legislature.

UC officials also acknowledged the impact that many alumni, faculty, staff, students and friends of the university have had on influencing the budget process. A major systemwide advocacy effort over recent weeks resulted in intensive communication with key lawmakers and the governor, urging them to continue state support for higher education.

The funding components of the compact are a floor, not a ceiling. The compact reflects the minimum level of state resources necessary to preserve quality and access in the two university systems. Additional funds can be made available when the state's resources allow.

Following the compact and the May Revision later this week, the UC Board of Regents will vote on a 2004-05 budget plan and 2004-05 fee levels at its May 19-20 meeting.

Major funding elements of the compact for UC include:

• Annual state funding growth of 3 percent for salary and other cost increases, growing to 4 percent annual growth in 2007-08;
• Funding for an additional 5,000 students each year starting in 2005-06 - which, after the enrollment cuts in 2004-05, will put the university back on its original plan for accommodating enrollment growth over the course of this decade;
• A further 1 percent annual augmentation for core needs, such as instructional equipment, instructional technology, building maintenance, and library materials, starting in 2008-09;
• Undergraduate fee increases averaging 10 percent the next three years (14 percent in 2004-05; 8 percent in 2005-06 and 2006-07). Fees at UC Davis will be slightly higher -- rising at total of 18 percent for undergraduates on this campus as a result of increases in fees passed through several student referendums;
• Longer-term, systemwide fees would go up no more than 10 percent per year, with UC keeping the revenue rather than backfilling state cuts. (Under the compact, fee increases would be indexed to per-capita personal income growth, but the Board of Regents could increase fees by up to 10 percent a year in compelling fiscal circumstances.) Again, fee increases at UC Davis will differ slightly as a result of the student referendums;
• A graduate fee increase of 20 percent in 2004-05, rather than the 40 percent originally proposed. Fees would increase another 10 percent in both 2005-06 and 2006-07, and UC will develop a plan for graduate fee levels over the longer term. A plan also will be developed for professional school fees;
• UC will reserve between 20 percent and 33 percent of new fee revenue for financial aid in order to preserve accessibility for students of all financial backgrounds.
• Continued state support for the development of UC Merced;
• Agreement by UC to use non-state resources to provide $12 million in support for K-12 academic preparation (outreach) programs, with additional state support to be determined through the annual budget process; and
• The Schwarzenegger Adminstration's support for future education bond measures providing UC with facilities funding comparable to that of Proposition 55.

Major accountability elements of the compact for UC include:

• Meet the enrollment objectives of the Master Plan for Higher Education, assuming adequate state resources are provided.
• Report to the state annually on a variety of student and institutional outcomes, focusing on demonstration of student success and efficient use of resources;
• Preserve faculty workload policies comparable to those of other universities, and continue to make the highest priority ensuring that students have access to the classes they need to graduate in a timely manner;
• Expand efforts to improve the supply and quality of math and science teachers in California's public schools to further bolster the state's economic recovery; and
• Strengthen programs encouraging students to participate in community service.

For further details, see http://www.universityofcalifornia.edu/news/compact/welcome.html.