The week began with a budget message from UC President Mark G. Yudof and ends today (Feb. 25) with one from Chancellor Linda P.B. Katehi and Provost and Executive Vice Chancellor Ralph J. Hexter.

In between, the chancellor gave her annual State of the Campus address, in which she addressed the budget, and, with Hexter, outlined the campus's budget planning strategy in a letter to Yudof. "This is only a proposal and will certainly evolve as our internal consultation process with the campus community continues," Katehi and Hexter wrote.

Now Katehi and Hexter are sharing that letter with the campus community, declaring in their message today, "We want you to have as much information as possible about how UC Davis is planning to approach the 2011-12 budget."

The Katehi-Hexter message today also echoed some of what the chancellor said Feb. 24 in her State of the Campus address to the Academic Senate: "As we try to address today's challenges, we will not be defined by the cuts we make, but by the vision we follow, the risks we take and the investments we make."

The budget planning letter draws on the campus's Budget IDEAS, which campus budget planners have prioritized. The campus started the ideas list on Jan. 31, inviting comments from the campus community, to help deal with a 2011-12 shortfall now estimated as high as $107 million.

The Katehi-Hexter letter to Yudof identifies 13 priority ideas that could cut the shortfall by up to $68 million, through a “balanced approach” of new revenue, efficiency improvements and cost reductions. The top ideas in each category, and their consequences, as outlined for Yudof:

• An increase in the number of nonresident undergraduates, domestic and international, for added revenue of $4 million in 2011-12 and $10 million in 2013-14. Consequences: With application numbers rising, and resident enrollment (freshmen and transfers) staying flat, as planned, the freshman admit rate would decline even more. This rate has already dipped from 67.8 percent to 44.9 percent over the last four years.

• Expand and accelerate shared service centers, for efficiency gains valued at $2 million to $3 million in 2011-12 and $10 million to $12 million in 2013-14. Consequences: Loss of 5 percent of general fund-supported staff positions. Different service delivery methods; significant cultural change for faculty and staff.

• Reduce expenses, eliminate subsidies and reduce service levels, for a savings of $9 to $10 million in 2011-12 and $20 million in 2013-14. Consequences: program closures, loss of an additional 4 percent to 8 percent of full-time, general fund-supported staff positions.

Read the budget planning letter and the updated Budget IDEAS, as prioritized.

“We are committed to making decisions that provide permanent solutions, but in some cases we will rely on transition and bridging strategies,” Katehi and Hexter wrote. “Our expectation is that all the majority of the savings will be achieved immediately in 2011-12, and all actions will be implemented permanently by the start of the third year (i.e., July 2013).”

Of course, Katehi and Hexter told Yudof, the campus will continue to face structural fiscal challenges irrespective of the state budget. She said the following factors intensify the fiscal challenge:

• The Board of Regents’ decision to restart employer (and employee) contributions to the UC Retirement Plan. The state is not covering the employer’s share, which means the campuses are responsible.

• Negotiated increases in compensation for many staff employees who are represented by labor unions, and for faculty.

• Rising health care costs.

“In addition, the university must continue to ensure competitive compensation for our faculty and staff and address other major challenges such as deferred maintenance and capital renewal,” Katehi and Hexter said.

As such, they said, UC Davis will continue to pursue the priority Budget IDEAS beyond what is needed to address the 2011-12 shortfall, and will pursue other strategies to increase revenue, improve efficiency and reduce costs. “This planning will continue as part of a multiyear strategic and financial planning process,” Katehi and Hexter said.

Throughout the process, they said, “we remain absolute in our view that UC Davis can and will make progress towards the Vision of Excellence.”

“These are difficult times,” they said, “but UC Davis has a well-deserved reputation for coming together and collaborating on creative, innovative and lasting solutions to tough challenges.”

Smaller work force

The Katehi-Hexter letter notes how 70 percent of campus expenditures go to personnel — and that the percentage is even higher for general fund and tuition funds. “Budget reductions of this order of magnitude will inevitably lead to a smaller work force,” Katehi and Hexter said

The priority ideas that they shared with Yudof would result in cutting up to 15 percent of the campus’s general fund and tuition-supported positions (450 to 500 staff positions). “Further reductions, whether driven by additional state cuts or our structural deficit, will no doubt lead to additional positions being eliminated,” Katehi and Hexter said.

“While we will rely on attrition and redeployment of employees to other fund sources on campus to the extent that we can, these cuts will be particularly painful.”

Students, Katehi and Hexter said, are likely to have more frequent difficulties in finding spaces in the courses that the students need and want — due to a combination of factors:

• Slowed hiring of replacement faculty.

• UC Davis’ continuing practice of maintaining space for 1,400 to 1,500 full-time equivalent students for whom the state provides no funding.

• Continued deterioration of department budgets.

“We will continue to optimize our deployment of teaching strength and develop other responses (e.g., use of technologies to improve experience of very large courses, hybrid courses); however, this will undeniably be an impact for our students.”

Budget Plan A

Kelly Ratliff, associate vice chancellor in charge of the budget, outlined the campus’s budget shortfall:

• $73 million cut in state funds (UC Davis’ share of an overall cut of $500 million in UC funding).

• $26 million in fixed costs (UC Retirement Plan, health care, collective bargaining agreements).

• $8 million placeholder for potential salary and compensation increases to mitigate the most significant compensation challenges for faculty and staff.

The campus’s Plan A addresses the shortfall with $68 million in cuts, efficiencies and other savings (from the Budget IDEAS list), and $39 million in universitywide solutions, including previously approved 2011-12 fee increases and further cost reductions at the UC Office of the President.

The campus has not prepared a Plan B, which would involve cuts of $1 billion or more to the university system — in the event Gov. Brown fails in his bid to put tax extensions on the June ballot, or if he gets them on the ballot and the electorate votes them down.

“Our planning efforts in the coming weeks and months will more fully develop a plan that will include difficult choices and will lead to severe impacts on access, quality and affordability,” Katehi and Hexter said.

If the tax extensions fail, and UC suffers a loss of state funding in excess of $500 million, the university must consider an additional fee increase and a reduction in the amount of tuition revenue that goes toward financial aid. The legislative analyst said the same thing recently, suggesting what UC must consider if the state funding cut worsens.

“Of course, even those changes will not be adequate,” Katehi and Hexter said.

Yudof: Efficiencies alone not enough

In his video message Feb. 22, President Yudof calculated UC’s “true budget gap” at $1 billion — combining unfunded obligations with Gov. Brown’s proposed cut of $500 million.

“We are doing our part,” he said, to be a good partner with the state, “working aggressively to implement efficiencies and identify how the cuts will impact programs and services.

“But make no mistake about it, no matter how efficient we are, a funding gap that is this large is going to significantly impact and change the University of California. We may be forced to lay off employees, turn away new students, reduce academic programs, suspend building projects and take other measures.

“We cannot save or streamline our way around a problem of this magnitude.”

He said UC cannot continue to operate without adequate state support — and he urges the UC community to get involved in advocacy efforts.

“With everyone's help — with your help — we can deliver a strong message to Sacramento and to people throughout the state about the importance of UC to California's future.”

More about UC advocacy

A UC Davis delegation will join others from around the UC system for UC Day at the Capitol, Tuesday, March 1. See separate story.

The UC for California website offers information on how to get involved in advocacy, and guidance on sending letters to your elected representatives.

Yudof’s video message (and transcript).