Facing a severe budget shortfall as a result of the state's fiscal crisis, which has been exacerbated by a deepening economic recession, the UC Board of Regents on May 7 approved student fee increases for the 2009-10 school year.

The board's vote was 17-4, with Regents John Garamendi, Eddie Island, Odessa Johnson and D'Artagnan Scorza voting no.

The increase (9.3 percent, or $662 for resident undergraduates) is consistent with the fee hike that the state expected UC to enact as part of the state budget adopted in February, which left UC with a cumulative state funding shortfall of $450 million ($115 million in new cuts, $122 million in underfunded enrollments, and $213 million in unfunded mandatory costs for utilities, employee health benefits and other inflationary costs).

Student fee increases were considered only as a last resort, and constitute just one element in a series of actions that the university and the campuses have taken to confront continuing cuts in state funding, while working to protect the academic program and student services to the greatest extent possible.

These actions include freezing senior managers' salaries, restructuring and downsizing the Office of the President, curtailing faculty recruitment and implementing hiring freezes at the campuses, among others.

Furloughs and-or pay cuts also are possible—and President Mark G. Yudof is asking the regents for clear authority to impose such actions, should he deem them necessary. A prerequisite would be a regents' declaration of a financial emergency.

All of this is spelled out in a proposed amendment to the board's standing order that lists the president's official duties. Yudof's office also has prepared draft guidelines for furloughs and-or salary reductions.

The regents reviewed the policies on May 7 but took no action. Faculty and staff input is now being sought, and, after that, Yudof will ask the regents to approve the standing order on financial emergencies; he already has the authority to implement the accompanying guidelines.

"Thus far, no decision has been made regarding furloughs or pay cuts," Executive Vice President Katherine N. Lapp said in a May 6 memo to employees. "But President Yudof believes it is important for the university to be in a position to act if additional reductions are necessary." 

Financial aid enhanced

The university this year has enhanced its already robust financial aid program in two ways to help mitigate the impact of higher fees for most UC undergraduates and their families. These include the Blue and Gold Opportunity Plan, which will cover systemwide fees for California residents whose families earn less than $60,000 a year and who qualify for financial aid, as well as increases in state and federal aid.

"While there is never a right time for a fee increase, especially during an economic downturn when families are facing hardships and uncertainty, I want to reassure our students that this year we will have an extraordinary amount of additional financial resources available to cover the higher fees," Yudof said.

"Substantial increases in federal, state and university student aid and tax credits will ensure that 81 percent of UC undergraduates with incomes below $180,000 will have access to enough new resources to fully offset the fee increase.

"I am particularly proud of our new Blue and Gold Opportunity Plan that will ensure lower-income families will no longer need to worry about how they will cover UC's basic student fees.

"Although nearly one-third of UC's undergraduate come from low-income families, a larger percentage than at any comparable public or private institution, I believe the more straightforward financial aid message of the Blue and Gold program will encourage even more low-income students to apply to UC."

The 9.3 percent increase in universitywide student fees, comprising a 10 percent increase in the educational fee and a 4.2 percent increase in registration fee, will generate approximately $152 million, of which $54.2 million will be set aside to provide additional financial aid to undergraduate and graduate students.

The rest of the revenue will be used to address state budget reductions, mandatory cost increases and other pressing needs, including student support services and mental health services.

Details of new fees and financial aid

Starting this summer, universitywide fees for the coming academic year will increase by 9.3 percent, or $662 per year for resident undergraduates, bringing the total mandatory systemwide fees for resident undergraduates to $7,788. With additional miscellaneous fees charged by individual campuses, average total fees will be approximately $8,720.

Mitigating the impact of these fee increases are the following enhancements to financial aid available to undergraduate UC students:

• Blue and Gold Opportunity Plan—Under this plan, eligible UC students with financial need and household incomes of under $60,000 per year will have their systemwide fees fully covered by scholarships or grants from federal, state, private and UC sources. The new costs of this plan will be funded in 2009-10 by $3 million from federal economic stimulus funds.

• Increased state and UC grant funds—Cal Grants for UC students will increase by $27 million in 2009-10 and UC grants will increase by $39 million due to the university's practice of setting aside 33 percent of all undergraduate fee increase revenue for grants to needy students.

• American Recovery and Reinvestment Act—The federal economic recovery package provides a substantial increase in new funding for students, including a $619 increase in the maximum Pell Grant for 2009-10 (from $4,731 to $5,350), which will generate an estimated $33 million in new grant funding for UC students, and $88 million in expanded federal tax credit eligibility for UC families.

Taken together, these programs are expected to provide, on average, between $1,150 and $1,500 in additional resources to UC undergraduate families with incomes below $180,000— fully offsetting the cost of the $662 fee increase for most of those families. UC estimates that 81 percent of all UC undergraduates with incomes below $180,000 will have access to grants and tax credits to fully cover the increase in systemwide fees.

About half of UC undergraduates have financial need (as defined by federal standards, which take into account family income, assets, family size, number of students in college and other factors). Among students with financial need, the additional financial resources available—particularly from need-based grants— should fully cover the $662 fee increase for 96 percent of students and provide at least partial coverage for 99 percent of students.

Among students without financial need, additional resources from enhanced tax credits are expected to fully cover the $662 fee increase for 45 percent of students and provide at least partial coverage for 63 percent of students.

Other education-related cost increases

A fee increase is not the only new expense students will face in 2009-10. When inflationary and other cost increases in housing, food, transportation, books, supplies and health insurance are taken into consideration, the total increase in UC's cost of attendance for 2009-10 is expected to average $1,250 across all undergraduates.

Even when viewed in the context of total cost of attendance, the new available financial resources are generally equal to or more than the increase in students' total expenses for families with incomes below $180,000. UC estimates that 68 percent of all UC students with incomes below $180,000 will have access to additional resources from grants and tax credits to fully offset the increase in both fees and non-fee costs.

2009-10 fee increases for graduate, professional and nonresident students include:

Graduate students—Mandatory systemwide fees for resident graduate academic students will increase 9.3 percent, or $750 per year, in 2009-10. This will bring the total mandatory systemwide fees for resident graduate academic students to $8,736. Adding in miscellaneous campus fees, including health insurance, their average total fees will be approximately $11,221.

Professional students—Mandatory systemwide fees for students in professional degree programs will rise by 9.3 percent, or $654 a year for most students paying professional school fees. This will bring total mandatory systemwide fees for most professional students to $7,722. Adding in miscellaneous campus fees, including health insurance, their average total fees will be approximately $10,207. Students in these programs also pay a professional degree fee that varies by campus and program. In 2008-09, these fees range from $3,685 to $22,049. Fee increases for 2009-10 range from 0-25 percent. The details are available online.

Nonresident tuition—In addition to mandatory systemwide fees, out-of-state students must pay nonresident tuition. Nonresident undergraduate tuition will increase by 10 percent in 2009-10, raising nonresident tuition by $2,000, from $20,021 to $22,021. Nonresident tuition will remain at $14,694 for graduate academic students and $12,245 for graduate professional students. Taken together with mandatory systemwide fees and campus fees, nonresident student charges in 2009-10 will average about $31,389 for undergraduate students and about $26,257 for graduate academic students.

Some national comparisons

Even with the fee increases, total charges for resident undergraduate and graduate academic students are expected to remain well below the average of UC's public comparison institutions. (University of Michigan, University of Illinois, University of Virginia and State University of New York-Buffalo).

Fees represent only a portion of the total costs that students must cover. In 2008-09, UC's average total cost of attendance (before financial aid) represents the midpoint among these institutions. However, gift aid (grants and scholarships) significantly reduces costs for financially needy students. After taking gift aid into account, UC's average net cost for need-based aid recipients in 2008-09 was below the estimated net cost of three of the four comparison institutions. The proposed fee increases are not expected to change the university's relative position among its comparative institutions.