Gov. Gray Davis and the California Legislature have approved a final 2001-'02 state budget that, while giving a boost to many UC programs, fell short of the university's goals for improving faculty and staff compensation.

UC's $3.2 billion state-funded operating budget will increase $152 million, or 4.7 percent. By contrast, due to a downturn in the state's economy and tax revenues, overall state general fund expenditures will fall 1.7 percent.

The new budget provides full funding for UC enrollment growth of 7,100 students in 2001-'02, a 4.5 percent increase, and includes resources for the university to begin a phased-in program of expanded summer instruction.

The budget also provides funding to avoid a student fee increase. And it includes funding to help cover the increased costs for natural gas.

However, the budget offers less funding than the university and the governor originally proposed for faculty and staff compensation increases. Funds provided to UC for fixed cost increases - including employee salary increases, increased health benefit costs, inflationary price hikes and other similar expenses - were reduced from 4 percent to 2 percent.

"The reduction in salary funding was particularly disappointing, and restoration of that funding will be a high priority for us because it is critical to maintaining quality programs," said UC President Richard Atkinson. "However, given the very difficult fiscal circumstances the state is facing overall, we are grateful to Governor Davis and the Legislature for continuing to place a high priority on all of education, including the university."

In addition, the budget provides $160 million, mostly from lease-revenue bonds, for infrastructure and construction at UC Merced.