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After two years of severe budget cuts for UC, Gov. Schwarzenegger last week unveiled a 2010-11 spending plan that includes $371 million in additional money for UC plus funding for Cal Grants.

The governor’s budget proposal, which came out Jan. 8, is only the starting point for a process that typically takes months. But, if the Legislature and the governor come to agreement on the extra money, �ٺ���Ƶ can expect to shave up to $40 million off its estimated shortfall of $77 million in 2010-11, according to Associate Vice Chancellor Kelly Ratliff, the campus’s chief budget officer.

This good news comes on top of the governor’s Jan. 6 proposal for a constitutional amendment to guarantee that UC and the California State University system would receive a set percentage of the state general fund, by shifting money from prisons.

A constitutional amendment must wend its way through the Legislature and onto the ballot (perhaps in the fall). �ٺ���Ƶ Chancellor Linda Katehi reminded: “This is a marathon, not a sprint. We must work hard to support (the governor’s) vision and convince the Legislature and California’s voters that universities should be restored as higher priorities than prisons.

“At the same time,” Katehi said, “we must continue our efforts to streamline our infrastructure and cut administrative costs so we can better support and strengthen the campus’s academic mission.”

The constitutional amendment, if approved by voters, would limit the state corrections budget to no more than 7 percent of the state’s general fund revenue and guarantee no less than 10 percent, total, for UC and the California State University system. The funding shift would begin in the 2011-12 fiscal year and be fully realized in 2014-15.

Said Schwarzenegger: “Spending 45 percent more on prisons than universities is no way to proceed into the future. It simply is not healthy. I will submit to you a constitutional amendment so that never again do we spend a greater percentage of our money on prisons than on higher education.”

California needs to find ways to run its prisons more cost-effectively, the governor said, by allowing private prisons to compete with public prisons. California spends about $50,000 a year per inmate while other states spend $32,000, he said.

“That’s billions of dollars that could go back to higher education where it belongs and where it will serve our future,” he said. His proposal prohibits cost-savings being achieved through early release of prisoners.

Yudof: ‘Still a significant gap’

UC President Mark G. Yudof said the governor’s proposals “are clear evidence that he understands the vital role public higher education plays in California.”

“While we deeply appreciate the governor’s actions, notwithstanding the crisis in the state budget, there is still a significant gap as we seek to repair a budget that has been severely cut.”

UC had asked the governor for an additional $913 million for 2010-11. Now that Schwarzenegger’s budget draft is on the table, Yudof said, UC will go to legislators to ask them to approve the governor’s plan and to look for opportunities to give UC everything it asked for.

“This money is vital if UC is to avoid declining educational quality, access and research,” Yudof said.

UC has racked up a budget shortfall of nearly $1 billion over the last two years, necessitating higher fees as well as cutbacks in academic and student services; layoffs and furloughs; and a severe slowdown in faculty recruitment.

Budget specifics for UC

Schwarzenegger sent his budget draft to the Legislature for its review and possible revisions, and, amid this process the governor usually delivers his own revision — typically in May — based on more up-to-date financial data.

Here are some specifics from the governor’s first draft, as it relates to UC:

Restored funding — $305 million that the state held back from UC in 2009-10. The money is needed to restore instructional offerings and student services, like class sections and library hours.

Enrollment — UC had asked for an additional $155.8 million for unfunded enrollment growth. The governorallocated $51.3 million in new growth enrollment funding (enough for 5,121 full-time equivalent students). However, this allocation is tied to California’s request for $8 billion in economic stimulus money from the federal government — so, no stimulus money from the feds would mean no additional enrollment money for UC.

Retiree benefits — $14.1 million for retiree health benefits. The governor did not allocate the $95.7 million that UC sought for employer contributions to the UC Retirement Plan.

Capital projects — No November bond measure aimed at filling UC’s request for $631.5 million. However, the governor indicated that his May revision may include an alternative funding proposal.

Student fees — The governor indicated that his budget will include language saying that UC and CSU should not raise fees any further for 2010-11. For UC, this could mean no further increase beyond the 15 percent already approved for 2010-11.

Cal Grants — Eligible low-income students would receive enough money to cover UC’s 2009-10 midyear and 2010-11 fee increases. Schwarzenegger put Cal Grants on the chopping block last year, and the Legislature saved them. The grants help stabilize UC’s Blue and Gold Opportunity Plan, which ensures that aid is available to pay the systemwide fees of all needy California resident undergraduates with family incomes of less than $70,000 a year.

ON THE NET

President Yudof’s video letter: (search for “President Yudof on 2010-11 budget proposal”)

Gov. Schwarzenegger’s budget proposal:

�ٺ���Ƶ budget news:

ALSO: Abigail Boggs, graduate student assistant to Graduate Studies Dean Jeff Gibeling and Chancellor Linda Katehi, blogs from the World Universities Forum in Davos, Switzerland, where Katehi addressed such topics as prisons vs. education, a blueprint for U.S. education, and “Privatizing a Public Research University.”

Dateline Associate Editor Dave Jones and UCOP Managing Editor Donna Hemmila contributed to this report.