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BUDGET PLAN

The “Budget Ideas,” as prioritized, comprise the 2011-12 budget framework. Under each idea, or strategy, the campus has assigned a dollar figure for each college and school and administrative unit. Here are the strategies, with estimated savings or revenue generation, and some of the actions that could be used to achieve those targets:

Revenue generation

• Consider a technology support fee for students — Annual revenue of $1 million to $2 million, after three-year transition. The budget planning letter notes that many institutions have implemented such fees, and that �ٺ���Ƶ leaders are working with students and academic units on an approach for implementation here as soon as the fall quarter.

• Increase autonomy for professional schools, and revenue-generating degree and nondegree programs — Annual revenue of $3 million to $5 million, after three-year transition. Part of this strategy involves a new budget model for the four professional schools that charge degree fees. Under the proposal, the schools would retain those fees, from residents and nonresidents, in exchange for a 5 percent cut in true state general fund support. The schools would then determine the best strategies to offset the reduction; those strategies might include student fee increases and enrollment changes.

All other schools and colleges and divisions must develop and-or expand degree and nondegree instructional activities, sufficient to bring in $50,000 to $100,000 in revenue annually.

• Identify opportunities to redirect a portion of faculty salaries to research or other funds — Annual revenue enhancement of $2.1 million. “As we have noted on many occasions,” Katehi and Hexter wrote, “it is important for us to leverage and incentivize use of a variety of funds sources for all aspects of the university operation, including faculty salaries.”

• Redirect a portion of the payroll assessment for staff recognition and development — Annual revenue enhancement of $1.8 million. The budget planning letter states that Vice Chancellor John Meyer is finalizing a recommendation to end a portion of this assessment for nonrepresented staff, with the money to redirected to offset future salary increases. In addition, deans and vice chancellors would lose the block grants that are given to offset training costs, with those monies redirected to other uses.

The portion of the assessment that supports Staff Development and Professional Services would not be affected.

The budget plan also tells the units how much they stand to gain from the university’s decision to enroll more nonresident students, and from increased Summer Sessions enrollment. The campuswide totals for 2011-12 (and after three-year transition):

• Nonresident enrollment — $7 million annually ($10 million annually)
• Summer Sessions — $6 million annually ($7.5 million annually)

Efficiency

• Accelerate the implementation of shared service centers — Annual savings of $3 million ($10 million to $12 million annually after three-year transition). The first campuswide shared service center is now in development, to handle selected finance and payroll, human resources and information technology functions for five administrative units.

• Reduce energy consumption — Annual savings of $7.25 million ($9 million annually after three-year transition), including more adjustments to thermostat settings, something that building occupants are likely to feel.

• Flatten the organization — Annual savings of $7 million. The budget planning letter indicates that the campus will increase staff-to-supervisor ratios, reassign about 100 positions from the Management and Senior Professional classification to Professional and Support Staff, and evaluate and consider a reduction in the number of ladder-rank faculty who are appointed to administrative positions.

Cost cutting

• Reduce or eliminate state general fund subsidies; and consolidate, close or outsource programs and-or services — Annual savings of $7.5 million ($9.5 million annually after three-year transition). The budget planning letter comes with an attachment of proposed actions.

In regard to general fund subsidies, the proposed actions include a 50 percent cut to the Academic and Staff Assistance Program, and 100 percent to Alumni Relations, Safety Services and child care.

The proposed actions also include the complete outsourcing of catering services, and the complete outsourcing or consolidation of fleet and other transportation services, including parking; and a reduction in mail delivery to three days a week.

• Reduce Academic Preparation Programs — Annual savings of $350,000.

• Increase the use of strategic sourcing contracts, and consider the consolidation of campus storehouse operations — Annual savings of $500,000 ($1 million annually after three-year transition).
 

The colleges and schools and administrative units today (May 6) received the numbers that go with the university’s new budget strategy.

Under the new approach, each unit has been given specific dollar amounts for reductions tied to efficiencies and cost cutting, as well as estimated dollar amounts for revenue generation — all aimed at compensating for a fourth consecutive year of reduced state funding.

Gone are the percentages that told the units how much to cut, but not where.

“The ideas and strategies that we are pursuing are not easy,” Chancellor Linda P.B. Katehi and Provost and Executive Vice Chancellor Ralph J. Hexter wrote in the 2011-12 budget planning letter. “Implementation will require discipline and resolve at all levels of our campus and the consequences will be significant.

“As a community, we must work together to make the necessary changes that will ensure the financial health and stability that is needed to achieve our collective .”

Katehi and Hexter said �ٺ���Ƶ’ reputation and global impact have been on the rise for decades, and the ongoing budget challenge threatens “an ambitious goal that is now in our reach: �ٺ���Ƶ’ joining the top tier of the world’s major public research universities.”

The chancellor and provost remain undaunted: “We will surrender neither the university’s essential mission nor its upward institutional trajectory. Accordingly, our plan aims to preserve and advance Davis’ academic excellence across the full range of disciplines and professions, as well as the pioneering contributions it makes to the quality of life in our region, state, nation and world.”

Careful analysis over 6 months

To meet this challenge, �ٺ���Ƶ has devised and implemented a more holistic, more surgical approach to budgeting, with precise dollar targets based on what is good for the whole campus. This requires more direction from the central budget office — which gave that direction in the budget numbers that went out today.

“We have based these figures on careful analysis over the last six months,” said Kelly Ratliff, associate vice chancellor in charge of the budget. For example, the budget office has looked at staff-to-supervisor ratios, energy conservation and the capacity of academic units to tap research or other funds to help pay faculty salaries.

The reductions and revenue enhancements will take care of $68 million of the campus’s projected $107 million shortfall for 2011-12. The remainder is covered by a carryover from this year, increased tuition (already approved by the Board of Regents) and a share of the savings from budget cuts in the UC Office of the President.

“�ٺ���Ƶ has entered one of the most critical periods in its 102-year history,” Katehi and Hexter wrote in today’s budget planning letter.

“With the governor’s January 2011 budget proposal, we will have seen a nearly 40 percent drop in the funding we receive from the state of California over a four-year period. At the same time, institutional costs in research, education and infrastructure have climbed steadily and demand for access to our academic programs has risen sharply.”

�ٺ���Ƶ’ budget pain may grow even worse — because, even though Gov. Jerry Brown and the Legislature have made some progress, they are still a long way from enacting a complete budget for 2011-12.

In the meantime, �ٺ���Ƶ must base its budget planning on state action to date: a $500 million cut to the UC system, as proposed by Brown in January and subsequently approved by the Legislature. �ٺ���Ƶ’ share of the cut is $73 million. (Add that to $34 million in fixed-cost increases, and the total shortfall for the year is $107 million.)

Much uncertainty remains

“The governor will soon release the May revision to his budget proposal, and all indications are that the university will face higher cuts,” Katehi and Hexter wrote in their budget planning letter.

One key factor: Brown’s proposal for tax extensions. The governor and other Democrats favor putting the extensions to a vote of the people; Republicans are opposed. Without the extensions, Brown has said he will produce an all-cuts budget.

“We will work closely with President (Mark G.) Yudof to develop a universitywide response and strategy to any additional cuts,” Katehi and Hexter wrote.

If the past is any indication, the budget wrangling at the Capitol will continue into the summer. Nevertheless, Katehi and Hexter said, �ٺ���Ƶ must proceed with campus budget planning — with the new fiscal year starting July 1.

Campus leaders and budget planners have been hard at work since January, reaching far and wide in consultations. Early on, Katehi and Hexter asked for the campus community for “Budget Ideas” in three categories: new revenue, efficiencies and cost reductions.

The chancellor and provost subsequently held a series of forums with students, staff and faculty, and have another one planned May 25 with graduate students.

“The (budget) plan was created, and will continue to be developed in the coming months, through extensive collaboration among campus leaders, faculty, staff and students, as well as friends and other external constituencies,” Katehi and Hexter wrote. “We know that the plan’s success, and Davis’ future, depend on the support and collaboration of the entire university community.”