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Jan. 21, 2011

SUBJECT: Campus Budget Update

Dear Colleagues,

As you know, last week Gov. Brown unveiled a state budget for 2011-12 that includes a $500 million cut to UC. If this budget were to be implemented as written, it could translate to a $73 million reduction for ºÙºÙÊÓƵ. In addition, the campus in 2011-12 must cover an estimated $26 million in increased fixed costs — increases in health care benefits, negotiated compensation and contributions to the retirement system. In all, ºÙºÙÊÓƵ would face a $99 million shortfall next year. Indeed, if the governor’s 2011-12 budget becomes reality, our state funding will have dropped by nearly 40 percent over the past four years.

To put these stark numbers into perspective, consider that under the governor’s spending plan, the state’s contribution to general support of the university (excluding monies restricted to specific research projects) would shrink to less than 10 percent of ºÙºÙÊÓƵ’ total revenues in 2011-12. This would be a devastating hit to our university, as these education funds are a key source of revenue for faculty and staff salaries and benefits, for student educational programs and for research and services that benefit the state.

President Yudof has asked the campus to act quickly; he has called on all 10 UC campuses to provide him with an initial plan that outlines the projected cuts and articulates the possible consequences of the governor’s proposed budget by Feb. 23, a little more than a month away. Therefore, we must begin immediately to work with the campus community to address these challenges.

Reducing state support for ºÙºÙÊÓƵ nearly 40 percent over four years cannot be accomplished without us fundamentally rethinking the structure of our university and the operations of our academic programs. Indeed, we must begin to re-envision our entire approach to supporting the university’s mission. Gone are the days of temporary fixes. Now and in the future, we must engage in a multifaceted strategy of permanent solutions and fundamental change, with an eye toward innovation and entrepreneurism to reduce costs and generate new revenue — and still continue to provide access to an excellent education. We can no longer build our budgets on the budgets of prior years. We require a new paradigm that maintains our mission of teaching, research and public service in this new, more turbulent fiscal environment.

To that end, our approach to the 2011-12 budget will be guided by three key elements:

• The establishment of planning principles and implementation strategies — The campus leadership has developed a draft set of principles and strategies (see below), and we are seeking your advice and input. Please take the time to review these lists and send comments to budget@ucdavis.edu by Jan. 28, so that we can finalize the principles and strategies by the end of this month.

• Education and advocacy — We all must develop a better understanding of the ºÙºÙÊÓƵ budget, as well as the potential impacts of Gov. Brown’s proposal. And clearly, we must do a better job of informing the governor and the Legislature about the true value and contribution of research and innovation at ºÙºÙÊÓƵ and throughout the entire world-class UC system, and how what we do contributes to economic success, cleaner environments and healthier communities throughout the state, the nation and the world. For information and regular updates on the ºÙºÙÊÓƵ budget, please visit ; for information about advocacy, please visit . For a solid, overall summary of the 2011-12 budget situation, please see the Jan. 14 Dateline ºÙºÙÊÓƵ article .

• Consultation — As we shape our campus’s budget and our budget strategy for 2011-12, we intend to stay in close contact and consultation with many groups on campus, including the Council of Deans and Vice Chancellors, the Academic Senate, the Academic Federation, the newly appointed Budget Task Force, student leaders, Staff Assembly, the Administrative Management Group (AdMan) and senior advisers. In addition, we encourage all in the campus community to share your ideas about how we might reduce costs or generate revenue by e-mailing budget@ucdavis.edu.

These are difficult times, but ºÙºÙÊÓƵ has a well-deserved reputation for coming together and collaborating on creative, innovative and lasting solutions to tough challenges. Please join us in this effort.

Sincerely,

Linda P.B. Katehi
Chancellor

Ralph J. Hexter
Provost and Executive Vice Chancellor

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ºÙºÙÊÓƵ Budget Planning Principles and Strategies
January 2011

BACKGROUND

Gov. Brown’s budget for 2011-12 proposes a devastating hit to ºÙºÙÊÓƵ, especially because it would immediately follow the budgetary damage of the past three years. The governor’s proposed $500 million cut to UC would translate to a $73 million reduction for ºÙºÙÊÓƵ. Combine that with the $26 million in additional fixed costs that ºÙºÙÊÓƵ will face in 2011-12 — including increases in health care benefits, negotiated compensation and contributions to the retirement system — and the campus next year would face a $99 million — or 17 percent — shortfall. If the proposed 2011-12 reduction becomes reality, our state funding will have been decreased by almost 40 percent over the past four years.

ºÙºÙÊÓƵ cannot and will not permit the educational opportunities we offer our students to be compromised. We must do a better job of informing the governor and the Legislature about the true value and contributions of ºÙºÙÊÓƵ and our entire world-class UC system to the state, the nation and the world. But let’s be clear: In the weeks and months ahead, there will be difficult — extraordinarily difficult — choices to be made.

PLANNING PRINCIPLES

1. Establish strategic priorities that focus on advancing the quality, reputation and excellence of ºÙºÙÊÓƵ consistent with our .

2. Minimize impact on student learning. We are committed to providing students the education they expect and deserve at ºÙºÙÊÓƵ.

3. Enhance our ability to generate and leverage nonstate revenue, including preserving and advancing our campus’s research enterprise and development efforts.

IMPLEMENTATION STRATEGIES

1. Balance the budget using strategic and permanent solutions that result in fundamental change. Consider a wide range of approaches to budget and use cost models that reflect full cost.

2. Use a transparent approach to budget planning and actively engage faculty, staff and students in the budget process.

3. Work closely with our partners, including the state of California, to develop and implement a wide range of cost cutting and revenue enhancement strategies.

4. Accelerate the Organizational Excellence initiative, both the completion of administrative unit reviews and risk assessments and the broader implementation of shared service centers.

5. Establish and maintain a prudent contingency fund.

6. Selectively invest in faculty and academic programs in accordance with our budget principles.