Good afternoon.
I am looking forward to the discussion on the proposed Disciplinary Communications requirement - therefore my comments this afternoon will be brief to allow as much time as possible for that discussion.
Quentin has always said that it is the Chancellor's job to deliver the good news to the campus, and my job to deliver the bad news.
Since the Chancellor cannot be here today, I was prepared to deliver the good and the bad news - and yes, there is good news to report.
However, I was convinced that people want to know about the budget - so I will limit my comments to the budget and direct you to our Public Information website where the good news is reported on a daily basis.
As Quentin mentioned in the call for this meeting, it is hard to put a positive spin on the topic of our budget.
I am not going to attempt to do that.
This afternoon I want to tell you what I know, discuss what has been done to date, and then outline the steps we will take over the next few months to implement campus-wide budget reductions.
What we know:
The state has a projected $41-billion deficit through June 30, 2010.
As described in a recent news report, the state is almost out of cash. Bills are not getting paid. Tax refunds aren't being mailed. Construction work is stopped. Bonds can't be sold.
Because the State's fiscal condition continues to deteriorate, a special session of the Legislature was convened in December to develop an 18-month budget proposal - to address additional shortfalls in the current year and develop new proposals for the 09-10 fiscal year.
Gov. Schwarzenegger and four legislative leaders have agreed on a package of $15.1 billion in spending reductions, $14.4 billion in tax increases and $11.4 billion in borrowing - although as of this morning the legislature was still at a standoff and the budget had not passed.
The State Senate is in lockdown and lawmakers have brought sleeping bags to work.
In the current year, the University has already implemented a $33M mid-year reduction approved as part of the final budget last September.
President Yudof reported to the Regents yesterday that if the budget currently under consideration in the Special Session is adopted it would mean a $450 million state funding shortfall for the University.
This consists of $115M in new permanent cuts, $122 M in under funded enrollments, and an estimated $213M in mandatory cost increases over a two-year period for utilities, employee health benefits, faculty merit adjustments, and other inflationary costs.
He notes appropriately that our needs are much greater given the state funding trends over time - this $450M illustrates only the impact on the University since the most recent fiscal troubles began.
He also points to two ongoing, serious concerns: 1) that the continuing deterioration of the State's fiscal health causes us to speculate that additional reductions may be forthcoming, and 2) the elimination of funding for re-starting employer contributions to the retirement system puts the fiscal health of the system at risk.
It is difficult to anticipate exactly what the current financial crisis means for the University beyond two undisputed facts: 1) state support to the university will be reduced dramatically 2) our students and their families will be faced with significantly increased costs to attend UC.
What has been done:
UC leadership has been taking action over the last several months to address the current year crisis and is actively engaged in planning on how best to manage our response to the expected multi-year financial downturn.
To address budget cuts already enacted and in anticipation of further reductions, the Office of the President has implemented a number of actions.
These actions include:
. Cost efficiencies and staff downsizing at the UC Office of the President reduced its current operating budget by $60.4 million, a 21 percent savings over the prior year, along with an FTE reduction of 500, or 27 percent.
. UCOP has a goal of reducing its work force by at least another 275 positions and $25 million by the end of the 2009-10 fiscal year. This would result in a total work force reduction of 43 percent.
. A freeze has been implemented on the salaries of top administrators and compensation for a large group of senior leadership has been restricted significantly.
. Additional savings came from not filling vacant nonessential positions, curbing travel and consulting expenditures and consolidating and reorganizing departments in central administrative offices.
. Those efforts will continue along with ongoing reviews of programs and services that could be better delivered through third-party vendors or campuses.
Further, an effort has been launched by President Yudof to begin to consider the system's response to the longer-term impacts of this downturn.
I have been asked to serve on a Budget Advisory Committee, charged by President Yudof and co-chaired by Vice-President Katie Lapp and UCSB EVC Gene Lucas to consider system-wide actions to reduce our expenditures.
I have also been asked to serve on an advisory committee to consider actions that should be taken with our retirement system.
I will keep you apprised as the work of these committees progress.
At UCSC:
To address the current year reductions I asked that all principal officers implement a soft-hiring freeze and fill only essential positions.
I have asked that strict restrictions be placed on entertainment, travel and consulting expenses and that appropriate actions be taken to reduce expenses to the extent possible.
We are implementing a mid-year cut of approximately $6M in one time funds made necessary by additional reductions proposed by the governor that were not included in the final 2008-09 state budget.
For 2009-10, we are attempting to estimate what our share of the permanent reductions will be - not an easy task.
At this time, we are projecting that UCSC may need to implement permanent budget reductions that could be more than twice the magnitude of the mid-year cut.
Our projections take into account current information about state funding, expected increases in revenue (due to increases in mandatory system wide fees), and estimated cost of collective bargaining and other known mandatory increases, such as academic merits and utilities.
I am certain that, given the magnitude of the anticipated reductions, no area of the budget (including direct instruction and research) will be exempt from cuts.
Despite the uncertainty of an actual number, we will need to establish target reductions for each division on campus.
In December, I asked each Principal Officer to provide me with a brief summary of how s/he might manage a 10% budget reduction.
I convened a small group of colleagues to help me review the submittals - trying to understand the impact of proposed actions on our teaching and research activities.
I will soon put forward for Senate consultation a budget reduction proposal that will allocate proposed reductions by division.
This proposal will be reflective of the following
. Recognizing the magnitude of the cuts that must be realized in one year, I believe we must allocate cuts strategically in order to maintain the ability to resume progress in the future.
. In order to achieve this, we must establish a framework to guide the actions of the principal officers as they make operational decisions to achieve the necessary budgetary savings.
The framework I propose identifies the following as highest priorities (although efficiencies in all areas must continue to be sought):
. Services/activities that directly affect instruction and research;
. Required safety and compliance functions of the university;
. Activities that yield new revenue sources or increase revenue beyond the current levels.
There are three general guidelines that I will ask the Academic Deans to bear in mind as they decide how to implement budget reductions:
. Academic programs for which there is clear evidence of being highly ranked should be considered a higher priority than other academic programs;
. Maintaining or enhancing the quality of graduate student programs is more important than growth in graduate student numbers.
. Maintaining and/or enhancing the quality of instruction and research are critically important. However, the modes of delivering instruction and research should be reviewed to identify opportunities for reducing cost of delivery.
We too must think about the longer-term - how will we adjust to what could be further reductions.
To do this we must look at activities that span multiple academic or support units and evaluate whether further potential exists to realize short or long-term savings through re-organization increased efficiencies or cost avoidance.
I have convened a number of workgroups to propose ideas for further evaluation in the following areas:
. Administrative restructuring;
. Instruction;
. Instructional support;
. Undergraduate academic advising;
. Residential and Student Life programs;
. Academic personnel practices;
. Institutional support;
. Auxiliaries
Going forward:
Shortly after the plane crash in the Hudson River, I read an article that discussed catastrophes - evaluating the characteristics and behaviors of those who survive in the face of catastrophe.
It reported that those who panic or are paralyzed by fear are least likely to survive.
Those who remain calm and figure out how to do what is necessary at the moment have a better rate of survival.
We are in a similar situation.
It is not life and death, but in order to get through this challenge and preserve our ability to progress (and I remind you that we have survived and progressed spectacularly despite previous budget reductions) we must do triage - cut more where the cuts are difficult but not disastrous, cut less where the cuts will do irreparable harm to the institution.
This will require support, involvement and sacrifice from faculty, staff, students and alumni.
It is incumbent on us, collectively, to ensure that UCSC remains positioned for future progress and competitive strength.
It is essential that we come together to make the necessary changes to sustain our excellence in education, research, scholarship, creative activity and public service.
We have much work ahead of us.
I will continue to rely on your continued input and counsel.
And in closing, I want to thank you for your patience, cooperation and commitment through these turbulent times.
