Dear Campus Colleagues,
I am so proud of all that we have accomplished this past academic year. We are continuing along an unprecedented trajectory as we support our students in their academic pursuits, conduct cutting-edge research and creative scholarship, and support the state of California as one of the nation’s leading universities.
As you know from previous communications, we came back strong from the pandemic by hiring more faculty and staff to restore regular campus operations, teach, mentor, and support our students, and undertake important research. That growth was beneficial, but the rise in core funds expenditures has been increasingly outpacing the revenues we receive to cover those expenditures. We closed this past fiscal year with a spending gap of more than $100 million, which is about 20 percent more than our core fund revenues.
Structural deficits occur when the campus collectively spends more than the revenue received each year over a number of years for various reasons, including unfunded mandates. Because we have been spending more than our revenues support, we have been drawing down our reserves, which is not a sustainable solution. Just as the structural deficit developed over time, we plan to reduce our spending over the coming years to once again put the campus on a sustainable fiscal path. As we do so, we must remain focused on maintaining our academic mission of delivering a quality education, producing impactful research, scholarship and creative activities, and advancing our region and the state through community and public service.
Earlier this year, I asked senior campus leaders to propose expenditure reductions that are future-focused and position the campus for longer-term success in achieving our goals and executing on our mission. Those proposed spending reductions were reviewed by the Budget Advisory Committee (BAC) and their recommendations were shared with me. As a result of this process, I am authorizing core fund expenditure reductions for fiscal year 2024–25 on the order of $17 million, as a first step toward closing the gap. The fiscal year 2024–25 core funds budget (based on anticipated revenue) for UC Santa Cruz is expected to be approximately $560 million of the campus’s just over $1 billion total budget.
In addition to spending reductions, we are looking holistically at our budget and processes to support long-term planning. I have been reviewing commitments of central funding for various purposes and have asked Ed Reiskin, VC FOA and our Chief Financial Officer, and the campus budget office to recommend other centrally-based solutions. Additionally, I am asking the co-chairs of the BAC and the Revenue Augmentation Committee to establish a small subcommittee to work over the summer to develop initial ideas for cross-divisional or whole-campus level reorganizations the campus should consider. I also anticipate receiving recommendations from the BAC in the near future on how we should manage carryforward funds moving forward.
All of those steps, together with somewhat better news from the state budget process–at least for FY25–represent progress, yet we need to continue our collective efforts to bring our expenditures in line with our revenues. It’s likely that the campus will need to make further budget reductions this fiscal year. The Budget Advisory Committee has been tasked with developing a multiyear plan to balance our core funds budget, and the Revenue Augmentation Committee I also charged earlier this year is undertaking its work to develop ideas to increase revenues. I’m grateful for the work of those serving on those committees as well as the many others across the university who are working to help address this situation.
I have tasked senior campus leaders with continuing to look thoughtfully at their units to identify strategic solutions to achieve a more efficient and cost-effective operation and produce additional cost savings in the 2024–25 budget year, while keeping focus on the core mission of the campus. This work will not be easy yet it is necessary to position our university for future success. As we address our structural deficit we will work collaboratively with campus leaders, the Budget Advisory and Revenue Augmentation Committees, and in consultation with the Academic Senate Committee on Planning and Budget, to ensure thoughtfully executed decisions.
I am confident that, working together, we will get through this current budget challenge and emerge stronger, supported by better budget processes, and spending and revenue practices. I appreciate the work each of you do every day in support of our mission, and look forward to continuing our work as we confront this and other challenges together.
Sincerely,
Cindy
Cynthia Larive
Chancellor
