The revised budget, commonly known as the May revision, reflects new spending proposals from state legislators, changes in the state’s economic outlook and decreases in federal government funding since the governor’s first proposed budget in January.

The UC Board of Regents will discuss the revised budget at its meeting in Sacramento on Wednesday.

If approved by the Legislature, the governor’s budget will increase funding for each of the state’s higher education systems above the prior year’s funding. The university will receive an increase of up to 20 percent in General Fund appropriations — about $511 million — over the next four years.

According to the budget, these changes will represent an increase of about 10 percent in total operating funds, including tuition and fee revenues.

The budget includes about $25.4 billion in total funding for higher education in the coming fiscal year, $400 million less than was proposed in January.

In addition, a previously proposed unit cap has also been removed from the budget following rejection from the state Legislature. Faculty groups and lawmakers criticized the 150 percent unit cap on state-subsidized courses for its “one-size-fits-all” model and argued that the mandate would not be as effective as individual campus caps.

According to the UC Office of the President, the unit cap would have impacted 2,200 UC students in the 2013-14 academic year.

“UC will continue working with the governor and the Legislature to address critical funding needs,” said Patrick Lenz, the university’s vice president for budget and capital resources, in a statement.

According to the governor’s press release, the budget is expected to remain balanced in the coming years. Spending cuts enacted over the past two years and new temporary funds brought in by Proposition 30, which was passed by voters last November, are expected to allow the state budget to reduce the state’s debt to $4.7 billion by 2017 — a reduction of more than 86 percent.

“This budget builds a solid foundation for California’s future by investing in our schools, continuing to pay down our debts and establishing a prudent reserve,” Brown said in a press release. “But California’s fiscal stability will be short-lived unless we continue to exercise the discipline that got us out of the mess we inherited.”

Additional elements of the revised budget include changes to the state’s public school funding system, investment in job-creation programs and an additional $72 million for county probation departments to compensate for their increased responsibilities as legislatures try to reduce the state’s prison population.

Brown will now have to convince the state Legislature that his plans for higher education and the state merit passage. After discussion from state senators and assembly members, the budget will be finalized in June and take effect July 1, the start of the 2013-14 fiscal year.

Alex Berryhill covers higher education. Contact her at aberryhill@dailycal.org and follow her on Twitter @berryhill93.

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Included in the governor’s budget is a $125 million increase in state funding for the UC system. This continues the trend of increasing state contributions to the university begun last year.

Another aspect of Brown’s budget is a funding plan that guarantees funding increases for the university for the next four years. The plan would provide the university with a 5 percent increase for 2013-14 and 2014-15 and a 4 percent increase for the following two years.

The UC system would benefit from a more predictable and less volatile funding schedule, according to the 2013-14 UC Budget for Current Operations. However, the $125 million unrestricted increases for this year amount to less than half of the 12 percent increases requested by the university last year.

The gap has caused worry that universities might have to turn to fee increases to maintain a similar level of spending.

“Even with this funding, we are still a long way from where we need to be,” said Raquel Morales, president of the UC Student Association, in a press release. “Students are deeply concerned that the gap in revenue will again be shouldered by students and their families in increased tuition.”

However, the budget could allocate an additional $125 million if tuition remains constant through the end of the academic year, providing an incentive against future fee hikes.

“Undergraduate tuition increases are largely off the table,” said UC President Mark Yudof at the UC Board of Regents meeting on Thursday.

No such arrangements exist to protect graduate and professional programs from fee increases, however.
“We seem to be fighting to keep undergraduate fees down, but what will it take to freeze professional tuition in the next couple years?” said Student Regent Jonathan Stein.

Freezes may not be the best solution for the university, however. According to a report published by the Legislative Analyst’s Office, long-term tuition freezes may actually be harmful to students trying to plan for the future.

“Extended tuition freezes help students who are currently in school but often lead to larger increases and greater tuition volatility for future students,” the LAO report reads. “A long term policy to maintain or gradually change tuition would result in more modest and predictable tuition changes for students and their families.”

Another important provision in Brown’s budget is a $10 million earmark for developing online and technology-based courses. Brown and many of the regents see online courses as an important source of future revenue and cost savings. The university has already implemented UC Online, a systemwide program that offers online courses for credit accepted at all UC campuses.

“I think we should think about the day when maybe 10 or 15 percent of the courses taken by each undergrad would be online,” said Yudof. “We can lower our marginal cost, live within our means and keep tuition down.”

The budget also establishes a cap limiting the number of units students can accrue to 225 quarterly units before they become ineligible for state-subsidized tuition. According to the budget, the cap would encourage students to reach their educational goals in a timely manner and increase access for others.

Brown will now have to convince the state Legislature that his plans for higher education and the state merit passage. State senators and Assembly members will debate the various provisions until early May. The budget will be finalized in June, and the 2013-14 fiscal year begins July 1.

Jacob Brown is the lead higher education reporter. Contact him at jbrown@dailycal.org.

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At the meeting, Brown, an ex-officio regent, suggested further fiscal discipline to make up for shortfalls in state funding. His proposals included reducing students average graduation time, lowering administrators’ compensation and decreasing faculty benefits.

Brown assumed an unusually active role in the financial committee’s discussion, at one point quoting Cicero’s “On the Republic” to describe the university’s current fiscal situation as part of a larger class conflict between the “elites and the plebeians.”

In response to the governor’s request for further fiscal discipline, Regent Richard Blum pointed out that UC faculty and executives continue to have significantly lower salaries than their counterparts at private universities — a trend that Blum said will “only result in the UC becoming a junior college.”

“You have to ask yourself, do you want the UC’s campuses to be as good as they have always been?” Blum said.

California Assembly Speaker John Perez, D-Los Angeles, warned the regents that Brown’s budget proposal is unlikely to pass if Sacramento’s demand for stable tuition levels is not met.

“If the discussion with the members of Legislature has the same tones as present here, I do not think you will be successful with the outcomes you want” Perez said. “Over the last several years there have been 900 million in cuts. Fee increases have been 1.4 billion. The fee increases are disproportionate to the disinvestment of the state.

According to Regent Sherry Lansing, current chair of the board, increasing tuition for certain graduate programs remained a possibility for dealing with fiscal difficulties — a statement that drew sharp criticism from  Student Regent Jonathan Stein and Perez. Still, she said, undergraduate tuition increases in the 2013-14 school year are highly unlikely.

Lansing praised the president and speaker for facilitating “healthy discourse,” which she said is productive in helping find alternative sources of revenue to state appropriations.

Contact Alex Berryhill and Shirin Ghaffary at newsdesk@dailycal.org.

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The budget, published Thursday, allocates an additional $125 million of general funds to both the UC and CSU systems over last year’s budget. Both universities are also entitled to $125 million each from a one-time-only buyout agreement in last year’s budget. Those funds would go to the universities only if they agreed not to raise tuition for the 2012-13 year.

If the budget passes, state funding would also increase over the next four years, putting the UC and CSU on the most stable fiscal trajectory in recent years. The budget proposes that the state’s General Fund contributions to the UC, CSU and the UC Hastings College of the Law increase by 5 percent during 2013-14 and 2014-15 and by 4 percent for each of the next two years.

However, the 5 percent funding increases provisioned in the budget may be insufficient for UC and CSU leadership. The $125 million unrestricted increases for this year amount to less than half of the 12 and 18 percent increases requested by the UC and CSU last year, respectively. This gap has caused worry that universities might have to turn to fee increases to maintain a similar level of spending.

“Even with this funding, we are still a long way from where we need to be,” said Raquel Morales, president of the UC Student Association, in a press release. “Students are deeply concerned that the gap in revenue will again be shouldered by students and their families in increased tuition.”

In a press conference in Sacramento on Thursday, Brown said he was concerned that tuition might rise at the UC and CSU but that tuition increases were a symptom of inefficiency, not a failure of the state to fund higher education. The budget cites the UC system’s high spending compared to other public research universities and CSU’s low completion and transfer rates as examples of inefficiency.

“The only way to stop (tuition increases) is for colleges and universities to reconfigure themselves so that they are more effective and they are able to do excellent work but do it in a way that will not keep the costs escalating at more than two times the cost of living,” Brown said at the press conference.

To tackle some of the perceived inefficiency, a provision of the budget establishes a cap limiting the number of units students can accrue before they become ineligible for state-subsidized tuition — 225 quarterly units for the UC, 150 for CSU and 90 semester units for community colleges. According to the budget, the cap would encourage students to reach their educational goals in a timely manner and increase access for others.

The budget also provides $10 million each to the UC and CSU and $16.9 to community colleges for developing and expanding  online and technology-based courses. These would allow a greater number of students into high-demand courses while using faculty and resources more effectively.

Republican leaders were supportive of the governor’s budget and hopeful about the forthcoming budget debate.

“Gov. Brown today proposed a realistic budget framework for California,” said Jeff Gorell (R-Camarillo), vice chair of the Assembly Committee on Budget. “We look forward to working across the aisle with the governor and our Democratic colleagues to enact vital budget reforms.”

The budget will continue on to California’s two legislative bodies, where state senators and Assembly members will debate the various provisions until early May.

Contact Jacob Brown at jbrown@dailycal.org.

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The proposed increase falls short of UC administrators expectations, opening the door for potential tuition hikes.

At a press conference in Sacramento, Brown called upon universities to reconfigure themselves to function more efficiently instead of asking for more state funding.

“We’re asking that teaching resources be deployed more effectively,” he said at the press conference.

Beyond the increase in general state funds, the budget also attaches strings to certain appropriations. Brown, who has taken a particular interest in online education at the UC, in his budget provides $10 million specifically for developing more courses using technology.

As part of his proposal, Brown also calls for the university to cap the number of units that students can take in an effort speed up the time students take to complete their degrees and to also free up resources for other students.

Check out the full budget proposal below.

Curan Mehra is the executive news editor. Contact him at cmehra@dailycal.org.

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The plan calls for state funding to the University of California to increase by more than $267 million next year — something Newsom said is very unlikely to happen.

“What we’ve basically passed today is a minimum 6 percent tuition increase,” said Newsom. “The budget is unrealistic. I’m concerned that the default to this plan is going to be to raise tuition to levels worse than what we were afraid of if Proposition 30 didn’t pass.”

Last week, California voters passed Prop. 30, which is projected to save the university $250 million this year in trigger cuts built into the state budget that would have gone into effect had it failed. Newsom emphasized that it is a myth that the proposition created new money for the UC system.

Newsom said that even if the state Legislature were able to approve the UC’s request,  the CSU and community college systems would certainly expect similar treatment. Brown seconded Newsom’s concerns, citing the need for alternative solutions for the UC’s revenue problems.

“When you look at this budget, the state would have to increase its funding by 12 percent to the university, and that’s just not likely to happen,” Brown said. “This is a group of bright people around here, and we can figure this out … but you’ve got to change the paradigm. We need reasonable, creative change.”

If state funding is not increased or creative solutions are not found, then tuition increases are inevitable, said Newsom, who expressed frustration over the lack of new ideas at the meeting.

“It’s Groundhog Day for me,” Newson said. “I’d love to be wrong. But it is likely that there will be a request to the UC Board of Regents for a minimum 6 percent tuition increase in the next months … and likely soon again after that.”

UC President Mark Yudof said he recognized that the approved budget is not a finished product but said the plan is not something to which the regents are held.

“I would just like to stress that we are in no way locked in to this plan,” Yudof said. “This is what we would like to do, but there are a lot of contingencies and issues to be worked out here.”

One major revenue-generating aspect of the budget is a debt restructuring that could bring in up to $80 million per year for the next few years.

UC Chief Financial Officer Peter Taylor said that because the UC system has better bond ratings than the state, the university will try to refinance them.

“Think of it as a refinance on a car loan,” said Taylor. “For example, imagine we were paying 5 percent and were able to drop that to 3 percent — the $80 million we are talking about would come from that drop.”

Contact D.J. Sellarole at dsellarole@dailycal.org.

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UC administrators proposed increasing the percentage of nonresident enrollment — which is currently 8.8 percent systemwide — in order to boost revenue to make up for decreased state funding. However, their suggestion was met with heated responses from some officials who argued that the increase would limit access to the system for California residents.

Student Regent Jonathan Stein voiced his opposition to what he called “clustering” of out-of-state students at the larger UC campuses, including UC Berkeley, UCLA and UC San Diego.

This fall, 24 percent of UC Berkeley’s incoming freshman class consisted of nonresident students, as did just over 30 percent of UCLA’s freshman class. But only about 8.3 percent of UC Davis’ freshman class consisted of nonresident students and only 4.5 percent of UC Riverside’s freshman class were nonresident.

Increasing the systemwide cap for nonresident students would cause a drastic decrease in Californian’s admittance to the top-ranking UC campuses, he said, adding that he would not be opposed to increasing nonresident enrollment “as long as we can manage where the out-of-state students are going instead of threatening access to UC Berkeley and UCLA.”

Because each nonresident student pays close to an additional $23,000 in supplemental tuition fees, the 16,000 nonresident students systemwide provide $407 million in annual revenue to the university.

“For every thousand nonresidents, you could have $23 million,” said Gov. Jerry Brown, an ex officio regent, to the board Wednesday. “That’s a great, tempting source of money.”

Currently, there is a limit to that source — a cap of 10 percent on nonresident undergraduate enrollment systemwide.

But some members of the board, including regents Eddie Island and Frederick Ruiz, said increasing the nonresident cap was a problematic solution to the university’s budget deficit as it could compromise the role of the university as a public institution primarily for California residents.

Supporters of the proposed increase pointed to the university’s ability to enroll more in-state students due to the extra revenue brought in from enrolling more out-of-state students. According to UC Executive Vice President for Business Operations Nathan Brostrom, last year enrollment of California residents at the UC increased by 1 percent.

“The question is, does the policy of admitting (out-of-state) students impact the (overarching) policy of admitting students to the UC?” said William Jacob, vice chair of the UC Academic Senate, to the board. “And the answer is, at the moment, it does not.”

UC President Mark Yudof also argued for the social benefits of international students — who made up 48 percent of last year’s class of nonresidents — saying that foreign students create a wider network of connections for UC students and better prepare California students for a globalized workplace.

“We’re in a global environment competing for talent worldwide.” said Yudof. “Berkeley, UCLA and UC San Diego are as much global universities as local universities.”

Contact Shirin Ghaffary at sghaffary@dailycal.org.

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When the senate depletes the roughly $1.6 million in funds that it collects from student fees, it relies on a Carry Forward Fund, which holds about $400,000 in reserves, according to ASUC Finance Officer Amir Chini.

Though the ASUC Senate has drawn money from its Carry Forward Fund for years, it was not running  a deficit because the amount of funds being drawn was replaced by funds from the ASUC Auxiliary’s business operations, according to ASUC Attorney General Hinh Tran.  However, because the Auxiliary has not made significant profits for several years, according to Tran, funds taken from the Carry Forward account have not been replaced. ASUC officials are classifying this unsustainable spending as the deficit.

At the meeting Wednesday night,  Tran warned senators that they should begin explaining to their constituencies that the levels of funding they now receive might be in jeopardy because of the deficit.

“We’ve reached a critical threshold where we have to take action now, or very soon or the Senate will deplete the Carry Forward Fund, and we’ll have to cut funding to student groups,” Tran said at the meeting.

The ASUC bylaws mandate that the senate operate a balanced budget. If revenues and spending are not balanced, the ASUC Judicial Council has the power to freeze senate spending.

To deal with the deficit, senators discussed the possibility of creating a student fee referendum for the spring 2013 ballot that would increase the amount students pay each semester to support the ASUC.

Student Action Senator Mihir Deo, a member of the senate’s financial committee, said a fee increase might be necessary to accommodate robust student life.

“When we’re in Finance Committee, we realize the urgency of certain groups who need that money,” Deo said.

Alternatively, CalSERVE Senator Nolan Pack suggested that the senate might have to cap the number of student groups it funds every semester.

Senators also emphasized the importance of long-term financial stability and avoiding the precedent of operating with an unbalanced budget.

“We need short-term policies to address this issue right now,” Cooperative Movement Senator Jorge Pacheco said. “We need to make sure the Association never goes down the path of structural deficit ever again.”

Tran said his goal was to address the impending deficit crisis in the next year, which Chini emphasized could easily turn out to be larger or smaller than projected.  Any surplus funding that student groups have at the end of the year would be returned to the senate’s contingency fund, shrinking the deficit. Alternately, student groups could request more funding than they were allocated in spring budgeting, causing the deficit to grow.

According to Executive Vice President Justin Sayarath, an ad hoc committee will be appointed soon to address the projected budget deficit.

Jeremy Gordon covers student government. Contact him at jgordon@dailycal.org.

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Below is a live blog of today’s meeting as it happens.

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Kamlarz, who worked for the city for 36 years, will have an annual pension of $249,420, which is slightly larger than the $242,580 he made when he left as city manager. Berkeley’s pension funds have suffered since the stock market crash of 2008, forcing the city to pay more out of pocket — a problem that some claim could eventually drive the city into bankruptcy.

Berkeley currently faces $329.87 million in unfunded liabilities, which are costs that are not presently due but must be paid in the future, according to city spokesperson Mary Kay Clunies-Ross. Of the nearly $330 million in unfunded liabilities, pensions account for approximately $205 million.

Part of the high pension costs lies in the fact that the city covers not only the employer contribution but also most employees’ 8 percent individual employee contribution for CalPERS, a state pension fund that uses investment returns to provide for employee pensions. Most city employees receive 2.7 percent of their salary at age 55 for every year that they worked. Firefighters and police, who do pay their CalPERS employee contributions, receive 3 percent at age 50 instead.

This means that if an employee offered 3 percent at age 50 were to work 30 years, he would get 90 percent of his salary after retirement past age 50.

Vallejo City Councilmember Marti Brown said that not even Vallejo, which went bankrupt in 2009 from plummeting tax revenues and high spending on employee salaries and benefits, was paying employees’ full contribution as Berkeley does.

“Hardly any cities anymore are doing that,” Brown said. “I can’t see how cities can afford to pay employee contributions for (CalPERS).”

The city had to close a projected budget deficit of $12.2 million in fiscal year 2012 and is looking at a similar shortfall for the upcoming fiscal year.

While lowering the city’s pensions contributions would ease some of these costs, the city has to negotiate with the unions that represent its employees to change the pensions agreements, and since that has yet to happen, the city has instead been faced with rising CalPERS cost.

The city is expected to pay $32.8 million to CalPERS in fiscal year 2012, according to CalPERS spokesperson Amy Norris. And without any change to the current system, CalPERS costs are expected to increase by $7 million over the next two years, according to the city’s budget report for fiscal year 2013.

This is a problem that members of Berkeley Budget SOS say the city has been sweeping under the rug for years now.

“The city auditor … she’s warned the City Council that they’re in real trouble, but the City Council pays no attention,” said Tim Wallace, a member of Berkeley Budget SOS and an agricultural economist with UC Berkeley.

Berkeley City Councilmember Gordon Wozniak, however, said that the council has been actively pushing for a two-tiered pension system, which could help alleviate pension costs by offering new employees a different pension package from that offered to current employees.

According to a budget report from a special meeting of Berkeley City Council Feb. 14, if all employees hired after July 1 of this year agreed to 2 percent instead of 2.7 percent at 55, the city would save $176,000 in fiscal year 2013 and $2.67 million by 2023. Over 10 years, the city would have a combined savings of $15 million, according to the report.

The Service Employees International Union Local 1021, which represents the city’s maintenance and clerical workers, agreed to a two-tiered system in June of last year. However, this will not be implemented until the city negotiates a similar system with all its other unions, according to union spokesperson Carlos Rivera.

This means that the city will have to reach agreements with all four of the other unions that represent the city’s employees and whose contracts expire in June of this year.

The city is currently negotiating with the Berkeley Police Association, and negotiations with the Berkeley Firefighters Association will not begin until that is finished, said Jim Geissinger, president of the Berkeley Firefighters Association. He added that BFFA negotiations typically last about 18 months.

Jeff Apkarian, business agent with Public Employees Union Local 1 — another union that represents city employees — said negotiations for his union normally start in March or April and last a few months.

“The only thing we know for sure is that we’ll be talking about retirement,” Apkarian said.

While the unions negotiate with the city, the city of Berkeley will be trying to balance its budget for the upcoming fiscal year in the coming months, taking into account the pensions costs they have agreed to pay while also dealing with a projected shortfall expected to surpass $10 million.

Vallejo City Councilmember Marti Brown remained optimistic but advised that cities like Berkeley learn from Vallejo’s mistakes — to take action now before it’s too late.

“I’d be surprised if they (Berkeley) ever reach the situation that Vallejo is in,” Brown said. “I hope that our experience tells other cities, ’Don’t wait until it hits you.’ You need to make cutbacks now. You need to make concessions from your employees now.”

Jaehak Yu covers city government.

Jaehak Yu covers city government.

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