The governor’s May budget revision, released Tuesday, remains largely unchanged from the January proposal. Patrick Lenz, the university’s vice president for budget and capital resources, said the university did not receive any additional increases in funding in the May revision.

The budget also calls for a four-year tuition freeze for all students except those in professional schools, a restructuring of debt and discontinuation of a proposed unit cap on state-subsidized courses, which could have affected 2,200 UC students in the next school year.

Student Regent Jonathan Stein and Regent Bonnie Reiss raised concerns about rising costs of professional student fees while undergraduate and other program costs have been held constant.

“Because Prop. 30 passed and because of new state revenues, we’ve been able to hold tuition constant,” Stein said. “In reality, we’ve been able to hold undergraduate and Ph.D tuition constant while professional schools continue to rise.”

The regents also discussed restructuring the university’s debt. The state of California currently takes out bonds on behalf of the university, but UC officials say shifting the responsibility of the debt to the UC system would help lower the debt.

“That debt is greater because the state of California’s credit rating is not as good as ours,” said Brooke Converse, spokesperson for the UC Office of the President. “What we’re asking is that the state of California let us take over and restructure that debt, because if we restructure it, we’ll be able to save $80 million a year.”

The university is also working with the governor to expand facilities at UC Merced, said Nathan Brostrom, the university’s executive vice president for business operations.

“The highest priority is a classroom and academic building at UC Merced,” Brostrom said. “They are now close to 6,000 students, and they do not have space for continued growth unless they get more classroom buildings.”

The regents also approved a plan to build a new aquatics center at UC Berkeley on the current site of the Tang Center parking lot.

Protesters from American Federation of State, County and Municipal Employees 3299, a union representing patient-care workers at UC medical centers, also interrupted early in the meeting for about 45 minutes to protest in favor of higher pay and increased staffing.

On Thursday, the regents will meet in closed sessions to discuss collective bargaining matters and lawsuits related to the UC system.

Staff writer Virgie Hoban contributed to this report. 

Mitchell Handler covers academics and administration. Contact him at mhandler@dailycal.org and follow him on Twitter @mitchellhandler.

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The funding ratio — a measure of the program’s financial health — fell from 81 percent to 77 percent between July 2011 and June 2012.

Anemic investment returns have only exacerbated the problem. Across all UC retirement plans, the return on investments was only 0.8 percent last year, compared to 20.5 percent the year before.

Troubles with the UC Retirement Plan follow the decision to suspend employee pension contributions from 1990 to 2010 because the fund appeared to have a surplus.

The plan now faces a roughly $11 billion unfunded liability as employee contributions have yet to catch up to the cost of benefits, creating an ever-widening funding gap.

Due to the plan’s massive size, its woes have begun to weigh heavily on the university’s financial health at large.

“Changes in the pensions and retirement are really the tail that wags the bulldog of the university,” said Nathan Brostrom, UC executive vice president for business operations.

But proposals to increase employee or employer contributions in order to improve the plan’s health have seen huge pushback from unions and campuses alike.

In October, UC Berkeley Chief Financial Officer Erin Gore said increasing employer contribution rates would place an even greater fiscal burden on the campus in an already difficult time.

At Thursday’s meeting, the regents also discussed potential changes to the methodology for analyzing the financial health of their plan.

To determine how much of a pension plan is funded, actuaries estimate how much the plan will pay out in benefits in the future and then discount that number based on various factors.

The choice of discount rate can have a huge impact on the apparent size of the unfunded liability — the amount the university will owe that the plan has not accounted for.

The art of selecting a discount rate mirrors Goldilocks’ dilemma: If actuaries choose too high of a discount rate, they may mask the unfunded liability; and if they choose too low of a discount rate, their analysis may produce a deceptively large unfunded liability.

The trick is choosing just the right rate.

The university’s choice of a discount rate has come under fire from all sides with some parties, like a group of UC San Francisco nurses calling for a higher discount rate, and others, like former secretary of treasury George Shultz and former chairma of the Federal Reserve Paul Volcker, calling for a much lower one.

During the public comment session of the meeting at UC San Francisco, Erin Carrera, a nurse at UC San Francisco, made reference to an independently prepared actuarial report that used a higher discount rate, reducing the apparent unfunded liability by $1 billion. Under this plan, there would be far less need to increase contribution rates.

But Brostrom said he remained comfortable with the university’s choice of discount rate because it remained in line with a long-term rate of return on investments.

Still, UC President Mark Yudof appeared open to having the administration consider all proposals.

“I want you to read this material, think about it (and) respond,” he told UC Chief Financial Officer Peter Taylor. “Treat that extremely seriously.”

Curan Mehra is the lead higher education reporter. Contact him at cmehra@dailycal.org.

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The Regents will discuss the 2012-2013 budget and issues regarding decreased state funding and the need for other sources of income for the UC. Though previously on their agenda, per the request of Gov. Jerry Brown, the Regents will not discuss whether to raise supplemental tuition for certain graduate programs.

Follow a liveblog of Wednesday’s meeting below.

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Much of the debate at Wednesday’s meeting centered around the possibility of increasing tuition to increase the percentage of students supported by the UC Blue and Gold Opportunity Plan, which uses one-third of the revenue from undergraduate fee increases as a return-to-aid policy to pay for the tuition of low-income students.

UC Executive Vice President for Business Operations Nathan Brostrom said that by increasing tuition by $2,000, the plan could support families making $120,000 a year, up from the $80,000 annual income limit it currently supports.

“The problem with having the perception that low-income students are taken care of is a false impression,” said Cinthia Flores, the student regent-designate, in an interview. “As we’ve seen, Cal Grants are constantly on the chopping blocks. In reality, low-income students depend on the wish and want of the state Legislature.

With state funding reduced by 27 percent since the 2008-09 fiscal year and individual campuses still absorbing a portion of $750 million in budget cuts from last year, administrators cautioned against the notion that the board will not have to consider tuition increases at all. If voters fail to pass Proposition 30, Gov. Jerry Brown’s tax initiative, at the statewide elections on Nov. 6, the board will likely approve midyear tuition increases at their meeting later that month to partly make up for $250 million in midyear “trigger” cuts.

“We learned of the budget situation at the end of June,” Brostrom said in an interview. “It’s a lot of revenue to make up in a short time.”

Since the board approved Brown’s UC budget proposal at their meeting July, hinging the short-term financial stability of university on the proposition, the university has explored financial options to raise revenue without increasing student fees. The university will begin restructuring its revenue, investments and endowment accounts, which could generate $20 million in one-time funds, Brostrom said at the meeting. Restructuring the university’s debt could generate an additional $80 million to $100 million in savings, according to Brostrom.

UC administrators said that if the tax initiative fails to pass at the polls, restructuring financial assets would help prevent the full 20.3 percent tuition increase that would be necessary to make up for trigger cuts.

“We want to know what our options are should the initiative pass and, God forbid, if it doesn’t,” said board chair Sherry Lansing. “We’d like to know we’ve done anything humanly possible (before voting) for tuition increases.”

Should the proposition pass, students will be off the hook for a tuition increase this school year but will likely face a 6 percent tuition increase for the 2013-14 academic year, according to UC Vice President for Budget and Capital Resources Patrick Lenz.

Earlier in the meeting, the board debated raising the percentage of the nonresidents in undergraduate student body, which is currently capped at 10 percent systemwide. Some regents, including William De La Pena, supported the idea, saying increasing nonresident enrollment is necessary for the university to remain economically viable.

Yet, others worried that raising the cap would further decrease the representation of underrepresented minorities at the university, a large portion of whom are California residents.

“We are changing fundamentally our mission, which is to provide education to Californians,” said Regent Eddie Island at the meeting. “Now, we are selling it to the highest bidder.”

Staff writer Sara Khan contributed to this report.

Contact Sara, Amruta and Aliyah at newdesk@dailycal.org.

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At the May 16 regents’ meeting, at which regents discussed a potential 6 percent fee increase, UC Executive Vice President of Business Operations Nathan Brostrom presented a method that could be used to fund the university’s return-to-aid program as one solution to a possible tuition and fee increase.

While return-to-aid is not a formal policy, it has been a customary habit within the UC system since 1968 and currently funds financial aid for eligible students by extracting one-third of all revenue generated by student tuition and fees and funneling it back into financial aid.

Faced with the scenario of tuition hikes, Brostrom said the UC has started brainstorming alternative funding methods for return-to-aid, which would use one-time funds — primarily in the form of donations made to the UC — to finance a percentage of return-to-aid, rather than just tuition and student fee dollars.

While the idea is in a preliminary state, it is an example of how money is being reorganized within the UC system because the funds available are far fewer than they have had in the past, said UC Spokesperson Dianne Klein.

“The threat of cutbacks is so severe that we are talking about actions that we never thought we would discuss,” Klein said. “We are getting creative.”

According to Brostrom, the UC currently takes roughly $700 million from tuition and puts it back into return-to-aid. However, if the UC could come up with other resources to replace tuition money, restricted funds and operating funds could be released to each campus for independent use, and tuition would not need to increase in order to ensure the financial aid obligations for each campus are filled.

“This is a way to meet financial aid obligations without raising tuition on the students,” Brostrom said.

Brostrom gave the example that if the regents were able to redirect revenue from return-to-aid towards other projects, it could potentially cut tuition by thousands of dollars.

In order to provide the 5 percent operating fund for each campus, the UC would need to institute a 7.5 percent tuition increase, Brostrom said. However, if return-to-aid money was generated by donations and philanthropy, tuition increases could be limited to 6 percent and would allow the same amount of financial aid while having less impact on middle-class families, who suffer the most from tuition hikes, he said.

Although using one-time funds to help finance return-to-aid would ease the severity of potential tuition hikes, it also presents the concern that these donated funds could run out in the future. If the current percentage that return-to-aid receives from student fees is erased, there is no guarantee for what the UC might receive from donors in the future.

UC Student Regent-designate Jonathan Stein raised this issue at the May regents meeting, at which point he questioned Brostrom about the longevity of the solution and whether one-time funds were a sustainable source of revenue when it comes to financial aid dollars for students.

“It makes me nervous that we would be doing this simply because we feel we are comfortable that we can find one-time funds currently to fill the difference,” Stein said at the meeting. “If we continue to pursue this as a policy, we might put ourselves in a position where in the future we do not rely on one-third return-to-aid and do not have enough money for financial aid.”

Stein also asked that the UC only pursue this option after confirming that sufficient funds had been secured from other sources to ensure that financial aid would not be reduced.

“If alternative funds from philanthropic donations are not available in the future, we would adjust the size of future tuition increases to generate the needed financial aid funds,” Brostrom said in an email.

While Brostrom acknowledges the importance of securing philanthropic funds, he states that the UC is hoping to create a steady flow of private and corporate donations in the UC name so that alternative funds would continue to be available in the future.

“Our goal, of course, would be to generate donations for UC’s endowment so that alternative funds would continue to be available in future years,” he said in the email.

Another aspect of the idea is what type of fundraising donors would be interested in. In some ways it might be easier to fundraise around the basis of scholarship, rather than school maintenance or building upkeep, according to Klein. However, she also said it could also be difficult to fundraise for broader financial aid revenue.

Nothing is settled, but the potential cutbacks are harsh and cut into the core values of the UC public education system, she said.

“We would like to get philanthropic support systemwide, but right now donors have specific scholarships,” Klein said. “It is a tricky dance here.”

Brittany Jahn covers higher education.

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In previous academic years, revenue generated from individual campuses had been collected and then redistributed across the UC system, but a change in policy implemented at the start of the 2011-12 academic year has allowed campuses to keep these revenues and instead pay 1.6 percent of that amount to UCOP.

The taxed funds can come from sources such as tuition, state general funds, application fee revenue and patent revenue. The funds then go toward shared systemwide needs such as multicampus research projects and central administrative services.

UCOP has left the question of whether to tax revenue such as fees generated by student fee referenda up to the chancellors at each campus, according to UCOP spokesperson Shelly Meron. The Berkeley campus currently does not collect revenue from student fee referenda for this purpose, but concerns have been raised at other campuses where fee referenda face taxation.

After UC Santa Barbara Associated Students expressed concern over the impact that the new funding model might have on student fee referenda, a forum was hosted on campus on April 16 at which students discussed the tax with UCOP Executive Vice President of Business Operations Nathan Brostrom and Executive Vice President and Chief Financial Officer Peter Taylor.

Student leaders on the Berkeley campus have raised objections to the inclusion of student fee referenda funds in the 1.6 percent tax.

Bahar Navab, campus Graduate Assembly president, said she felt that the inclusion of student fee referenda was unfair because students might have been aware when voting for the new fees that some of the money might go toward the UCOP tax.

“I’m hoping that UCOP will offer a stronger message to chancellors that this money shouldn’t come from student fee referenda and student money, but in the long term we’d like to see UCOP not include student referenda or student money in these calculations,” Navab said.

Erin Gore, UC Berkeley associate vice chancellor and chief financial officer, said that the new tax method, which resulted in UC Berkeley paying approximately $27 million this academic year, is better for the campus because the previous method of gathering revenue made it difficult to determine the actual revenue amount Berkeley would receive from taxed funding sources.

“As a campus, we are seeking ways to achieve financial stability — both by knowing the revenues we expect to receive and the expenses we expect to incur,” Gore said in an email. “This change is a move in the right direction, it supports our ability to predict campus revenues and expenses.”

Gore added that the amount the Berkeley campus paid this year under the new funding initiative was comparable to “off the top” funds UCOP would have received under the previous revenue collection model.

The new method of collecting revenue also gives campuses more of an idea of how money will be applied, according to Elizabeth Deakin, co-chair of the campus division of the Academic Senate Committee on Academic Planning and Resource Allocation.

“We are actually better off because we have a clearer picture of what we bring in on each campus and what we  are paying for shared systemwide services,” Deakin said.

However, in light of financial problems, UCSF Chancellor Susan Desmond-Hellmann has expressed concerns with the new tax, and the campus has made moves to increase its independence from the system in order to strengthen its financial situation.

According to UCSF spokesperson Jennifer O’Brien, Desmond-Hellmann has asked the UC Board of Regents and the UCOP to partner with UCSF to review governance and financial issues. The regents have responded by agreeing to convene a work group, which will report to the regents in July.

Jamie Applegate covers higher education.

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While UC President Mark Yudof has called on the board to endorse Brown’s tax initiative, some regents remained wary of its impacts and said more negotiation with legislators would need to take place. Additionally, the board addressed a 1999 policy that has triggered threats of a lawsuit from UC executives seeking higher pensions.

After sustaining cuts of $750 million in 2011-12 alone, the UC will face a $200 million mid-year cut if Brown’s initiative does not pass in November.

According to a presentation given during the board’s Committee on Finance open session, exactly how much revenue Brown’s initiative would garner is unclear. The Legislative Analyst’s Office estimates earnings of $6.8 billion in 2012-13 and $5.4 billion in 2013-14. The state Department of Finance, however, projects higher numbers, with $9 billion the first year and $7.6 billion the next.

Several regents mentioned the need to educate elected officials about the importance of reinvestment in education, and the meeting’s agenda noted that the primary focus of advocacy activities has been to urge Brown and the state legislatures to make higher education a priority. The meeting’s agenda did not specify whether the board will endorse Brown’s initiative, and this was reflected by passionate comments from several regents.

“There’s nothing in here to support,” said Regent Norman Pattiz. “I want to support the governor, but I want to support something that accomplishes what we need to do to address the multiple challenges we face going forward. What we’re being asked to support doesn’t come anywhere close to that.”

Pattiz called the state an “unreliable partner,” saying that the initiative lacks binding language that will ensure the university receives the funds it is promised.

According to Lt. Gov. Gavin Newsom, the initiative “takes pressure off the general fund but it does nothing to secure the fate of the UC system.”

Newsom stressed that the board needs to continue negotiating with the governor.

“I feel very strongly that if you’re going to continue these negotiations you’ve got to take tuition off the table,” he said. “There’s got to be much more guarantee and certainty.”

Yudof, however, said he supports the initiative and recommends the board endorse it, saying it could provide “a peace treaty on tuition” and would improve the university’s financial situation. He and other administrators have been pushing state legislators for a multi-year plan to fund the university.

Claudia Magana, president of the UC Student Association, urged the board to support Brown’s tax initiative in order to prove its commitment to stopping fee hikes and state disinvestment.

“The UC system cannot absorb another cut without a huge impact on affordability, accessibility and quality,” she said.

Brown’s budget plan would add $92 million to the state’s share of employer contributions toward the UC retirement program. The university faces $362.5 million in unfunded mandatory cost increases, which include contributions to the university’s retirement program, according to the committee agenda.

Additionally, the board addressed the threat of a lawsuit the UC may face demanding higher pensions for executives.

The issue surfaced in December 2010, when a group of executives demanded that the UC should calculate their pensions as a percentage of their entire salary, and not based on the federal limit of $245,000. The executives — including vice chancellors and deans such as Dean of the Berkeley School of Law Christopher Edley — say their claim is based on a measure passed in 1999 that would increase the limit.

The board voted to clarify its stance on the measure — Yudof said the board’s stance is that the measure “never took effect for lack of appropriate action by the president or regents.”

After the vote, during the Committee on Educational Policy’s open session, the regents were briefed on the amount of private support received by the university, which has increased by 20 percent since last year. By the end of 2011, donors had given $775 million. Last year’s combined fundraising totaled $1.6 billion, according to statistics presented at the meeting.

Interim UC Senior Vice President Daniel Dooley, who presented a report on advocacy, said the university can increase revenue through corporate relationships, patents, more individual donations and philanthropy, as well as increase its visibility through social media.

According to a presentation given by Nathan Brostrom, executive vice president for business operations, the university can strengthen its finances by developing its medical enterprise, research, increasing donors and nonresidential enrollments.

Brostrom also advocated for “a student tuition plan that provides modest and predictable increases to the benefit of both the UC campuses and students and their families.”

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With declining state funding driving University of California tuition higher and higher in recent years, a group of students at UC Riverside is proposing an alternative student contribution plan that would allow students to pay for their education once they have a steady, post-graduation income.

The plan, called the UC Student Investment Proposal, would have students cease payments to the university and instead have them pay a percentage of their income after graduating and entering a career for the next 20 years, interest-free. The group behind the proposal, called Fix UC, is composed of members from the editorial board of UC Riverside’s student newspaper, The Highlander, and other student leaders at the Riverside campus.

UC Executive Vice President Nathan Brostrom and UC Vice President for Budget and Capital Resources Patrick Lenz will meet with students when they are at the Riverside campus for next week’s UC Board of Regents meeting to discuss the proposal, according to UC spokesperson Steve Montiel.

“We’re open to hearing and exploring all ideas,” Montiel said in an email.

Montiel added that the discussion is not on the agenda for the meeting.

Fix UC President and Highlander Editor-in-Chief Chris LoCascio said the idea came about last spring during the state’s budget crisis.

“As a member of editorial board for the Highlander we ultimately called for new ideas — an out-of-the box solution that attempted to address some of the root problems with funding for the UC,” he said. “We were just kind of dissatisfied with a lack of ideas and lack of action with everyone involved in the UC.”

UC Berkeley professor Robert Reich presented a similar idea in remarks to the UC Commission on the Future in 2010, according to Montiel.

LoCascio said the proposal encourages a lifelong relationship with the university.

“Having the UC backing you in the search for your career is really something you can’t put a price on,” he said.

The proposal also suggests that the UC change the current Blue and Gold Opportunity Plan to implement Fix UC’s plan. Under the proposal, the university’s financial aid program would also cease to exist entirely, and its funds would be dedicated elsewhere.

Although it is unclear whether the group will present its ideas at the upcoming board meeting, LoCascio said Fix UC’s role there is “still in development.”

“Whether or not this is something the regents decide to explore or implement I can’t say,” he said. “But regardless, I feel like this is extremely important and will get people to start to think about education in new ways.”

Damian Ortellado is the lead higher education reporter.

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UC Executive Vice President for Business Operations Nathan Brostrom lamented to the Bay Citizen in an article published Tuesday that instead of giving back to the university, many alumni are taking the mentality that “If I did it, why can’t they do it?”

There are many factors for why current alumni are not donating, all reflective of a culture of weak alumni networks and a historically insufficient emphasis on building these relationships. But perhaps the most important question now, with administrators focusing on philanthropy as a major part of the campus’s fiscal future, is whether we — the current generation of students and next crop of potential donors — will continue the trend of not contributing. As of now, we are not so confident that we would give back.

UC Berkeley struggles more than many other universities to garner alumni support. A mere 12 percent of alumni gave back in 2010, and 40 percent have donated in their lifetimes.

A key to resolving why many alumni are reluctant to give back is understanding that due to our campus’s large population (with over 35,000 students), many feel the need to find their own unique niche on campus.

We feel the strongest allegiance is to student groups, academic majors, living spaces and other affiliations that we identify with while on campus. We will recall these bonds most vividly when we reminisce. In contrast, when we look back at what “UC Berkeley” means to us, we will think of continuous tuition increases and staggering debt — not exactly the kind of memories that would encourage us to write a check when an unknown telephone caller announces a fundraising drive.

In seeking a solution to the dilemma of apathetic alumni, the campus must not solely maintain an outward-looking view, focusing on how it can better pull alumni back in. It must look internally as well, to foster a culture in which graduates look back once they receive that diploma.

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The board’s members considered — and, at times, vehemently rejected — the possibility of increases, which could take tuition and fees to $22,068 for the 2015-2016 academic year. Many of the board members, expressing a need to take urgent action, formulated other solutions to the university’s looming funding problems, including increased corporate sponsorship and an ad campaign to spark public action against the state’s cuts to higher education funding.

“I think I speak for all of the regents when I say that this scenario that we’re looking at is not what we want ,” said board Chair Sherry Lansing. “I know what the worst case scenario is and I don’t want to accept it.”

The plan would ideally increase fees 8 percent per year to accompany an 8 percent increase in state funding that the UC would request. In the absence of any increase in state funding, fees would increase at a rate of 16 percent per year, which would cause fees to cross the $22,000 level, according to Nathan Brostrom, UC executive vice president for business operations.

But many of the members of the board advocated for seeking additional funding from outside sources such as corporations in lieu of further discussing the logistics of the multi-year budget plan, which would depend on funding from the state government.

“I have no faith in Sacramento to ever do the right thing,” said Regent Richard Blum. “The truth of the matter is, where is the money? It’s in the private sector, it’s with the corporations, it’s with the wealthy individuals.”

Although some board members discussed the possibility of taking action on the budget plan in November, it is not likely the board will vote on it until next year, according to UC Vice President for Budget Patrick Lenz.

Read the UC report outlining the multi-year budget proposal, annotated by higher education reporter Damian Ortellado:

Clarification: A previous version of this article may have implied that the discussed fee increases could have been $22,000 in addition to current tuition and fees. In fact, tuition and fees could total $22,000 if the fee increase discussed at the meeting were to be approved.

Damian Ortellado covers higher education.

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