Too Many in the UC Lifeboat?

Mike Lofchie pointed me to this article which questions theone-system view of UC and, in particular, UC-Merced, in a period of budget stringency.

February 12, 2012,Chronicle of Higher Education

Fault Lines Form Among Campuses as Finances Strain U. of California(excerpt):

By Eric Kelderman

President Mark G.Yudof of the University of California often says that the system he oversees isone university with 10 campuses.  Butsome higher-education experts say the economic strains and budget cuts of thepast three years are fraying the ties that hold the system together. Severalcampus leaders have proposed measures to increase their financial independencefrom the system, in some cases at the cost of the other campuses.

…Meanwhile, thesystem's youngest campus, at Merced, was shielded from the latest round ofbudget cuts, causing some people on other campuses to grumble that it is notfinancially viable and is weighing the system down.  None of the institutions openly suggests thatit would leave the system, says David L. Kirp, a professor of public policy atthe University of California at Berkeley. But if the state's budget situationcontinues to force cuts, there could be "more drastic proposals fordisentanglement," he says.

…While six of theinstitutions are members of the Association of American Universities­—aselective group of research institutions—the Merced campus is still strugglingfor a perception of legitimacy.

…Because it is stillso young, system officials spared Merced from the most recent budget cuts,which caused some in the state to gripe about whether it should remain a partof the system or even remain open…

Full article at http://chronicle.com/article/Fault-Lines-Form-as-Finances/130742/

Always room for debate:

State Out of Cash?

You may see some headlines about the state running out of cash.  The state controller today sent a letter to the legislature supporting passage of a bill allowing for more internal borrowing.  What does this development mean?

As we have noted in past blog posts, in the current fiscal year and the past two years, in common English parlance the general fund of the state has been in rough balance, i.e., inflow = outflow.  But prior to that there were big deficits that ultimately left the state with a negative reserve in its general fund.

When the general fund has a negative reserve, borrowing from somewhere must occur.  It comes in two flavors: external borrowing from outside financial markets and internal borrowing from funds the state has outside the general fund.  There are many such funds. But the biggies are in transportation where the gas tax and other related revenue flows into earmarked funds for roads and other transportation activities.

Essentially, internal borrowing consists of the controller putting an IOU into these other funds and using the money for general fund purposes.  However, if you go too far in that direction, you begin to interfere with the functioning of the activities geared to the special funds.

Apart from the fact that we have ended recent fiscal years with negative reserves in the general fund, there are seasonal issues of timing since outflows and inflows from the general fund do not match within the fiscal year.  The controller wants the legislature to give him more authority to dip into special funds with IOUs. From the UC perspective, the fact that the controller is having cash management problems is just more evidence that we should not be looking for budgetary salvation from the state any time soon.

You can read his letter at http://www.sco.ca.gov/Files-EO/Controller_letter_01_31_2012.pdf

UPDATE: Just to drive home the point on the UC perspective, consider:
http://www.dailybruin.com/index.php/article/2012/02/uc_may_loan_200_million_to_state

Obama on Higher Ed Tuition and State Support

In the State of the Union address last night, President Obama called on states to enhance their higher ed budgets and universities to hold down tuition.  Whether the California state legislature is going to heed that request is another matter, of course. The President talked about less federal aid if tuition goes up, although in what form that would come about was not clear.


Video clip below.

"When kids do graduate, the most daunting challenge can be the cost of college.  At a time when Americans owe more in tuition debt than credit card debt, this Congress needs to stop the interest rates on student loans from doubling in July.  Extend the tuition tax credit we started that saves middle-class families thousands of dollars.  And give more young people the chance to earn their way through college by doubling the number of work-study jobs in the next five years.

Of course, it’s not enough for us to increase student aid.  We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money.  States also need to do their part, by making higher education a higher priority in their budgets.  And colleges and universities have to do their part by working to keep costs down.  Recently, I spoke with a group of college presidents who’ve done just that.  Some schools re-design courses to help students finish more quickly.  Some use better technology.  The point is, it’s possible.  So let me put colleges and universities on notice:  If you can’t stop tuition from going up, the funding you get from taxpayers will go down.  Higher education can’t be a luxury – it’s an economic imperative that every family in America should be able to afford."

UPDATE: Inside Higher Ed has a report on reactions to the statement at:
http://www.insidehighered.com/news/2012/01/26/obama-plan-tie-tuition-prices-aid-eligibility-draws-criticism

Plenty of Nothing

Here is a quote from the governor’s recent budget proposal: "The University of California (UC) willreceive an increase of $90 million General Fund for base operating costs, whichcan be used to address costs related to retirement program contributions."

Question: What does it mean?  Answer: Nothing.  UC has always been free to take its generalrevenue and put it into the pension fund. Indeed, since the state has so far refused to resume paying the employercontribution for state-funded employees into the pension fund, that is what UChas been doing.

Question: If it means nothing, why are you discussingit?  Answer: It appears that some folksup in Oakland view this statement as a kind of recognition of a stateliability for the UC pension.  As we havedocumented repeatedly, before the two-decade pension contribution “holiday,” the stateroutinely paid its contribution, even putting in IOUs when it was short ofcash.  When the state paid in, whether in cash or in IOUs, that action allowed UC to collect from non-state sources, currently roughly $2 fromnon-state for every $1 of state.

 

Earlier in the state budget crisis, then-GovernorSchwarzenegger put a token $20 million in his budget proposal for the UCpension.  But the legislature – acting onadvice of the Legislative Analyst – deleted the $20 million and insertedbudgetary language that there was no state liability.  That perverse language was later removed, butsince then there has been zero progress in getting state recognition of itsliability.  Note that CSU, which is partof CalPERS, does not have this burden since the state does not dispute itsliability to the giant CalPERS system.

If UC depicts the governor’s non-statement as amounting tomore than nothing, we will continue to get just that: nothing.  As we have noted before, if the state wantsto privatize UC, not taking responsibility for the pension liability is a goodway to do it.  The Regents can’t createmoney.  They cannot raise taxes.  They can only keep raising tuition.

So let’s not pretend nothing is something.  This song sums it up nicely:

The quote from the budget is at http://www.ebudget.ca.gov/StateAgencyBudgets/6013/6440/department.html

A history of UC pension funding by Faculty Association Executive Director Susan Gallick is at http://www.uclafaculty.org/FASite/Home_files/UCRPCAPolicyOpt2012%20.pdf

Not Worth a Mention?

Gov. Brown delivered his “State of the State” speechyesterday.  Click below for thespeech.  Lots of topics arediscussed.  Higher ed, however, is notone of them.  An earlier post noted thatUC is like a flea on the back of an elephant when it comes to state budgetingand such.  That message was reinforcedyesterday.  But perhaps our absence willmake the governor’s heart grow fonder. Valentine’s Day is coming up after all.  Thegovernor did mention his public pension plan in the speech – which would sweepUC into a larger state change.  Withregard to that plan, however, we would rather be absent.

Part 1 of the Speech:

Part 2:

Update: With regard to pensions (mentioned in part 2 of the speech), presidential politics are beginning to creep into the issue http://www.californiaprogressreport.com/site/vulture-capitalists-dominate-california-pension-reform-funders-links-bain-revealed

Chancellor Block on KPCC Airtalk

Noshockers emerged from the KPCC Airtalk panel on higher ed yesterday that includedChancellor Block.  There was a fairamount of discussion of online courses and related items.  Chancellor Block spoke about the need tochange the “funding model” given the state cutbacks.  However, he used philanthropy, not tuition,as the example of the change.  Description and link below:

What is the future of highereducation in America? Is the four-year degree model with students living on ornear a campus, is the idea of creating a well-read, well-rounded cohort ofcritical thinkers perhaps outdated? Can the nation's colleges and universitiesprepare students for the competitive challenges of a global economy?

A distinguished panel of universityheads that represent the diversity of California’s higher educationinstitutions joins Larry Mantle to discuss. The event was sponsored byCommunity Advocates Inc. It was made possible by generous grants from the RighteousPersons Foundation and the California Wellness Foundation.

Guests:

Chancellor Gene Block becamechancellor of UCLA in August 2007.

President C. Max Nikias has beenpresident of USC since 2010.

Chancellor Jack Scott ischancellor of the California Community Colleges.

President Laura Skandera Trombley is in hertenth year as president of Pitzer College.

Thebroadcast can be heard at http://www.scpr.org/programs/airtalk/2012/01/12/22092/education-forum/

UC Like a Flea on an Elephant in Latest LAO Budget Report

Maybe the biggest lesson to take away from the LegislativeAnalyst’s Office latest report on the state budget – responding to the governor’sbudget proposal – is that UC is a flea on the back of an elephant.  We are hardly mentioned, other than a referenceto possible trigger cuts next year if Governor Brown’s tax initiative isn’tpassed by voters.

Much of the report focuses on the world of Prop 98, i.e.,K-14 schools, not surprisingly since that is such a large chunk of the budget.

The LAO is concerned about possible over-optimism in Brown’sbudget projections.  Just a few days ago,however, the Brown projections were criticized by a highly-regarded privateforecaster as too pessimistic.  Thedivergence underscores the point made in an earlier post on this blog on the budget:forecasting cannot be precise.

 

Editorial comment: The uncertainty over budget forecastsshould give pause to various do-good groups who think our budgetary problemswould be solved by going to a two-year budget. Note that in the current one-year regime, we have considerableuncertainty forecasting 18 months ahead (since the budget year begins July 1,2012 and ends June 30, 2013).  Theproposed two-year regime would require a forecast 30 months ahead,substantially raising the level of uncertainty.  

Editorial prediction: It should give them pause, but it won’t.

The LAO report is at http://lao.ca.gov/reports/2012/bud/budget_overview/budget-overview-011112.pdf

Comments on the Brown budget proposal by forecaster Chris Thornberg are at http://blogs.sacbee.com/capitolalertlatest/2012/01/economist-says-jerry-browns-budget-underestimates-revenue.html

Someone let the cat out of the bag on the state budget

Normally, the governor's budget proposal (reminder - it is a proposal, not an enacted budget) would be made public January 10.  Someone in the governor's entourage apparently goofed and posted it on the web today.  So there was a hasty unveiling without the usual leaking of bits and pieces for days before January 10.

As it happens, yours truly is about to go to Chicago for three days so only a rough perusal of the budget was possible.  But here are some highlights.  First, take a look at the chart on the left.  The dark part of the bars are what folks mean by deficits in normal English parlance.  That is not necessarily the language spoken in Sacramento.  But what the dark bars tell you is that without changing anything with regard to revenue or spending, there would be about $5 billion deficit (outflow > inflow) in the next budget year that would gradually decline with (assumed) economic growth.  However, each year of deficit adds to the debt in the general fund, which is not supposed to be in debt.
==================================

The numerical table of "problem definition" tells us that the budget is roughly in balance for the current year that started last July 1.  But there is a debt overhang inherited from the past which the governor would like to pay off.  Paying off such past debt means - again using common English parlance - running a surplus.  The faster you want to pay off the debt, the more of a surplus you need.  The governor would like all of it gone by the end of the next fiscal year which starts July 1, 2012.  But note that there is always the issue of how fast you should go in paying off past debt.  The Legislative Analyst has pointed out this issue in prior years.

==================================

The governor's solution is in part temporary tax increases he will propose in a ballot initiative that will appear in November 2012.  Signatures will have to be obtained since it is clear he will not get a 2/3 vote in the legislature to put such a proposal on the ballot.  Some of that revenue - assuming the initiative passes - would show up in the current year.  So the rough balance above becomes a surplus for the current year.  And there is a larger surplus for the coming year.

But what if voters do not pass the tax increases?  Then there will be a trigger - as there was in the current year.  And guess what?  UC would be cut $200 million relative to the proposal for next year.

==================================

Note that there is a footnote on the trigger table which effectively says the governor expects a UC tuition increase.  The proposed UC budget - assuming the initiative passes - raises the UC budget by almost $300 million.  (You can find the UC budget on page 149 of the budget summary - see link below.)  So the $200 trigger cut, if it happens, still leaves an added $100 million, net.

Again, a reminder that a proposal is not an enactment.  The legislature will hold hearings.  There will be a "May revise" of the budget unless there is speedy enactment of a budget.  And there could be much drama before a budget enactment occurs.

If you would like to see the governor's official budget proposal, go to:
http://www.ebudget.ca.gov/pdf/BudgetSummary/FullBudgetSummary.pdf

Update: There is a statement from UCOP on the budget at http://www.universityofcalifornia.edu/news/article/26905.  It pegs the increase to UC at $90 million.  Given my trip to Chicago, I can't reconcile that figure with the $300 million cited above.  But here is the statement:

OAKLAND — Patrick Lenz, UC vice president for budget and capital resources, made the following statement today (Thursday, Jan. 5) regarding Gov. Jerry Brown's proposed state budget for 2012-13:  


We're gratified that Gov. Brown is proposing an additional $90 million in funding for the University of California — an ongoing increase that the governor said can be used to address costs of employee retirement. We applaud the governor's willingness to grant UC leadership maximum flexibility in navigating these fiscal times, and also his recognition that, after a 20-year hiatus, the state has a responsibility to resume paying for a portion of retirement costs.

The administration's focus on protecting higher education from further budget reductions is a welcome relief, and the governor's stated desire for a long-term state investment is encouraging. It appears the governor is moving in the right direction after cuts totaling $750 million this year alone.

His proposal is only the first step toward a state budget for 2012-13. We will continue to make the case that public higher education is not a cost but the best investment an innovative state like California can make.

We will continue to seek out and implement administrative efficiencies that already are saving hundreds of millions of dollars a year — savings that go straight to our core mission. We also are working hard to identify alternative revenue sources that could help us preserve quality and access.

Finally, we intend to press forward with the governor and legislature to develop a long-term plan that would give the university much-needed financial stability, help the families of students and benefit Californians in every part of the state.

Redevelopment Decision Likely a (Marginal) Good Thing for UC Budget

For those who have been following the statebudget/redevelopment drama on this blog that unfolded after yesterday’sCalifornia Supreme Court ruling seemingly abolishing redevelopment agencies, belowis an update, courtesy of the California Planning and Development Report(excerpts).  Our prior background postsare at:

http://uclafacultyassociation.blogspot.com/2011/12/state-budget-ruling-expected-today-on.html

http://uclafacultyassociation.blogspot.com/2011/12/be-careful-what-you-wish-for-seems-to.html

Redevelopment Will BeBack -- But At What Price?

By Bill Fulton andJosh Stephens on 29 December 2011 

The California SupremeCourt killed redevelopment this morning, but that doesn’t mean it’s dead.  At first glance it would seem as thoughredevelopment agencies have no bargaining power at all. After all, it’s hard toimagine a weaker position than a state Supreme Court ruling saying you don’texist.  But don’t forget the mostimportant point about the redevelopment battle: It’s not about redevelopment.It’s about money. And if all sides in Sacramento can resolve the money issue,the legal status of redevelopment will be practically irrelevant. There isevery reason to believe a deal will be struck. It's just not the deal that theCalifornia Redevelopment Association and League of Cities were hoping for whenthey filed suit four months ago…

In the meantime,however, California’s $6 billion redevelopment system has been thrown intouncertainly. Technically, at least, no redevelopment agencies exist and noredevelopment activities can move forward. Counties and school districts willpresumably move forward in creating the oversight committees required under thelaw to take over and dispose of redevelopment agency assets.

One thing is clear:Time is on the state’s side. For now redevelopment does not exist. The longerthe status quo persists, the more the state can claim the money – and the fartherdown the line counties and school districts will go in trying to lay claim toredevelopment agency assets. If the redevelopment establishment can’t strike aquick deal, we may be in for a long siege.

Within hours of theruling’s release on Thursday morning, both sides issued statements that couldbe considered conciliatory. Gov. Jerry Brown – who instigated the proposedelimination of redevelopment agencies in his budget last January – issued aone-sentence statement saying that the ruling “validates a key component of thestate budget and guarantees more than a billion dollars of ongoing funding forschools and public safety.”

Brown doesn’t crowabout the death of redevelopment. He doesn’t even mention redevelopment; nordoes he stake a claim to all $6 billion in redevelopment funds. He simply saysthe ruling means $1 billion more for schools and courts – making it easier for himto cash in last week’s promise that schools will get more money in this fiscalyear.

Meanwhile, the CRA andthe League – which have taken a slash-and-burn rhetorical approach since Day 1of this battle – also issued a statement containing calm-it-down language aimedat making a deal. CRA’s interim executive director, Jim Kennedy, said theorganization looked forward to finding “ways to restore redevelopment whilealso providing the state budgetary relief in a manner that doesn’t violate Prop22.” …

The League and the CRAimmediately tipped their hand as to what the likely negotiating points will be– and how they will build up enough political support to force a solution inthe Legislature. Many urban Democratic legislators are logical allies ofredevelopment and seemed uncomfortable in the party-line attack on it last year– just as Republicans seemed uncomfortable supporting it.

The CRA boardreportedly met via conference call this afternoon to discuss their strategy.CRA had already indicated that it would use at least two tactics to buildsupport: First, use the powerful affordable housing lobby as much as possible;and, second, resubmit their proposal from last year, which would permitvoluntary payments to school districts in exchange for extended life of projectareas.

It was not immediatelyclear on Thursday afternoon what Brown and legislature leaders will seek toextract as a price. But one thing is clear: Time is on the state’s side.

Full article at http://www.cp-dr.com/node/3081

Here is the official statement of the lobbying groupsmentioned above: http://protectourlocaleconomy.com/node/92

So what does all of this mean for UC and its budget.  Nothing immediately.  But note that the revenue that was at stakefrom redevelopment for the state comes to about 70% of what the state gives toUC.  Had the state lost the case, UCmight have suffered in the next fiscal year. With negotiating strength now on the state’s side – as the excerpt aboveindicates – it is likely that the state will extract at least what it hadexpected from the redevelopment agencies when this year’s budget deal wasreached – and maybe more.  On balance,from the UC perspective anything that enhances state revenue is a GoodThing.  So the outcome is likely to be aGood Thing at least marginally.

Meanwhile, theposition of the redevelopment agencies can be seen below:

Be Careful What You Wish for Seems to Be Effect of Court Decision on Redevelopment

In an earlier post today, yours truly noted that the CaliforniaSupreme Court was going to issue a ruling on redevelopment agencies that hadpotential consequences for the state budget. Please look at that post for background details.  The opinion (with only one dissent) has nowbeen posted.  It may be that theredevelopment agencies will regret a) supporting Prop 22 which supposedlyprotected their funding and b) asking the Court to invalidate the compromisedeal worked out in the legislature.

The Court – based on a non-lawyer reading – seems to saythat 1) the legislature had a right to abolish the agencies but 2) it had noright to require them to pay tribute to avoid being terminated.  The court seems also to have delayed the effective termination date.  (See pp. 51-52 of the opinion - link below.)  So maybe thelegislature will come up with some other deal. Thus, exactly what the eventual consequences for the state budget - and thus the UC budget -  may beare uncertain.

The court decision, for those with better legal minds, is athttp://www.courtinfo.ca.gov/opinions/documents/S194861.PDF

A preliminary summary from the Sacramento Bee – which leavesthe above ambiguities intact – is at http://blogs.sacbee.com/capitolalertlatest/2011/12/california-high-court-says-state-can-eliminate-redevelopment.html

The preliminary summary from the San Francisco Chronicle seems to suggest that the redevelopment agencies are gone.  I don't think that is quite so - as noted above, the legislature can still work out something: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/12/29/BA6R1MI73D.DTL

The LA Times version is similar to the Chronicle's: http://latimesblogs.latimes.com/lanow/2011/12/california-supreme-court-redevelopment-agency-ruling.html

The LA Business Journal's account refers to possible legislative action to save redevelopment agencies: http://labusinessjournal.com/news/2011/dec/29/court-upholds-brown-plan-dissolve-redevelopment-ag/

Maybe the lesson for all concerned in this case is sometimes its better to leave things alone:

State Budget Ruling Expected Today on Redevelopment Agencies

From the San Jose Mercury-News: The California Supreme Court will issue a long-awaited ruling Thursdayon the legality of the state's move to grab $1.7 billion in redevelopment moneyto help close California's budget shortfall -- a move that rocked cities aroundthe Bay Area and across the state.

The ruling, expectedat 10 a.m., should give critical guidance on two state laws: one that dissolvesredevelopment agencies and redirects their property tax revenues to the state,and a second that allows agencies to stay afloat if they agree to relinquish alarge portion of their funding, which will be used to pay for schools…

What is this issue all about?  In November 2010, voters passed Prop 22 whichwas intended to prevent the state from grabbing pieces of local budgetrevenue.  Among the supporters of Prop 22were local redevelopment agencies.  Theseagencies – set up by local governments – are intended to do what their namesuggests, i.e., promote redevelopment of “blighted” areas.  They are in part funded through (property)tax increment financing.  As the propertyvalues of the redeveloped areas rise (because of the renewal), the added taxrevenue goes to the agency.  Other localgovernments – such as school districts – don’t get it.

Because state and local budgets are intertwined, thediversion of property tax indirectly pulls money from the state which hasobligations to the schools under Prop 98 of 1988.  Governor Brown, in putting forth his currentyear budget (2011-12), proposed to get around Prop 22 by abolishingredevelopment agencies entirely.  If theydid not exist, you could not take money away from them, so the reasoning seemedto go.  It is not clear that the stateSupreme Court will see it that way.  Inany event, as the budget progressed through the legislature – and the localagencies screamed – a compromise was reached whereby the agencies couldcontinue to exist, but only if they paid tribute to the state.  They have mostly done so under protest.

All of this matters to UC because if the state’s attempt totake money from redevelopment agencies is ruled to be a violation of Prop 22,another $1.7 billion will have disappeared from the current year budget.  If that happens, the governor will likelypropose to make it up in next year’s budget. That budget will be announced in early January, although the governorhas been leaking bits and pieces of it in recent days (as is the tradition).

Full story from the Mercury-News is at http://www.mercurynews.com/california-budget/ci_19632057

The court proceeding should go off on schedule - but you never know:

Young at Heart (of Lawsuit Challenging Prop 13)

Proposition 13 of 1978 - the brainchild of Howard Jarvis (at right) and Paul Gann - drastically cut and limited localproperty taxes and imposed a two-thirds vote rule in the legislature for taxincreases.  Various court cases havechallenged it over the years.  However,UCLA’s former chancellor, Charles Young, is part of a lawsuit to overturn it on(state) constitutional grounds. Obviously, if that were to occur, it would have a major impact on fiscalaffairs of state and local government in California.  It would surely affect the UC budget.  From Mother Jones:

Back when Proposition8 — the anti-gay marriage initiative — was in court, one of the arguments madeagainst it was that it represented a fundamental revision to the Californiaconstitution, not a mere amendment. As such, it should have required two-thirdsapproval from both houses of the legislature plus a majority of the public.  Gay rights supporters lost that argument, butCharles Young, the former chancellor ofUCLA, had a brainstorm. Maybe Prop 8 wasn't a fundamental revision, but howabout Proposition 13?

Passed at a time whenproperty taxes were sharply on the rise and California was running a surplus,Proposition 13 limited property taxes to 1% of a property's value andrestricted the annual increases on assessed values. ... But Proposition 13 alsorequired that "any change in state statute which results in a taxpayerpaying a higher tax" must be approved by two-thirds of both houses of theLegislature.

That language has hada profound impact on the power of the executive and the Legislature. The powerthat it constrains — the authority to raise public funds — is among the mostfundamental of government. And the requirement gives more weight to somelegislators — and, by extension, their constituents. As the lawsuit notes,"legislators opposing a tax increase are given the functional equivalentof more votes than those legislators who favor such proposals." …

Full article at http://motherjones.com/kevin-drum/2011/12/proposition-13-goes-court

Howard Jarvis - long dead - would surely be mad as Hell if he knew about the lawsuit.  He did have a brief movie career after Prop 13 passed.  You may have seen him in Airplane in which he had less success in getting a taxi at LAX than with his ballot measure:

Another Hint of Discussions with the State Behind Closed Doors on Multiyear Tuition Increase Deal

The text below in italics is from UC President Yudof’s Facebook page. As noted in a prior post on this blog, there are hints of a multiyear-tuition-increase/steady-budget-support-from-the-state being discussed behind closed doors with Brown administration officials. See the bold print below.

We are extremely disappointed that UC is faced with yet another significant State budget reduction: the $100 million “trigger cut” just announced. This additional cut will exacerbate the fiscal challenges the University faces in the current year and place additional stress on the quality of education provided to UC students. While the $650 million cut to UC enacted by the State last June resulted in additional tuition hikes for our students, let me assure you there are no 2011-12 mid-year tuition increases planned.

Over the past several years, cuts to higher education by the Governor and the Legislature have had a severe impact on students, their families, faculty and staff. The University has consistently objected to additional mid-year cuts, and while we certainly understand the ongoing fiscal challenges the State faces, we are requesting that this latest reduction be considered a one-time cut to UC’s budget and not made a permanent reduction. We will ask to have this funding restored to UC at the beginning of the next fiscal year (July 1, 2012).

In the current economic environment, marked by a huge State deficit and a limited revenue stream, we recognize that the Governor is in the eye of a “perfect storm.”

As we draw closer to the 2012-13 State budget release in January, however, we are asking the Governor to refrain from any additional cuts to higher education. Faculty and staff have sacrificed, and our students in particular have given more than their fair share.

Moreover, as we move forward, we will continue to work closely with State officials to develop a long-term revenue plan that will give the University much-needed financial stability.

This has been a challenging year for the University of California. I understand the concerns that many in the UC community have voiced over the recent incidents surrounding student protests on some of our campuses. I assure you that a thorough review of these incidents is in progress. I am making every effort possible to protect our long-held traditions of free speech and peaceful protests. During these difficult times, I ask you not to lose sight of our common goals—to make public higher education a priority and to keep a UC education accessible and affordable for Californians.

Thank you for your continued support for the University of California and best wishes for a happy holiday season.

Sincerely yours,

Mark G. Yudof

President

University of California

From http://www.facebook.com/note.php?note_id=10150425120888379

One problem with this strategy is that a handshake deal between the UC president and the governor on a "compact" reached behind closed doors did not work out well under Schwarzenegger. The governor cannot appropriate funds; only the legislature can. To make such a deal work, there needs to be wider participation including the legislature, the Legislative Analyst, major interest groups, etc.

It would be nice to know what is going on behind the door:

Our earlier post on this subject is at http://uclafacultyassociation.blogspot.com/2011/12/buried-lede-uc-reviving-multiyear.html

Buried Lede: UC Reviving Multiyear Tuition Increase Plan with State?

Last September, UC President Yudof proposed to the Regents a multiyear tuition increase plan. The Regents argued among themselves and nothing was adopted. Today's San Francisco Chronicle, in a report on how higher ed is dealing with the trigger cuts (see earlier blog posts), has a buried lede*:

UC will offset the $100 million cut with money it over-contributed for health care, a pool of excess cash that happens to be just above $100 million, UC spokesman Steve Montiel said.

"It's a temporary solution," Montiel said, adding that UC is in talks with the state Department of Finance to try to work out a multiyear agreement in which the state would stop cutting the universities' budgets every year in exchange for a steady, predictable schedule of tuition increases.

Such "compacts" have been tried before, but have blown up in the face of persistent budget shortfalls.

Full article at: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/12/13/MNFV1MBVNN.DTL

*Verb: to bury the lede

(idiomatic, US, journalism) To begin a story with details of secondary importance to the reader while postponing more essential points or facts. From http://en.wiktionary.org/wiki/bury_the_lede

State Budget Trigger Pulled

The state budget trigger was pulled today, costing UC $100 million in additional cuts (as expected). Actually, the trigger was a two-part mechanism and the lesser version was pulled. But either part involved cutting $100 million from UC. For summary details, see http://blogs.sacbee.com/capitolalertlatest/2011/12/details-of-browns-trigger-cuts.html

and for the official notice see

http://www.dof.ca.gov/documents/2012_Rev_Forecast_Determination.pdf

What's in a name?

A prior post on this blog noted that Governor Brown had submitted an initiative for temporary taxes entitled "The Schools and Local Public Safety Act." (That may not be the title that appears on the ballot which is set by the attorney general.) It was also noted that perusing the text of the act suggested it was aimed at K-14 funding, i.e., higher ed was in it only at the community college level. However, to get the initiative on the ballot - and then run a campaign to get it passed - Brown will need a lot of money.

The Sacramento Bee today reports he has created a campaign fundraising committee called "Californians to Protect Schools, Universities and Public Safety." It's a bit of a stretch to call community colleges "universities," no?

The initiative is at http://ag.ca.gov/cms_attachments/initiatives/pdfs/i1035_11-0090.pdf

The Bee article is at http://blogs.sacbee.com/capitolalertlatest/2011/12/jerry-brown-opens-tax-campaign-committee-starts-fundraising.html

And the question is:

Rosy Scenario on State Budget Likely to Be Ending Soon

The Sacramento Bee points out today that the process of re-examining the rosy scenario budget forecast on revenues will soon be coming to an end.

As readers of this blog know, the governor was unable to get GOP support for putting tax extensions on the ballot. But under new procedures approved by voters, only a simple majority was needed to pass a budget even though 2/3 was needed for the taxes. So extra revenue was assumed and the budget was passed. However, a trigger mechanism was included to cut expenditures if revenue assumptions were not met. Since then, it has seemed likely that the trigger would be pulled and we are now approaching the time set for that to happen.

The Bee article is at http://www.sacbee.com/2011/12/12/4116082/californias-financial-forecast.html

For UC, the trigger means another $100 million in cuts. However, we can of course be hopeful it won't happen:

On the other hand, it may not smell like roses, at least not at UC-Berkeley:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/12/11/BA7V1MB8RJ.DTL

Another Pepper Apology? Let's Focus Instead on the UC Budget

The UC-Davis chancellor has now apologized for the pepper spray incident last Friday. Meanwhile, the Washington Post reports that the incident has gone viral with creative images such as the one above on the web. See http://www.washingtonpost.com/blogs/arts-post/post/pepper-spray-cop-works-his-way-through-art-history/2011/11/21/gIQA4XBmhN_blog.html

Below is video of the chancellor's apology. A story about it is at:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/22/MNK71M2548.DTL

As noted in last night's blog post, instead of trying to regain "control" via crisis management techniques, it would be nice if the Regents and the powers-that-be at UC focused instead on the ongoing UC budget emergency. Please see last night's blog posting for a link to the UCLA Faculty Association's position - as expressed to the Regents - back in 2009 on the budget emergency:

http://uclafacultyassociation.blogspot.com/2011/11/pepper-spray-regent-chair-reacts.html

For example, UC needs the legislature and governor to step up and take some responsibility for funding the UC pension system. No immediate state cash is needed; an IOU from the state - as was done back in the days when the state did take its responsibility seriously - would be helpful to UC. Under the current arrangement - in which the state has decided it never heard of the UC pension system - from every dollar that the state gives to UC for its core academic operations, there must be a subtraction to fund the pension. That situation does not exist at CSU (which is under CalPERS). Whether anyone intends it or not, the result of current state policy (or non-policy) will be a slow-moving and unspoken privatization of UC. The Regents can't collect taxes. They control only tuition as a revenue source. Every dollar that should go into the pension plan on behalf of the state, but does not, costs the plan $2 in contributions from non-state sources.

Want to know more? Try

http://www.dailybruin.com/index.php/article/2011/04/on_the_record

As has been pointed out ad nauseum, the lack of state funding for the UC pension is not an old folks or retiree issue. It is a young folks issue, since it taxes the limited budget appropriation the state does provide for core academic programs.

Update: Latest tweet:

mark_yudof Mark G. Yudof

Please note: **There is no tuition item on Monday's regents meeting agenda, nor was there ever a tuition item scheduled.**

There may not be a tuition item but there are budget items:

http://www.universityofcalifornia.edu/regents/regmeet/nov11/fins.pdf

Update: Legislature schedules hearing on UC's use of police

Capitol Alert 11-22-11

The Legislature will hold a hearing next month to investigate the recent use of police force in response to protests on University of California campuses. The joint hearing of the Assembly Higher Education Committee and Senate Education Committee will be held Wednesday, December 14, Assembly Speaker John A. Pérez announced today…

Full article: http://blogs.sacbee.com/capitolalertlatest/2011/11/legislature-schedules-hearing-on-ucs-use-of-police.html

PPIC Poll on Public Higher Ed in California

The charts above come from a poll taken by the Public Policy Institute of California available at:

http://www.ppic.org/content/pubs/survey/S_1111MBS.pdf [Click on the table above to enlarge it or go to the report itself.]

You can interpret the charts as you like. As the saying goes, an optimist is someone who thinks we are in the best of all possible worlds - and a pessimist is also someone who thinks we are in the best of all possible worlds.

It Sure Looks Like the Trigger Is Going to be Pulled

There is an advance report from the Sacramento Bee that the Legislative Analyst later today will be announcing that projections of revenue will fall sufficiently short of assumptions to fire the budget trigger – which further chops the UC budget this year. By itself, just the LAO projection does not fire the trigger but it is part of the mechanism. The LAO report is not yet posted.

From the Bee:

California would impose $2 billion in mid-year "trigger" cuts next month, mostly through K-12 school reductions, under a new revenue forecast issued this morning by the nonpartisan Legislative Analyst's Office… The analyst's report is not the sole determinant of whether the state will impose those cuts, but it is one of two tools the Department of Finance must rely upon before deciding whether to slash spending. The finance department will issue its own forecast in December. The Analyst said the state will not receive $3.7 billion of the $4 billion revenue bump that Gov. Jerry Brown and lawmakers optimistically relied upon to help close the budget in June. The enacted budget projected the state would receive $88.5 billion in revenues and transfers; the analyst says it will only get $84.8 billion…

Full story at: http://blogs.sacbee.com/capitolalertlatest/2011/11/legislative-analyst-2-billion-of-mid-year-cuts.html

Of course, if the legislature could corral enough votes, it could stop the trigger. Let’s hope everything works out OK:

UPDATE: The LAO report has now been released. You can find it at

http://www.lao.ca.gov/reports/2011/bud/fiscal_outlook/fiscal_outlook_2011.pdf

As usual, the report - following the great state tradition of fuzzy language - uses "deficit" in a way that mixes up past debt (a stock) and flows. It also follows the great state tradition of including "transfers" with revenues which has an obscuring effect.

What the report basically says - but not in the language below - is that last year 2010-11 the state ran a surplus of about $2.8 billion (which included temporary taxes that are now gone). But that surplus was not enough to reduce the negative reserve in the general fund to zero or get it into positive territory. Cuts in spending were made for the current year and a revenue trigger was included which fires if optimistic revenue assumptions are not met. It looks as if the trigger will fire. The state will run a deficit (revenues and transfers < expenditures) of about $500 million in 2011-12, which makes the general fund reserve that much more negative. Next year - if nothing is done (which won't happen) - the state would have another deficit (revenues and transfers < expenditures) of $9.7 billion.

The task of the legislature starting in January will be to begin making further cuts, apart from what the trigger produces, unless someone comes up with a way of obtaining a substantial increase in revenue beyond what assumed economic group would produce. (Don't even think about what would happen if there were a double-dip recession!)

UC will experience a trigger cut of $100 million this year. Had the Regents meeting not been cancelled, President Yudof would have given the board a budget request to the state that all of this info more or less guarantees would not have been adopted by the legislature. Since the Regents meeting has been postponed, the folks at UCOP might well want to reconsider what to present whenever that meeting is reconvened in the light of the LAO report.

LAO Video on Report:

Further update: CSU approves 9% fee hike amid raucous protests
See http://blogs.sacbee.com/capitolalertlatest/2011/11/csu-approves-9-fee-hike-amid-raucous-protests.html