BUDGET AND PLANNING

BUDGET AND PLANNING A Universitywide Perspective August 2005 Jerry Kissler UCOP Budget Office Today’s Agenda Large Trends  The Impact of California’s Fiscal Crisis  The Regents’ Benchmarks  Role of the Budget Office  Jerry Kissler UCOP Budget Office Today’s Agenda  Large Trends  A Changing Economy with More Professional and Managerial Jobs Jerry Kissler UCOP Budget Office California Is Losing Its Comparative Advantage + 20% Per Capita Personal Income California as % above the National Average Actual + 15% Projected + 10% + 5% National Average 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Actual data from U.S. Bureau of Economic Analysis Projection from the Anderson Economic Forecast Jerry Kissler UCOP Budget Office The Only Way to Raise Average Income Is Through Education $120,000 $100,000 $80,000 $60,000 $41,080 $93,518 2004 Average Earnings $57,200 $32,812 $23,712 $68,328 $40,000 $20,000 $0 0% ($20,000) ($40,000) 5% ($60,000) 10% ($80,000) 15% ($100,000) < HS H.S. Grad A.A. Bachelor's Master's Doctorate 2004 Average Unemployment Rate Source: Bureau of Labor Statistics Jerry Kissler UCOP Budget Office California Needs Companies Creating Well-Paying Jobs  UC helps create fast-growing companies.  R&D-intensive industries rely upon universities because they under-invest in basic research.  Thousands of new professional and managerial jobs will be created over the next decade. Jerry Kissler UCOP Budget Office Fastest Growing Occupations Professionals and Managers 150% Actual 125% Projected P M Percent Increase in Jobs 100% 75% Managers 50% Professionals O 25% All Other Occupations 0% 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Sources: Actual data from Bureau of Labor Statistics Jerry Kissler UCOP Budget Office More Californians Will Want and Need a University Education 250,000 Actual Projected General Campus FTE Students Including Summer 200,000 150,000 Graduate Students 100,000 Undergraduate Students 50,000 Can We Maintain Quality? 1985-86 Source: UCOP Budget Office 1990-91 1995-96 2000-01 2005-06 2010-11 Jerry Kissler UCOP Budget Office Today’s Agenda  Large Trends  A Changing Economy with More Professional and Managerial Jobs  The Demography of California Is also Changing Jerry Kissler UCOP Budget Office California’s Population in 1980 100% Percent of Population by Ethnic Group 75% California Population 24 Million in 1980 50% 25% 0% White Hispanic Asian Black Source: California Department of Finance, Demographic Research Unit Jerry Kissler UCOP Budget Office California’s Population in 2000 100% Percent of Population by Ethnic Group 75% California Population 34 Million in 2000 50% 25% 0% White Hispanic Asian Black Source: California Department of Finance, Demographic Research Unit Jerry Kissler UCOP Budget Office California’s Population in 2020 100% Percent of Population by Ethnic Group 75% California Population 44 Million in 2020 50% 25% 0% White Hispanic Asian Black Source: California Department of Finance, Demographic Research Unit Jerry Kissler UCOP Budget Office California’s Population in 2040 100% Percent of Population by Ethnic Group 75% California Population 52 Million in 2040 50% 25% 0% White Hispanic Asian Black Source: California Department of Finance, Demographic Research Unit Jerry Kissler UCOP Budget Office Increase as % of Population 100% Percent of Population by Ethnic Group 75% 67% 50% 50% 26% 25% 19% Demographic Shift 1980 to 2040 13% 5% 0% 8% 7% White Hispanic Asian Black Source: California Department of Finance, Demographic Research Unit, May 2004 Jerry Kissler UCOP Budget Office California’s Population in 1960 12% Baby Boom Age Distribution of California's Population 1960 8% 4% 0% 0-4 10-14. 20-24 30-34 40-44 50-54 60-64 70-74 80-84 Jerry Kissler UCOP Budget Office California’s Population in 1980 12% Age Distribution of California's Population Baby Boom 1980 8% 4% 0% 0-4 10-14. 20-24 30-34 40-44 50-54 60-64 70-74 80-84 Jerry Kissler UCOP Budget Office California’s Population in 2000 12% Baby Boom Age Distribution of California's Population 2000 8% 4% 0% 0-4 10-14. 20-24 30-34 40-44 50-54 60-64 70-74 80-84 Jerry Kissler UCOP Budget Office California’s Population in 2020 12% Baby Boom Age Distribution of California's Population 2020 8% 4% 0% 0-4 10-14. 20-24 30-34 40-44 50-54 60-64 70-74 80-84 Jerry Kissler UCOP Budget Office Today’s Agenda Large Trends  The Impact of California’s Fiscal Crisis  Jerry Kissler UCOP Budget Office However, California Faces a Fiscal Crisis  Capital gains and stock options bubble Jerry Kissler UCOP Budget Office Internet Boom Produced Capital Gains and Stock Options Revenue 30% Capital Gains and Stock Option Revenue as a Percent of Total General Fund Revenue Actual 25% $17.6 billion 20% Stock Options Capital Gains 15% $7.5 billion $5.5 billion $4.0 billion $2.6 billion $12.7 billion 10% 5% 0% 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 Fiscal Year Source: California Department of Finance, January 2004 Jerry Kissler UCOP Budget Office Tax Revenue Fell Sharply When Bubble Burst 30% Capital Gains and Stock Option Revenue as a Percent of Total General Fund Revenue Actual 25% $17.6 billion 20% Stock Options Capital Gains 15% $7.5 billion $5.5 billion $4.0 billion $2.6 billion $5.2 billion $8.2 billion $12.7 billion $12.4 Billion 10% 5% 0% 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 Fiscal Year Source: California Department of Finance, January 2004 Jerry Kissler UCOP Budget Office The Structural Problem 30% Capital Gains and Stock Option Revenue as a Percent of Total General Fund Revenue Actual 25% $17.6 billion 20% Stock Options Capital Gains 15% $7.5 billion $5.5 billion $4.0 billion $2.6 billion $8.2 billion $7.3 billion $5.2 billion $6.2 billion $12.7 billion 10% 5% 0% 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 Estimate 04-05 Source: California Department of Finance, January 2004 Fiscal Year Jerry Kissler UCOP Budget Office California’s Fiscal Crisis Has Impacted the UC Budget $5.0 Normal UC Workload Budget $1.5 Billion Shortfall in State Support $4.0 State General Funds ($ in Billions) $3.0 $2.0 Actual State Funding $1.0 $0.0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Estimated Jerry Kissler UCOP Budget Office State Budget Cuts Create Gap of $2,470 per UC Student $20,000 $2,070 $17,500 $1,390 $2,340 $3,440 $1,620 $4,280 $1,720 $5,120 Funding Gap = $2,470 $15,000 Cost of Instruction (in 2005-06 Dollars) $12,500 $1,690 $10,000 $1,980 $7,500 $15,560 $14,530 $13,060 $11,230 $5,000 $9,450 $2,500 $0 1985-86 1990-91 1995-96 2000-01 2005-06 State General Funds UC General Funds Student Fees Jerry Kissler UCOP Budget Office Short Term Versus Long Term  Cycles: California Had Financial Problems in Early 1980s and 1990s Jerry Kissler UCOP Budget Office Costs to Universities Have Risen Steadily 200% 150% Percent Increase Higher Education Price Index 100% 50% 0% 1980-81 Source: UCOP Budget Office 1985-86 1990-91 1995-96 2000-01 2005-06 Jerry Kissler UCOP Budget Office UC Spending Lagged Then Caught Up 200% 200% Percent Increase/Decrease Percent Increase 150% 150% Higher Education Higher Education Price Index Price Index 100% 100% 50% 50% State and UC General Funds, and Student Fees Adjusted for Enrollment Growth 0% 0% 1980-81 1980-81 Source: UCOP Budget Office Source: UCOP Budget Office 1985-86 1985-86 1990-91 1990-91 1995-96 2000-01 2005-06 Jerry Kissler UCOP Budget Office Short Term Versus Long Term  Cycles: California Had Financial Problems in Early 1980s and 1990s Better Funding When Economy Improves Fundamentals of California’s Economy Are Strong; Funding Should Improve Again Jerry Kissler UCOP Budget Office Short Term Versus Long Term  Cycles: California Had Financial Problems in Early 1980s and 1990s Better Funding When Economy Improves Fundamentals of California’s Economy Are Strong; Funding Should Improve Again  Lags: Faculty Hiring and New Buildings Lag behind Student Increases and Then We Catch Up at Enrollment Plateau UCOP Budget Office Jerry Kissler State Dollars, Student Fees, and UC General Funds Are the Foundation D.O.E. Auxiliaries Research Restricted by Source Committed by Policy Restricted by Source Private Fund Raising Restricted by Source UC General Funds Student Fees State Funds Jerry Kissler UCOP Budget Office Core UC Support State Dollars, Student Fees, and UC General Funds Are the Foundation State Provides 60% of UC Core Support UC General Funds Student Fees State Funds Jerry Kissler UCOP Budget Office Core UC Support Today’s Agenda Large Trends  The Impact of California’s Fiscal Crisis  The Regents’ Benchmarks  Jerry Kissler UCOP Budget Office Maintaining Excellence Quality Quality Undergraduate Education Excellent Research Leading Graduate Programs Enabling Factors Students Staff Facilities Academic Support Jerry Kissler Faculty UCOP Budget Office Maintaining Excellence Benchmarks of Quality Quality Quality Undergraduate Education Excellent Research Leading Graduate Programs Slow Moving Indicators Enabling Factors Students Staff Facilities Academic Support Jerry Kissler Faculty UCOP Budget Office Maintaining Excellence Early Warning Indicators Quality Quality Undergraduate Education Excellent Research Leading Graduate Programs Slow Moving Indicators Enabling Factors Students Staff Facilities Academic Support Jerry Kissler Faculty Early Warning Indicators UCOP Budget Office UC Has High Persistence and Graduation Rates 100% 75% One-Year Persistence Rates for Freshmen 50% Five-Year Graduation Rates for Freshmen 25% 0% 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 Source: Office of Student Academic Services Jerry Kissler UCOP Budget Office Higher Four-Year Graduation Rates Mean Shorter Time to Degree 100% 75% One-Year Persistence Rates for Freshmen 50% Five-Year Graduation Rates for Freshmen 25% Four-Year Graduation Rates for Freshmen 0% 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 Source: Office of Student Academic Services Jerry Kissler UCOP Budget Office Increase in Competitive Awards to UC Faculty $2,000 Federal Research Research Expenditures at UC (Dollars in Millions) $1,500 $1,000 $500 $1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 Jerry Kissler UCOP Budget Office Increase in Funding per General Campus Faculty Member $100,000 General Campus Research Expenditures per Ladder Faculty FTE $75,000 Federal $50,000 $25,000 Industry Foundation $1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 Source: UCOP Budget Office Jerry Kissler UCOP Budget Office Growth Is Due to More UC Faculty and More Federal $ Available $100,000 General Campus Research Expenditures per Ladder Faculty FTE $75,000 Federal $50,000 Federal, Adjusted for Growth in Federal Support to Academic Institutions (1990-91 $) $25,000 Industry Foundation $1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 Source: UCOP Budget Office Jerry Kissler UCOP Budget Office Many Indicators of Strong Graduate Programs  Of the 261 doctoral-granting universities in the U.S., only 61 are members of the prestigious American Association of Universities (AAU).  6 of the 8 UC campuses eligible for the AAU are members.  In spite of being small and young, UCR and UCSC are in top 15 on Graham/Diamond ratings.  Of the top 12 universities on the NRC rankings, 3 are UC campuses. were in the top 20.  Of the 229 rated UC programs, more than half Jerry Kissler UCOP Budget Office First UC Benchmarks 2002  Slow Moving Indicators  Graduation rates for undergraduates  Research funding  Rankings of departments and programs  Early Warning Indicators         Jerry Kissler Undergraduate enrollment Graduate enrollment Faculty salaries Staff salaries Academic/Support services Financial aid Graduate student support Facilities UCOP Budget Office Are We Still on Track? 2002 2005  Slow Moving Indicators  Graduation rates for undergraduates  Research funding  Rankings of departments and programs  Early Warning Indicators         Jerry Kissler Undergraduate enrollment Graduate enrollment Faculty salaries Staff salaries Academic/Support services Financial aid Graduate student support Facilities UCOP Budget Office Faculty Salaries Are 10% Below the Comp 8 Average 115% Faculty Salaries as % of Market 100% 85% 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 Source: Office of the President Salary Survey Jerry Kissler UCOP Budget Office We May Not Be Able to Catch Up in the Near Future 115% Faculty Salaries as % of Market 100% 85% 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 Estimated Source: Office of the President Salary Survey Jerry Kissler UCOP Budget Office Funding for Staff Salaries Has Fallen Below Market 10% % Increase/Decrease in State Funding for Staff Salaries 8% 6% 4% 2% 0% 1992-93 -2% 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 -4% UC Staff Salary Increase Funding Source: WorldatWork, "Annual Salary Budget Survey" Market - Western Region Jerry Kissler UCOP Budget Office Funding for Staff Salaries Has Fallen Below Market 10% % Increase/Decrease in State Funding for Staff Salaries 8% 6% 4% 2% 0% 1992-93 -2% Estimated 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 -4% UC Staff Salary Increase Funding Source: WorldatWork, "Annual Salary Budget Survey" Market - Western Region Jerry Kissler UCOP Budget Office Inadequate Resources: Less Funding for Academic/Support Services 1.75 Computed ARL Index Value Based upon Library Books, Subscriptions and Staff 1.50 Yale 1.25 1.00 0.75 U. of Michigan UCLA 0.50 0.25 0.00 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 Source: Association of Research Libraries Jerry Kissler UCOP Budget Office However, UC Has Leveraged the Power of the Multi-Campus System 300,000 10,000,000 Books Lent Between UC Campuses 7,500,000 200,000 5,000,000 Request Service Begins in Jan. '99 100,000 2,500,000 California Digital Library Begins in Jan. 1999 0 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 - Jerry Kissler UCOP Budget Office Use of Digital Journals The New Compact with Governor Schwarzenegger     Ends Four Years of Budget Cuts and Provides a Floor for Future Budget Increases Provides Operating Funds for Enrollment Growth and Salary Increases. Continues the Current Level of Capital Funds for Our Facilities Contains a Schedule of Fee Increases So That Students and Parents Can Plan. Raises Financial Aid to Insure Access for Low-Income Students Includes Accountability Elements for Student Enrollment, Timely Graduation, Faculty Workload, etc. Jerry Kissler UCOP Budget Office Today’s Agenda Large Trends  The Impact of California’s Fiscal Crisis  The Regents’ Benchmarks  Role of the Budget Office  Jerry Kissler UCOP Budget Office UCOP Budget Office Responsibilities Budget Development Budget Negotiation Budget Management Jerry Kissler UCOP Budget Office Internal Budget Consultation Campus Community Chancellors/ Campuses Campus Academic Senate Groups Campus Student Body Academic Council/UCPB UC Student Association UCOP Budget Office President Vice Presidents Executive Budget Committee Jerry Kissler The Regents’ Budget Jerry Kissler UCOP Budget Office Annual Capital Outlay Funding Needs UC Needs More Than $600 Million per Year through 2010 Jerry Kissler UCOP Budget Office Negotiating the Budget President Office of the President The Governor and Department of Finance Budget Committee Members & Staff Legislative Analyst Jerry Kissler UCOP Budget Office Budget Development Governor’s Budget Regents Approve Budget Request January Leg. Analyst Recommendations Subcommittee Hearings President Meets with Dept. of Finance Year 1 UC Drafts Budget Request July Jerry Kissler UCOP Budget Office Budget Negotiation Governor’s Budget Regents Approve Budget Request January Leg. Analyst Recommendations Subcommittee Hearings President Meets with Dept. of Finance Year 1 Conference Committee UC Drafts Budget Request July Line Item Veto and Gov. Signature Jerry Kissler Senate and Assembly Approve Budget Bill UCOP Budget Office Budget Management January UC Expends Funds Year 2 UC Expends Funds July Fiscal Closing UCOP Budget Office Jerry Kissler Allocations to Chancellors 1996-97 UC Budget Initiative Changed Internal Budget Allocations Decentralization of Authority Can Go Hand-in-Hand with Accountability Jerry Kissler UCOP Budget Office Budget Management January Year 3 Reporting / Accountability for Results July Fiscal Closing UCOP Budget Office Jerry Kissler Summary       UC is more important to California than ever before. UC faces a decade of exceptional growth. Quality must be protected if this valuable public asset is to be an engine of economic growth. Resources are essential for quality but early warning signs are pointing in the wrong direction. The new Compact ends four years of budget cuts and provides a floor for future budget increases. California is well positioned for economic competitiveness later in the decade. UCOP Budget Office Jerry Kissler