Revised Long-Term Budget Model Executive Vice President Nathan Brostrom Vice President Patrick J. Lenz September 18, 2013
Context for Update of Long-Term Budget Model Long-term budget model originally presented to Regents in March 2011 UC revenue and expenditure assumptions and State budget situation have changed considerably since 2011 Long-term budget modeling needs to take into account Governor s proposed multi-year funding plan Updated data now available on alternative revenues and other measures Display 2
Context for Update of Long-Term Budget Model Earlier modeling assumed restoration to 2007-08 funding levels Getting back to 2007-08 08 funding levels is unrealistic in the current context Current modeling uses 2013-14 as base year and focuses on four years of the Governor s proposed multi-year plan Restoration of academic quality is still a priority, but assumptions are no longer set to 2007-08 levels Display 3
UC s Three Pillars of Excellence: Access, Affordability and Quality During recent years of fiscal crisis, i UC has protected access and affordability However, measures taken in budget cuts have affected quality Student-faculty ratio Faculty salary gap Faculty hiring Display 4
UC s Three Pillars of Excellence: Access All eligible freshmen have been offered a place at UC Fall 2013 freshman applications rose to nearly 100,000 Number of California freshman applicants grew 6.2% over last year In 2012-13, 13, UC enrolled nearly 240,000 students In Fall 2011, 40% of UC s undergraduate students were first-generation college students Display 5
UC s Three Pillars of Excellence: Access UC has a higher proportion of Pell Grant recipients 41% during 2010-11 than any comparable public or private institution 2010-11 Undergraduate Pell Grant Recipients 40% Selected Public Flagship Institutions California Research Universities 30% 20% 10% 0% Virginia Michigan Stanford USC UC Display 6
UC s Three Pillars of Excellence: Affordability Over 50% of all California i resident undergraduates pay no systemwide tuition or fees About half of UC s 2011-12 graduating undergraduates had no student loan debt The 52% who borrowed had average debt of $19,751, well below the national average of $26,600 Display 7
UC s Tuition Policy Has Been Marked by Chronic Volatility, l ty, Which Has Hurt Students, ts, Their Families and Our Campuses Year to Year Percentage Change in Mandatory Charges (Nominal Dollars) Since 1980 Change (Nominal) 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 10% 1980 81 1985 86 1990 91 1995 96 2000 01 2005 06 2010 11 Display 8
UC s Three Pillars of Excellence: Affordability SUNY Buffalo Illinois Michigan Virginia UC $20,000 $15,000 $10,000 $5,000 $0 Undergraduate Resident Graduate Resident In 2012-13, UC s average in-state tuition and fees were below two of four public comparators for undergraduates and three of four comparators for graduate academic students UC also utilizes higher return to aid than comparable institutions, therefore net tuition is even lower Display 9
UC s Three Pillars of Excellence: Quality A revised budget model needs to provide adequate resources to: employ outstanding faculty and staff recruit and educate outstanding undergraduate and academic/professional graduate students engage in robust programs of research, scholarship, and creative activity share its expertise and resources with the people of California provide the infrastructure necessary to support all this Display 10
Student-Faculty Ratio Has Risen Budgeted Actual 22.0 21.0 20.0 19.0 18.0 17.0 16.0 15.0 1989-90 1994-95 1999-00 2004-05 2009-10 Display 11
Since 1989-90, UC s enrollment has grown at nearly twice the rate as faculty Students (UC general campus FTE) Faculty (UC general campus FTE) 1989-90 140,507 7,161 2010-11 220,293 9,367 change +58.6 % +30.8 % Display 12
Faculty Salaries Lag the Market Faculty Salaries as a Percentage of Market Actual Market 100% 90% 80% 1999-00 2003-0404 2007-0808 2011-1212 Display 13
Four Essential Elements of a Long- Term Funding Plan Stable and predictable funding from the State Leveraging of alternative revenues Achieving administrative efficiencies Stable and predictable tuition and fee plan Display 14
Governor s Multi-year Funding Plan State General Fund increases of 5% in 2013-14 and 2014-15 and 4% increases in 2015-16 and 2016-17 State funding increases contingent on no tuition and fee increases over four-year period Display 15
Governor s Multi-year Funding Plan 5% State General Fund increase yields a 2.1% overall increase in Core Funds (assuming no tuition and UC General Funds increases) 8000 7000 6000 $6.2B No incr. in 14 15 UC General Funds Tuition and Fees 5000 State General No incr. Funds in 14 15 4000 3000 2000 5% incr. in 14 15 2.1% incr. in 14 15 1000 In millions of dollars 0 2013 14 2014 15 16
Elements of Long-Term Budget Model Mandatory Costs cost increases that t are unavoidable High Priority Costs budget items that are discretionary but are essential for operating a world-class university Reinvestment in Academic Quality areas identified as key to maintaining UC s excellence Display 17
Mandatory Costs Employer Contribution to UCRP Health Benefits Annuitant Health Benefits Academic Merit Program Non-Salary Price Increases Display 18
High Priority Costs Compensation Deferred Maintenance Enrollment Growth Capital Projects Display 19
Reinvestment in Academic Excellence Enhance undergraduate instructional support Reduce student-faculty ratio Support start-up costs for new faculty Increase graduate academic student support Reduce faculty and staff salary gap Display 20
2013-14 through 2016-17 : UCRP Costs, $244 million 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Solutions UCRP Costs Display 21
: Employee and Retiree Health Benefits, $108 million 1,800 1,600 1,400 1,200 1,000 800 600 400 200 Employee and Retiree Health Benefits 0 Solutions UCRP Costs Display 22
: Academic Merits, $120 million 1,800 1,600 1,400 1,200 1,000 800 600 400 Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 23
: Non-Salary Price Increases, $92 million 1,800 1,600 1,400 1,200 1,000 800 600 Non salary Price Increases 400 Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 24
: All Mandatory Costs, $564 million 1,800 1,600 1,400 1,200 1,000 800 600 Non salary Price Increases 400 Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 25
: Compensation, $534 million 1,800 1,600 1,400 1,200 1,000 800 600 Compensation Non salary Price Increases 400 Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 26
: Deferred Maintenance, $100 million 1,800 1,600 1,400 1,200 1,000 800 Deferred Maintenance 600 Compensation 400 Non salary a Price Increases ceases Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 27
: Enrollment Growth, $88 million 1,800 1,600 1,400 1,200 1,000 800 600 Enrollment Growth Deferred Maintenance Compensation Non salary Price Increases 400 Academic Merits 200 Employee and Retiree Health Benefits 0 Solutions UCRP Costs Display 28
: Capital Funding, $60 million 1,800 1,600 1,400 1,200 1,000 800 600 Capital Funding Enrollment Growth Deferred Maintenance Compensation Non salary Price Increases 400 Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 29
: High Priority Costs, $782 million 1,800 1,600 1,400 1,200 1,000 800 600 Capital Funding Enrollment Growth Deferred Maintenance Compensation Non salary Price Increases 400 Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 30
: Reinvestment in Academic Quality, $200 million 1,800 1,600 1,400 1,200 1,000 Reinvestment in Academic Quality Capital Funding Enrollment Growth 800 Deferred Maintenance 600 Compensation Non salary Price Increases 400 Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 31
Solutions: 2013-17 State Augmentation, ti $576 million 1,800 1,600 1,400 1,200 1,000 2013 17 State Augmentation Reinvestment in Academic Quality Capital Funding Enrollment Growth 800 Deferred Maintenance 600 Compensation Non salary Price Increases 400 Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 32
Solutions: Asset Management and Other Fiscal Strategies, t $120 million 1,800 1,600 1,400 Asset Mgt. & Other Fiscal Strategies 2013 1717 State Augmentation 1,200 Reinvestment in Academic Quality 1,000 Capital Funding Enrollment Growth 800 Deferred Maintenance 600 Compensation 400 Non salary Price Increases Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 33
Solutions: Nonresident Supplemental Tuition uto and Indirect Cost Recovery, ecovey, $65 million 1,800 1,600 Nonresident Tuition and ICR 1,400 Asset Mgt. & Other Fiscal Strategies 2013 17 State Augmentation 1,200 Reinvestment in Academic Quality 1,000 Capital Funding Enrollment tgrowth 800 Deferred Maintenance 600 Compensation 400 Non salary Price Increases Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 34
Solutions: Philanthropy, $80 million 1,800 1,600 Philanthropy Nonresident Tuition and ICR 1,400 1,200 Asset Mgt. & Other Fiscal Strategiest 2013 17 State Augmentation Reinvestment in Academic Quality 1,000 Capital Funding 800 Enrollment Growth Deferred Maintenance 600 Compensation 400 Non salary Price Increases Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 35
Remaining Gap: $705 million 1,800 Remaining Gap 1,600 Philanthropy Nonresident Tuition and ICR 1,400 1,200 Remaining Gap, $705M Asset Mgt. & Other Fiscal Strategies 2013 17 State Augmentation Reinvestment in Academic Quality 1,000 Capital Funding 800 Enrollment Growth Deferred Maintenance 600 Compensation 400 Non salary Price Increases Academic Merits 200 0 Solutions Employee and Retiree Health Benefits UCRP Costs Display 36
Tuition and fee increases in 2015-16 and 2016-1717 would reduce gap to $354 million 1,800 Remaining Gap 1,600 1,400 1,200 1,000 800 600 Remaining Gap, $354M Tuition and Fees Philanthropy Nonresident Tuition and ICR Asset Mgt. & Other Fiscal Strategies 2013 17 State Augmentation Reinvestment in Academic Quality Capital Funding Enrollment Growth Deferred Maintenance 400 200 0 Solutions Display 37
Reducing could narrow shortfall to $192 million 1,800 Remaining Gap 1,600 Tuition and Fees 1,400 1,200 Reduced Costs, $162M Remaining Gap, $192M Philanthropy Nonresident Tuition and ICR Asset Mgt. & Other Fiscal Strategies 2013 17 State Augmentation 1,000 Deferred Maintenance 800 600 Rd Reduced ducrp Costs at 12% 14% Reinvestment in Academic Quality Capital Funding Enrollment Growth 400 200 0 Solutions Display 38
Other Solutions Extend balance sheet strategies Strategically invest more of our liquid assets Borrow from balance sheet for UCRP Secure additional funding from State For UCRP costs Enrollment growth Alternate strategies in funding UCRS Reduce enrollment growth Implement additional budget cuts to corefunded programs Display 39