The Budget Revision After the UCOP Audit

The Governor's May budget revision is the first concrete sign of UC's weakened condition following the release of the Auditor's Report on the Office of the President.  Although there is relatively little change in the State's overall funding to UC, two things stand out.

First, the Governor has made it clear that his trust in the University administration has been further damaged. As part of the May revision he has sequestered $50 million until the University completes demonstrates both that it has begun to implement the Auditor's proposals and that it has made progress on pilot budget projects at Riverside, Davis, and Merced as well as admitting one transfer student for every two first year students. (3-4)  In linking these disparate initiatives together the Governor has simultaneously moved towards even more interventionist budgeting (he is sequestering general funds based on new benchmarks as opposed to offering targeted new funds for specific initiatives) and joined in the larger skepticism displayed in Sacramento about UC leadership.  Insofar as the Audit provides excuses for tightened budget interventions any formal preservation of UC autonomy will be hollowed out.

The governor's second, ongoing challenge to UC's leadership concerns the state's program of financial aid.  As you are aware, both UC and CSU have voted to increase tuition and fees for the upcoming academic year.  Some years ago, this governor started publicly and explicitly to count the state's contribution to the Cal Grant program as part of its contribution to the universities.  The budget revision notes that any increase in tuition forces an increase in the General Fund contribution to the universities as the Cal Grant programs costs rise to meet the new tuition levels. (4)  Although often left out of discussions of state support, nearly $900 million of Cal Grant funding will go to UC and nearly $700 million will go to CSU in the proposed budget. (4) In order to compensate for parts of the increased financial aid costs accompanying the tuition rise, the Governor is proposing to reduce both system's budgets by $4 million dollars this year.  He then redirects these funds towards financial aid for private college and university students that he had planned to reduce. (4)  He shows no indication that he plans to reverse his plans to eliminate the middle-class scholarship fund over time.  (8)

In addition, Governor Brown fires a shot across the bow on future tuition increases:

Rising Cal Grant costs from tuition hikes will also limit the state’s ability to increase General Fund support in the future. The state has increased General Fund spending by at least 4 percent annually since 2012—while tuition has been flat. Going forward, the universities should plan for 3‑percent growth annually beginning in 2018‑19. If the universities raise tuition in the future, additional downward adjustments to state support may be needed to cover the higher Cal Grant costs.

In other words, the financial benefits of a tuition increase will be reduced via a general fund reduction from 4 to 3 per cent per year.

This threat is, to be sure, directly at CSU as well as UC.  But CSU has also recently received an unfavorable audit.  In the case of CSU the auditor was critical of the expanded number of managerial positions (as with the Auditor's criticism of the growth of the size of UCOP over the past several years).  Each, in other words, are the effects of an expanding managerial culture at both systems.

Of course it is the universities as a whole that will pay for ongoing state discontent with both systems' management.