Santa Barbara on December 24, 2023   

In the May Revision of his January budget proposal for 2025-26, California Governor Gavin Newsom cut his cut to the two state university systems. 

 CSU Chancellor Mildred García wrote, “The May Revision reduces proposed cuts to the CSU to 3% or $143.8 million of ongoing funding – down from the 7.9% or $375 million cut initially set forth in the governor’s January proposal.”  UC got the same percentage reduction of the January cut—from nearly 8%, announced a week or so before Trump took office, to 3% now.

 

García went on to note that the Compact continues to exist at the convenience of the Governor and thus isn’t really a “Compact” in the normal sense.  “It’s like the father who announces, ‘I have a compact with my children not to spank them—except when I really need to spank them.” Sorry, I misquote. García’s only comment was, “However, the 2025-26 CSU ongoing multi-year compact funding ($252 million) remains deferred until fiscal year 2026-27 to help address the state’s budget shortfall.”

 

García added, “I commend and appreciate Governor Newsom for taking a thoughtful and measured approach to addressing the state’s fiscal challenges, while recognizing the unique and invaluable role that higher education institutions, and the CSU in particular, play in driving California’s workforce and economy.”

 

Not to be outdone, University of California President Michael V. Drake wrote, 

We are deeply grateful to Gov. Newsom for recognizing the value of the University of California’s contributions to our state in the May Revise. This is a challenging budget year for California, and our state leaders are facing very tough choices. Even in this difficult moment, the Governor has reduced the University’s cut from 8 percent to 3 percent, demonstrating his strong commitment to California’s students. His proposed budget minimizes cuts to vital student support services and preserves critical investments like affordable student housing construction.

 

The top managers at CSU and UC regularly teach their students and the public that Newsom is a sturdy hero of higher education funding.  If you criticize Newsom’s budgets for your campus, you in effect criticize your president, chancellor, and university officials, even though they've already done the maximum.

 

UC’s Executive Vice President and Chief Financial Officer Nathan Brostrom presented the cut-of-the-cut budget to the Board of Regents on May 14th (Item F4; video is from Finance and Capital Strategies Committee starting at 14’30.”  Here’s the summary slide.

Figure 1

 

 

I recommend ignoring the rightward columns, in which we imagine that the state stops hurting UC and turns over a new leaf. This is still very bad news. The ongoing $129 million state cut is oblivious to the cuts tsunami coming from the federal government, in the ten dimensions I outlined in my last post (Liner Note 25).

 

In his Remaking post, “Manufactured Austerity,” Trevor Griffey laid out the history of the negotiations. He noted the injustice of the January plan: 

Budget cuts negotiated in 2024 seemed like a done deal. Then something unexpected happened: new, more optimistic revenue forecasts came in, and the state of California entered 2025 with a projected $363 million budget surplus.

 

The Governor could have proposed to use some of this money to give a reprieve to the UC and CSU systems, or try to sustain the compact another year. 

 

Instead, the Governor’s January budget proposal reduced planned cuts to state agencies, while leaving the 8 percent cut and compact deferral in place for UC and CSU. 

 

The May Revision is a partial correction of that extra cut meted out by the governor and legislature to UC and CSU. But it’s still a cut in the worst year in my lifetime for U.S. colleges and universities. 

 

Where did the Department of Finance and the California legislature get the idea that it would be OK to replace the Compact increase with a $129 million cut?  

 

At Cal Matters, Mikhail Zinshteyn has reported,

The chair of the Assembly’s budget subcommittee on education finance, David Alvarez, a Democrat from Chula Vista, asked UC senior officials how much the state could cut and still leave student academics largely unaffected, including graduation rates and other endeavors that “ensure that student access remains the same.”

 

For UC San Diego Chancellor Pradeep Khosla, the answer was about $30 million, much less than the roughly $73 million in state cuts the campus would absorb under the current plan.  Systemwide, the UC’s 10 campuses could tolerate an ongoing cut of $125 million, said Seija Virtanen, a UC government relations official.

 

Mystery solved. The new cut idea came from UC officials themselves. Khosla told the Assembly Budget Committee that UCSD was cool with a $30 million cut three weeks after he told his campus community that they face cuts of $75-$500 million. Virtanen said a $125 million cut would be tolerable. UC’s cut was $129 million.  

 

The official UC discussions take place in a short-termist bubble in which only the most recent increments are in public view. The repressed pattern is a quarter-century of cumulative shortfalls.  

 

I’ve updated the blog’s ongoing calculations for the UC budget (CSU isn’t here) to reflect the May Revision.  If you’d like more background or a refresher, see “The Essential Charts.”  For Newsom’s funding pattern see “Shortfall.”

 

Figure 2

 

Here you see several lines.

 

The red line tracks the state's actual general fund allocation in nominal dollars.

 

The blue line is a benchmark, tracking growth in state per-capita income.  This measures the strength of the economy as it exists in people's pockets.  It goes up 4-5 percent a year most of the time.  

 

UC enrollment did not stay flat through this period, but increased by about 50 percent. The yellow line takes the per-capita income benchmark (blue line) and corrects it for actual UC student growth. 

The purple line is the California state budget (right-hand scale).  State government--health, corrections, transportation, K-12 education, etc--has grown at around the same rate as personal income.  California doesn't have an exceptional government, measured by growth rates.  It has an average-growth government--except for higher education, which state government has made sub-par.

 

Note that none of this data is corrected for inflation.

 

If a state wanted to fund an agency in an average way, it could use several metrics.  It could increase that agency’s budget at the overall government median.  The red line would track the purple line. 

 

Or it could increase that agency's revenues at the same rate as per-capita income. The red line would track the blue line. (In such a case, the legislature wouldn’t be treating that agency as more special, but just letting UC or CSU or public health or transportation grow with the state.)

 

Or the state could also acknowledge the growth in that agency’s service obligations, like enrollment growth.  In this case, the red line would track the yellow line. 

 

You can see that none of these average treatments take place.  UC’s state general fund revenues have fallen steadily behind the state in all three measures. And UC officials seem not only to be okay with this, but to co-create the substandard increases over years.

 

I’ve never understood why they do this, or why UC people don’t try in an organized way to make them stop. But here we are.

 

The traditional excuse was that UC will made up for state cuts with increases in student tuition. This has always been unpopular with the California public, so the line was that UC is compensating for state cuts by triple-charging international students, and this it’s a win for the state taxpayer.  When the taxpayers’ 4.0 or 4.3 GPA kids were getting rejected in large numbers from the flagship campuses with the highest shares of international students, parents complained, and the state negotiated campus-by-campus caps. Resident tuition got frozen by Jerry Brown (thanks to student protests) in the early 2010s, and the “cohort” tuition replacement makes little revenue difference. 

 

Long story short, if you calculate net tuition income, taking out some big expenses no longer covered by the state, you get this chart.  The green line adds UC general funds and net tuition income to state general funds.

 

Figure 3

 

Any way you slice it, the University of California has been underfunded by the state throughout this century. 

 

After these many years of substandard funding, UC (and CSU) are now woefully exposed to the ax-murdering of federal agency grants. At CUCFA, Eric Hays has calculated (conservatively) a UC-wide loss of $421 million in federal research funds from just one of the ten types of cuts—NIH reductions in indirect cost recovery rates to 15%.  

 

Damage is settling in everywhere. The system has frozen hiring on all campuses, amid various campus measures.

 

I noted above that UC San Diego, Chancellor Pradeep K. Khosla warned of cuts on April 1^st.

We are unable to predict exactly what the losses will be, but our initial scenario planning models indicate possible reductions ranging from $75 million to more than $500 million annually. In preparation, I have asked budget offices to model a 2.5% to 12.5% budget reduction based on these initial scenarios. We will continue to evaluate the data and further refine the range of our estimates.

 

That was the last update on his page.

 

At UC Santa Barbara, the chancellor has asked units to prepare for across-the-board cuts of 10%.

 

UC Santa Cruz already had a $107-111 million structural deficit before Trump’s election, and faces cuts and layoffs.  Students are noticing educational effects.

 

UC Davis was already projecting a doubling of its core funds deficit to $90 million, and now expects further losses due to federal cuts of $118 to $408 million.  The chancellor's statement following the May Revision (h/t Mikhail Zinshteyn) declares a $53 million deficit on tuition and state funds, and a prospective $500 -$907 million deficit adding federal sources at the campus and medical center combined.

 

And so on. 

 

The financial information is woefully incomplete. It doesn’t tie specific levels of cuts to known policy variations.  There are no “bridge funding” policies of the kind I discussed in Liner Note 25. There are no elements of a coming plan. 

 

Researchers across the system engage in pure guesswork trying to figure out the near future of their research and of their students and staff. What kind support institutional support might they have? Nobody knows. 

 

This atmosphere may explain why the chair of the Santa Barbara division of the Academic Senate resorted to writing, “I like to think that the temporal rhythms of institutions—which can admittedly be frustratingly slow, particularly in relation to the frenzied pace of the news environment—are ultimately going to be our best defense.” Perhaps that’s the function of opacity too: the psychic defense of knowing little and thus having a reason never to be ready with a large and possibly successful counteraction.

 

Pressure seems to generate many bad ideas on high.  Faculty have had to spend time this year opposing ideas like converting the 7 quarter-based UC campuses to the semester system (look at the work already poured into this), or UCOP forcing universal adoption of root-level surveillance software on all UC computer hardware without consultation (this UC Irvine Senate resolution against the plan passed with a 94.9% yes vote). 

 

Unquantified, undebated budget calamity is also behind serious challenges to UC’s educational core. At the UCLA Faculty Association blog, Dan Mitchell summarized part of EVC Darnell Hunt’s commentary like this: 

 

After the student-worker strike a couple of years ago - which boosted labor costs - and given the current outlook of reduced federal and state support, the number of PhDs UCLA can train is being re-examined. The job outlook for PhD graduates has also been diminished by federal policy. Some departments in the past created sections staffed by PhD student TAs in order to support those students. Now only needed sections will be staffed. And UCLA is looking at whether even needed sections might be replaced by such tech alternatives as AI and remote/hybrid classes.

 

Hunt is suggesting a major shrinkage of UCLA’s doctoral programs, which will make undergraduate majors unteachable, which would require conversion of a large share  of instruction to online or “AI” instruction. Some unknown large proportion of graduate students would disappear, and undergrads would have college on their phones. 

It’s hard to imagine a better way to dismantle the UCLA product and brand--not to mention knowledge creation and public benefits.  And yet there seem to be private talks going on about this at senior levels. 

 

None of these budget disasters are acceptable. I hope more people will fight them furiously.

Mosteiro de Santa Clara-a-Nova,
Coimbria, Portugal on April 26, 2025   

by Trevor Griffey, UC Irvine

 Before 2025, California Governor Gavin Newsom developed a reputation for being a modest advocate for public higher education compared to his predecessors. This year, he proved that this reputation depended on flush state budgets, not on principle. 

 

When Newsom first came into office in 2019, the state had a projected $20 billion surplus, which allowed Governor Newsom to substantially boost spending for public higher education as part of what he called a “California for All” budget for 2019-20. 

 

And in 2022, with the state of California still receiving substantial CARES Act funding from the federal government, Newsom negotiated a 5-year “compacts” with the University of California and California State University systems that committed him to advocating for 5% annual increases to UC and CSU budgets. In exchange, the school systems committed to increase enrollment of California residents and increase student retention and graduation rates.

 

Though the compacts were legally nonbinding, they promised a sense of stability and modest recovery to UC and CSU after decades of inadequate and unpredictable funding. Unfortunately, they would soon be shredded because of a catastrophic accounting error.

 

Years of Austerty to Pay for Budget Mismanagement

 

According to CalMatters reporting, during the same legislative session that Governor Newsom negotiated the compacts, budget analysts working in his Department of Finance massively overestimated tax revenue for future years. They treated an anomalous spike in income taxes as normal, and over-estimated state revenue in future years by $200 billion per year. Legislators relying on these projections believed that they were balancing the state’s budget in 2022, and thereby set the state on a course to spend hundreds of billions of dollars more than it would collect in taxes. 

 

As the effort to undo the damage of faulty budget projections continued into 2024, Governor Newsom proposed “deferring” funding increases in the compact to future years. UC and CSU leaders successfully negotiated to receive a modest increase to their general funds in 2024-25, but in exchange for accepting an 8 percent cut in 2025-26. Since the Governor and the state legislature were also proposing an 8 percent cut to other state agencies, the shared sacrifice seemed fair. The compact was temporarily saved, but the Governor’s commitment to it was effectively over.

 

Governor Puts Majority of Budget Cuts Onto Public Universities

 

Budget cuts negotiated in 2024 seemed like a done deal. Then something unexpected happened: new, more optimistic revenue forecasts came in, and the state of California entered 2025 with a projected $363 million budget surplus.

 

The Governor could have proposed to use some of this money to give a reprieve to the UC and CSU systems, or try to sustain the compact another year. 

 

Instead, the Governor’s January budget proposal reduced planned cuts to state agencies, while leaving the 8 percent cut and compact deferral in place for UC and CSU. 

 

As the Legislative Analyst Office has highlighted, this move increased state government spending by $2.4 billion over the 2024 budget deal. The Governor also proposed increasing discretionary spending by $507 million, and proposed $150 million in new tax breaks for 2025-26.

 

To pay for this new spending, as well as cover billions of dollars of unexpected Medi-Cal expenses and rising costs for other programs, the Governor proposes to withdraw state reserves by about $7 billion in 2025, leaving $17 billion for next year. Remarkably, the Governor did not propose using any of those reserves to prevent or reduce cuts to public universities.

 

Indeed, whereas the State’s Special Fund for Economic Uncertainties is normally kept at $3.5-4 billion, the Governor proposed to increase that fund to $4.5 billion. If the Governor had simply thought to keep it at a normal $3.75 billion, he could have eliminated cuts to the UC and CSU system entirely for 2025-26. 

 

The rhetoric about the state budget in Sacramento is pessimistic. Concern that Trump’s reckless actions will weaken the economy further add to a sense of foreboding. Cuts to essential services seem inevitable, and this rhetoric of inevitability undermines politicians’ willingness to vote against the Governor’s proposed budget.  

 

Staff for the California Assembly’s subcommittee on education finance have instructed legislators that even though “CSU appears to be facing a fiscal crisis,” and “UC clearly faces significant financial challenges,” politicians should focus their hearings less on stopping the cuts and more on how the school systems “will weather increasing costs and potentially declining state and federal revenue.” 

 

This fatalism is baffling— more cowardice than analysis.  Decisions made by the Governor demonstrate that the need for cuts to higher education has been manufactured by treating UC and CSU differently than other state agencies. While state budget cuts may be necessary, they are being spread unevenly for political reasons, not financial ones.

 

As Jason Sisney, the budget advisor to the California Assembly Speaker, recently wrote, the July 2024 budget deal was that budget cuts would be equitably distributed across state agencies, and UC and CSU cuts would make up 22 percent of the state’s projected budget shortfall. Instead, Governor Newsom wants to increase spending, increase tax breaks, reduce cuts to state agencies, drawn down reserves, and still leave cuts to UC and CSU in place to cover 53 percent of the state’s resulting budget deficit. 

 

In other words, the Governor is proposing balancing the state’s budget on the backs of its four-year college students. This will take the form of increased class sizes, increased tuition, and increased debt, and possibly even one or more CSU campus closures and mergers. 

 

Can Democrats Stand Up to Their Governor?

 

On April 25, 2025, State Senator Catherine Blakespear, who describes UC San Diego as “in the heart of my district”, sent an email to constituents titled “Fighting for UC.” In it, she decried the Trump administration’s research cuts to UCSD, and pointed out that UCSD had already implemented a hiring freeze and was reducing graduate student enrollment. 

 

What Blakespear failed to mention is that she has declined to sign onto a letter from more than 60 of her colleagues in the state legislature opposing cuts to the University of California’s budget. In fact, she didn’t mention the Governor’s proposed budget cuts at all, or encourage her constituents to speak out against them. 

 

Blakespear made it seem as if UCSD hiring freezes and budget cuts were coming from the federal government controlled by Republicans, when much if not most of it is currently coming from the state government controlled by Democrats.

 

Like many Democrats, Blakespear is happy to oppose Donald Trump’s policies. But when it comes to standing up to a Democratic Governor, will she or others really “fight for UC”?

 

In my conversations with multiple state legislators this term, both Republican and Democrat, I have yet to find a single one who wants to cut the UC or CSU budget. I have yet to find a single one who wants the quality of instruction to go down while the cost of tuition goes up. 

 

Many California state legislators graduated from one or more public colleges or universities in the state. They know that California voters are mostly proud of their public higher education system, and see it as a core part of the services that the state provides.

 

And yet, when you ask a California state legislator if they’d vote against a budget that includes cuts to the UC and CSU, most Democrats— even those who sign letters opposing the cuts— will tell you that they have no choice but to vote for whatever budget the Governor, the Assembly Speaker and the Senate leader negotiate behind closed doors. Their ability to move legislation requires ceding their agency on the budget, or else be ostracized by their party leadership. 

 

When you meet with the staff of the Assembly or Senate leaders, you get the reverse message: the leadership needs to hear as much as possible from members before they head into negotiations about the need to protect higher education. 

 

Few will commit. Almost everyone is equivocal. One legislator I met with repeatedly asked if we could talk about how the state legislature could oppose Trump’s attacks on higher education, so we could avoid discussion of the state budget altogether.

 

And some share legislators whispers that because the Governor provided a 6 month delay to people impacted by wildfires to file their income taxes, and a 12 month delay to file their property taxes, his “revised” budget proposal, coming very soon, is likely to be even worse. 

 

Not treating delays in revenue collection as shortfalls is also somehow off the table. 

 

Taking their cues from elected leadership over the past couple years, UC has already increased non-resident student tuition 10 percent, and the CSU system is in the midst of raising tuition 34 percent over 5 years. Who knows what more may be coming?

 

Fighting for Higher Ed at the State and Federal Level

 

Shared sacrifice may be necessary during times of budget woes, even ones created by administrative error. Yet we as college teachers, students, staff and community members need to tell our politicians that balancing the budget on the backs of college students is totally unacceptable. 

 

For decades, politicians across the US, regardless of political party, have consistently raided the budgets of their public universities during recessions, or to cover the rising costs of health care, corrections, and other services they don’t want to tax people for. Politicians may publicly bemoan tuition increases. But they secretly depend on increasing student debt to balance state government budgets.

 

That game may be coming to an end. It ultimately relies upon federal grants and loans to students that Republicans are threatening to eviscerate in what the Debt Collective has called “the most dangerous higher education bill in history.” And it relies upon students believing that the inferior education provided to them in increasingly large and online classes is worth going into debt.

 

It's up to campus labor unions to invest their resources into organizing not just their own members but organizing students and community members to contact their legislators to oppose state government budget cuts.

 

It would be great if the defense of public higher education only required standing up to Donald Trump. But for now, we also have to stand up to Democrats whose support for public higher education is always hostage to their other priorities.

 

Contact your legislator to Stop the Cuts!

·      UC-AFT: For teachers and librarians represented by AFT

·      Teamsters: For UC and CSU clerical workers and building trades

·      University of California: https://www.universityofcalifornia.edu/get-involved/advocate/state-budget

·      California State University: https://www.calstate.edu/impact-of-the-csu/government/Advocacy-and-State-Relations/Pages/Budget-Advocacy.aspx

That may be my worst title ever but it's an important point.  So here we go. 

Where are university budgets near the end of our bad policy summer?  In a bad place -- a worse place than seemed likely during the weeks of activist government from mid-March to mid-May. In this post, I'll discuss the national issue, describe a flawed university budget discourse that makes universities more vulnerable, and link this to the failure of today's mainstream Democrats to accept the economic role of government.

The federal CARES Act was signed on March 27th, and sent universities $14 billion of the $46.6 billion they'd requested (with half of that going directly to students). Having gotten 1/6th of their stated need, higher ed advocates placed their hopes in a follow-up HEROES Act passed the House on May 15th, which Mitch McConnell, Senate Majority Leader, sat on throughout the summer.  Thus the nation's schools and colleges planned for fall in a state of deep uncertainty and growing dread.

This past weekend, POTUS signed executive orders (mostly "memoranda") mandating supplemental unemployment benefits at $300 rather than CARES's $600 per week, with another $100 to come from the states. He extended student loan forbearance from September 30 to the end of the year.  Even if these orders go into effect, there are no provisions for supplemental funding for education at any level, including nothing for the K-12 systems that POTUS and his Department of Education secretary have been trying to bully into opening.  If the states are forced to pay part of the federal unemployment supplement, which some say they can't, that will mean even bigger state cuts to education.

The American Council on Education has a helpful summary of the current situation:

There are technically three bills under discussion in the COVID-19 emergency aid negotiations. The first bill is the HEROES Act written by House Democrats and approved by the full House two months ago. The second is the HEALS Act, which represents the ideas of Senate Republicans and the White House. Finally, the Coronavirus Childcare and Education Relief Act (CCCERA) is legislation introduced by Sens. Chuck Schumer (D-NY) and Patty Murray (D-WA) that reflects Senate Democrats' ideas about education spending in response to the pandemic. . . . The bills all include emergency aid for students and institutions, but the levels of funding proposed differ greatly. ACE has estimated that institutions have a total of $46.6 billion in increased student financial need and lost revenues, and will spend at least $73.8 billion on new expenditures to reopen in light of the COVID-19 pandemic. While CCCERA provides a total of $132 billion to meet these needs, the $37 billion provided for higher education in HEROES and the $29 billion provided in HEALS fall far short. 

The federal bill that comes closest to meeting actual higher ed need--at $132 billion--has no chance of passing McConnell's Senate.

Republican control of key governing bodies has artificially induced massive state failure in suppressing SARS-CoV-2.  The U.S. has the worst Covid-19 suppression record in the wealthy world, and, by failing to build public health infrastructure (see Jeneen Interlandi's superb overview), will continue to inflict massive suffering, disparately along lines of race and class, in all of the areas where common life should offer equal treatment, including education.  The failure of public infrastructure is damaging the private economy that Republican-driven premature opening was trying to protect. Republican opposition to a new stimulus increases the odds of a new depression (see Hiltzik and Krugman for summaries). 

Operating on this familiar political landscape, it's hard for people to maintain transformative ambition.  I sketched one version at the end of April ("Our Converging Crises III"), which involved massive public spending for full Covid-19 suppression, full employment, and educational experimentation. The American self-conception is of a nation that leads the world into a better future. The reality, given our decrepit social infrastructure, is a vast majority focused entirely on getting by. 

The Real Covid Budget Crisis

The same is true in higher education. There's been no follow-up on the early burst of federal effort,  and higher ed is engaged in a new round of austerity, translated as operations cuts, layoffs, and program downsizing. The Cal State system threw in the towel early, announcing on May 12th that it would be all-online.  This was at a time when most administrations assumed Covid-19 would be well in hand by fall; Cal State's Chancellor Timothy White could see pretty clearly that they didn't have the extra billion they needed for testing, tracing, isolating, cleaning, tent classrooms, and the rest. Since then, reopening plans have gone into full reverse, including at wealthy private institutions like Princeton and Johns Hopkins whose core value is small-scale face-to-face learning.  

University of California campuses are quietly joining Cal State's closures on a case-by-case basis.  Berkeley announced all-online on July 21st.  The other semester campus, UC Merced, will open August 26th with an unspecified ratio of remote and in-person. Among quarter campuses, which start a month later, UCLA has dropped its in-person proportion from the 15-20% announced in June to 8%.  UCSB hasn't officially updated its mid-June description of fall quarter as "some face-to-face," but is heading toward basically closed. UC Irvine is keeping its students in the "most classes will start remotely" twilight zone.  All sorts of intensive planning is going on behind the scenes.  And so are planning for budget cuts when UC needs that same extra billion that Cal State needed to open safely.

Although dominated by liberal Democrats, the California state legislature put stable CSU and UC funding in the hands of Mitch McConnell at at time when he was already holding it hostage.  In the final state budget, UC will get a 5% increase over 2019-20 if and only if California gets $14 billion in federal stimulus.  If there's no stimulus, UC gets what UCOP calls an 8% cut from 2019-20.  

In addition, the permanent state budget is cut either way: the federal stimulus money will be treated as a one-time backfill on the state cut.  Even that was a bizarre combination of "augmentations totaling $212.9 million and reductions totaling $471.6 million." Rather than offering higher ed affirmation and stability during the pandemic, the legislature provided a changing combination of cuts and increases that, without an unlikely Senate backfill, gives UC and CSU a major cut.

How big a cut, actually?  The legislature reduced the state allocation for UC from $3.938 billion in 2019-20 to $3.466 billion in 2020-21.   This is a year-on-year reduction of 12.2%.  Its a Covid cut of a size that a red-state legislature could brag about.

It's worth remembering all the way back to November 2019, when The Regents requested an increase of $422.1M in overall state funding, which would have brought state general funding to $4.360B (see the slide here minus $25M for the Riverside School of Medicine).  Annual base cost increases at UC are a bit more than 5%, and since that's 5% on less than half the revenues of the core budget, which comes mostly from (long-frozen) tuition, 5% state increases put core funding further behind.  Campuses have tirelessly tried all sorts of revenue workarounds, mostly involving overenrollment coupled with non-resident student growth, but it hasn't worked. (For the resulting long-term austerity, see "Three Essential Charts"). On top of its rather brutalist history, the California legislature now proposes to cut UC by $903.5M from its November request--barring a McConnell conversion like Saul's on the road to Damascus. The is a cut of 20.7% from the Regents's November request.  

Remember too that even had that $903.5 million November increase been enacted, many campuses were projecting deficits in 2020-21 or the following year. That was not a luxury budget. To repeat: because of prior cuts by Govs. Schwarzenegger and Brown, years of tuition freezes, and sub-inflation state growth, the non-miracle state budget cut that now looks likely is a 20.7% cut from pre-Covid's home for UC semi-solvency.

This would be a disaster for UC (and CSU). And it's likely enough to be treated explicitly in plans for both budgeting and the University's political engagements.

Budget Idealism at the UC Regents

This brings is to the July 30th UC Regents meeting. The Regents have absolute authority over budgeting, revenue strategies like borrowing, as well as political advocacy. If alerted to a budgetary emergency, the Regents might be expected to instruct UCOP to mount a massive siege of Sacramento and Washington D.C., pulling in their contacts in the tech community as well as in national politics.  But UCOP's budget presentation (see the July 30 afternoon session at the bottom of this page), rather than rallying the Regents, kept the real dangers behind the curtain. And Regental behavior encouraged this concealment. 

UCOP presented the budget as in basically good shape.  Medical losses for March-June 2020 are $1.7 billon rather than the earlier projection of $2.8 billion.  UC Health VP Carrie Byington had already suggested that the med centers have learned so much about Covid treatment that they won't repeat spring's revenue losses during the current and future infection spikes. 

Undergrad enrollments are "looking very strong," in the words of associate budget VP David Alcocer (11'47"). He said the same was true of international enrollments, in spite of a very turbulent policy picture on top of Covid travel problems.  He basically claimed that enrollment targets would be hit no matter what. I'm also a bit of an optimist on enrollments because I'm a pessimist on the economy: even remote-college looks good compared to a nonexistent job market.  Polling data suggest we're both wrong, and that colleges should expect a growing enrollment melt.

The presentation noted that housing and dining revenues will be down, but UCOP did not quantify or tie these to different durations of Covid-related reductions. A bit later, UCLA chancellor Block offered some campus numbers, and in later questions a couple of Regents clarified that only single rooms will be offered in the fall, though without revenue numbers for system losses. New VP for Research and Innovation, Teresa Maldonado, gave a candid appraisal of major disruption to research, UC's distinguishing educational activity. She was particularly direct on the damage to women and early-career researchers. But this remained a matter of delayed research progress more than a fiscal crisis.

The presentation of the state budget was a delicate matter (starting around 7'40"; I'm not following UCOP slide order). Alcocer explained the numbers in the slide below (they are different from my calculations above). He noted that the final July budget has a better upside than the May Revise and a smaller potential downside. 

He then went on to explain his right-hand column. He noted that "there's a lot of uncertainty here" because the range of outcomes is nearly half a billion dollars, or 5% of the core budget (9'20").  I can attest that the uncertainty has created in campus planning a somewhat toxic mixture of paralysis, wishful thinking, gloom, and fatalism about cuts. Uncertainty is actually encouraging austerity by making the early stages seem very mild.  

But Alcocer's statement about uncertainty incurred an interruption from Chair John Pérez, who said, 

I just want to push back on the way we characterize this uncertainty. And here's why. The way this reads to me, in simple terms, is "uncertainty is bad, and smaller uncertainty is better than greater uncertainty." When in fact the final budget, in both the worst-case scenario and the best-case scenario, are better for the University, than the May Revise. . .  "Uncertainty" is inherently a bad term, so if we want to look at "range"--some other way to characterize it--because we don't want a negative connotation to the spread we see in the final budget, when in fact it serves us better than the May Revise does."

This intervention forced Alcocer to repeat what he had said two minutes before, which was that the upside was better in July than in May. It suggested to me that Pérez has no idea how uncertainty is weakening the campuses. It also suggested that he would not tolerate university officials criticizing the state legislature in even a polite and indirect way. Any campaign to get a reliably flat budget from the state (not conditioned on McConnell's conversion to St. Mitch), or an increased budget that could cover Covid costs, would never get off the drawing board under Pérez.

The misty aura of fiscal stability was punctured only by Berkeley chancellor Carol Christ, who projected a $340M deficit through fiscal 2021 (or more than ten percent of the campus's $3 billion or so in annual revenues).  She read a version of her administration's July 15th statement, and stressed the dependence of the campus on tuition and state revenues. She stated that the latter were $100M below their 2008 level even though the campus enrolls 8200 more students today.  

If the Regents had paused to take that in, they'd get a glimpse of the system's deep structural woes. Berkeley is historically wealthier per student than any campus except UCLA, so a responsible Board might wonder what its woes say about the rest of the system.  This was the only time in living memory that a Berkeley chancellor has said point blank that privatization doesn't work and thus we need good state support. Actually Christ didn't say that, but she came closer than ever before to noting that the problem isn't just Covid but a flawed business model in which the University has let state funding massively decline.

Later, as Alcocer was about to move to UCLA chancellor Block for a campus view of losses in auxiliaries, Board chair Pérez interrupted to complain about how long the budget presentations were taking.  "This was identified as a thirty minute discussion. . . . when an item is 30 minutes, the presentation is no more than half of that. We've now exceeded 35 minutes, before we've gotten a single Regent engaged in discussion." (32'30"). The obvious remedy would be to allocate more than a half-hour to analyzing what may be most important fiscal crisis in the University's history.  The time overrun was entirely due to letting three chancellors say a few words about their campus finances outside of the UCOP PowerPoint story.  Things got even more rushed after that--and even more superficial.  

In questions, terribly delayed to minute 38, Regent Makarichian performed his solo role of asking for budget numbers, and guessed at overall losses by adding some numbers in his head.  Pérez instructed CFO Brostrom to have those figures in the September meeting. I know Brostrom had versions he could have produced then, but who would dare try the Pérezian patience by pulling up another slide?  

In the meantime, UC is covering its losses with borrowing. It floated a bond for $2.8 billion in July, with $1.5 billion in "working capital" and the rest for capital projects. (UC debt has doubled in a decade from around $10 billion in 2009-10  to $24.6 billion in 2018-19). The budget discussion ended with a hopeful wait-and-see good-case scenario which, as I've said, is translated on the campuses as cuts.  

A Plausible Scenario for 2020-21

The Office of the President and the campuses are all doing projections, so I'm going to adjust some internal UC numbers to draft a plausible negative scenario.  This is not a good case, but it's not a worst-case: for example, I optimistically assume that students who can enroll do enroll, and that all are willing to pay full tuition for mostly remote instruction.  The nicer scenarios assume a return to mostly-normal after the fall term. Based on our country's failed-state approach to Covid suppression, I assume that full fall impacts last through the end of Spring 2021.  I use the governor's January budget as a base for state funding, which was $220M less than the Regents' November budget.

The assumptions:

• Tuition: full undergraduate enrollment.  Though 75% of admitted international students do not enroll, many are replaced by domestic non-resident and resident students. Waitlists and "appeal" lists are liberally used, maintaining overall totals.
• Housing is converted to singles, and dining does not return to normal, costing campuses 70% of normal revenues.
• Grad student enrollment. This falls 15%, slowing research, but it has little impact on revenues as campuses simply eliminate sections as necessary in remote courses, while canceled grad seminars free up some faculty to teach more undergraduates.
• Research continues to be affected by outbreaks made worse by shortages of tracing and isolation programs.
• Philanthropy is reduced by renewed turbulence in the markets, as is UC investment income.
• Medical center and clinical revenues recover from spring 2020 levels but don't get back to normal.
• The Republicans block higher ed stimulus funding in the Senate. Although the Democrats win back the Senate in November, President Biden wishes to govern from the center, and decides not to antagonize the 48 remaining Republicans by giving too much help to education.  Like public universities everywhere,UC goes to its lower permanent state funding base.

Here's a rough estimate of what this would look like by standard budget category.

Scenario B Budget Category	Decline $Millions	Negative % Change
2020-21 Base	39,738
Student Tuition and Fees	775	14
Auxiliary Enterprises	1165	61
Research Contracts & Grants	779	12
Philanthropy & Investment Income	555	19
Medical Centers	2279	15
Educational Activities (esp Clinical Rev)	521	12
State General Fund Appropriation	481	12
Total Losses	6555	16.6
Projected 2020-21 UC Revenues	32,823

Scenario B is a decent guess at one possible program for 2020-21: 17% revenue declines for the UC system overall, and 12% or so for the educational core.  Cuts like these would cause major damage to teaching and research, and of course prevent meaningful Covid-19 suppression.  If two things happen, first, Covid illness persists for several years, as some medical officials predict, and second, U.S. politics allows economic decline, then UC, like other universities, will be permanently downgraded.

The Governance Problem

The Republicans are obviously the biggest problem, but so are Democrats and their governing boards.  The Republican donor base sees government as a potentially victorious competitor to business and finance in economic management (through equitable tax policy and regulation but also better social infrastructure and more productive investment).  Weak government has enabled today's "plutonomy." Republican politicians logically oppose programs that will make government useful, effective, and popular and thus empower their direct rival.

But Democrats are also a problem when they reject both strong and weak Keynesianism.  In the strong version, public agencies spend massively to reconstruct society on the principle of equal treatment. This would fund a Green New Deal in which, for example, some of our tens of millions of unemployed people would be paid by the government to insulate the country's housing stock, starting with those owned by low-income people. I pointed towards this kind of spending in an April post.  Let's call it democratic-socialist Keynesianism, Sanders and AOC-style.  

There's also weak Keynesianism, a very useful combination of FDR and LBJ, in which public agencies spend massive amounts to keep an unjust and unequal status quo economy from imploding.  That would include the common-sense goal of keeping the education sector from shedding employees into a non-functional economy by giving schools and colleges stable funding. It would include the UK policy--enacted by the Conservative government--of covering 80% of the salary of laid-off employees so they can be furloughed rather than fired.  

Mainstream Democrats don't exactly oppose this kind of thing. But they don't promote it as their bread and butter. They also don't clearly expose the urgent need for it, or encourage others to expose it. At times, liberal Democrats like John Pérez actively block the creation of a budgetary need for weak Keynesian spending by preventing the open declaration of a budgetary problem. 

The current UC Board of Regents is chaired by the former Democrat Speaker of the Assembly. It includes the Democrat Lt.Governor, the husband of California's senior U.S. senator, and several former or current members of two Democratic governors' immediate offices. It also boasts several wealthy and prominent Hollywood liberals.  There is really no reason for this group not to activate itself in centrist Keynesian fashion. They would then create an urgent obligation on the part of the state to sustain its educational workforce, infrastructure, and student population, whose lives are currently set to be permanently damaged by the Covid depression. 

I don't understand the complacency that demands the current UC budgetary vagueness in which nothing is true and everything is possible, until the only possibility becomes austerity. It feels like proleptic excuse making--"we didn't fail to act, because we didn't know." I don't understand the lack of ambition, even the bare ambition to keep the rising generation whole. We can obviously do that, but it will take much clearer budget work at the level of senior management and governing boards.  It will take boards willing to support unprecedented mobilizations of political will for higher education, or at least willing not to block them,