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State Budget Shortfall Forces Second Fee Increase for Fall 2011

July 15, 2011

The University of California Board of Regents today (July 14) approved a plan to close a $1 billion budget shortfall through a combination of higher student tuition, cost-cutting measures and operational efficiencies.

Regents, on a 14-4 vote, reluctantly approved a 9.6 percent tuition increase, effective this fall for all UC students, after agreeing with administrators that it was the only course left that would not erode the quality of the university.

“Faced with enormous financial cuts forced on us by political leaders, we only have a handful of options open to us, and all are horrible options,” said regent Bonnie Reiss. “As much as I hate voting for this increase, I hate even more letting this institution slide into mediocrity.”

Together with a previously approved 8 percent tuition increase also set to take effect this fall, revenue from student fees and tuition will cover about one quarter of UC's budget deficit. The remainder is being closed through campus reductions, increasing out-of-state enrollments and administration efficiencies.

The 9.6 percent increase will push annual undergraduate tuition and fees up by $1,068 for the academic year that begins in August, for a total cost of $12,192.

Provost Lawrence Pitts noted that UC's generous financial aid program ensured that roughly 55 percent of UC students would see no fee increase.

Students with family incomes below $80,000 per year will continue to have tuition covered through grants and gift aid, while students from families with incomes up to $120,000 will be offered a one-year grant to cover the new fee increase. In addition, the university is working on ways to further expand financial aid for the 2012-13 academic year.

“We are very unhappy that we have to raise student fees, but it only meets about a quarter of the need,” Pitts said. “Quality just cannot go down. We have a much greater risk of losing future students not from having the costs go up, but because the quality goes down.”

The decision to increase tuition comes just two weeks after lawmakers in Sacramento approved a state budget that cut UC's funding by $650 million. UC's budget could be reduced by another $100 million later this year, if state revenues fall short of projections.

In addition to the $650 million cut in state support, UC faces mandatory cost increases this fiscal year of $362.5 million for which it receives no state funding. That includes rising costs for health benefits, utilities, retirement plan contributions and unfunded student enrollment.

UC has been squeezed relentlessly by successive years of declining state financial support. Over the past four years, UC's state appropriation has fallen by 27.1 percent, from $3.25 billion in fiscal year 2007-08 to $2.37 billion in fiscal year 2011-12.

As a result, UC has implemented layoffs, consolidated and eliminated programs, increased class sizes, delayed faculty hiring, and reduced levels and hours of service. It has also moved quickly to find administrative efficiencies, capturing $157 million in savings and revenue generation over the past year.

UC's 10 chancellors, many of whom spoke today in support of the fee increase, said students would fare better with slightly higher costs than if campuses made even deeper cuts to their academic programs.

UCLA Chancellor Gene Block said that his campus simply could not absorb more than the $125 million shortfall it already faces. Without the fee increase, UCLA would need to cut an additional $29 million, the equivalent of replacing 168 ladder-rank faculty with lecturers, cutting 324 staffers, or replacing 1,268 California students with out-of-state students who pay the full cost of their education.

“We've come to the conclusion that a fee increase is the only way we can meet the additional reduction. We don't look forward to this, but the cuts are severe.”