Future Funding Strategies for the University of California

Presented by Peter J. Taylor

April 12, 2010

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Table of Contents

• The Budget Gap

• Commission on the Future

• Funding Strategies Workgroup:

1. Develop advocacy campaign for state funding for UC2. Identify, promote, and adopt best practices in admin

efficiencies3. Revise ICR practice & policy for non‐federally funded research4. Improve ICR rates with federal agencies5. Develop multi‐year tuition plan6. Increase nonresident enrollment7. Advocate for federal Pell PLUS augmentation grants8. Examine faculty compensation plans9. Allow for possibility of differential tuition by campus

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Section I: The Budget Gap

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The University faces an ongoing budget challenge

FY10-11 Budget Gap: $1,223.4 million

637

368

218

211

330

305

65

75

237

0

250

500

750

1,000

1,250

1,500

Gap Causes Gap Fillers

($mm)

Remaining Budget Gap

Additional State Funds

State General Fund Restoration

Mid-Year Fee Increase

Fee Revenue

Debt Restructuring

Additonal Mandatory Costs

Mandatory Costs

State General Fund Reduction

$1,223.4

Gap Fillers

Gap Causes

$1,223.4

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The State budget is not getting any better

According to the LAO:

• There is no way CA can avoid reprioritizing its finances

• Link between state funding and enrollment has been disrupted

• Fees projected to continue rising

• Federal funds provided only a one-time budget solution

• Key choices facing Legislature:―How much enrollment should be accommodated?―How much should higher-education cost?―How should the universities reduce operating costs?

Billi

ons…

…for at least the next five years

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Section II: Commission on the Future

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“Reimagining” the University

• On July 16, 2009, Board of Regents Chairman Russell Gould announced UC Commission on the Future

Funding Strategies

Size & Shapeof UC

Education &

Curriculum

Access &

Affordability

ResearchStrategies

FundingStrategies

• The Commission was charged with developing a new vision for the University within context of UC’s mission and budget, and its commitment to quality, access, and affordability

• Five workgroups were established:

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Section III: Funding Strategies Workgroup

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1. Develop grassroots advocacy campaign

2. Implement a best practices system

3. Revise ICR practice/policy for non‐federally funded research

4. Improve ICR rates with federal agencies

5. Develop multi‐year tuition planning framework

6. Increase nonresident enrollment

7. Advocate federal Pell PLUS augmentation grants

8. Examine faculty compensation plans

9. Allow possibility of differential tuition by campus

Workgroup Submitted nine recommendations to the Commission on March 23:

FundingStrategies

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#1: Develop grassroots advocacy campaign

• Rationale:

• Public institutions must have backing of those who pay taxes to support it• Activism is strongest at the local level• Political leaders can gain from a relationship with UC

• Challenges:

• Development of an adequate campaign infrastructure • Development of campaign messaging• Doing it the UC Way (not just another political campaign)• Internal constituencies need to be educated and “buy in” to the

campaign

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#2: Implement a best practices system

• Rationale:

• Administrative activity pervades any large organization, and especially complex public research universities• Our funding model may be misaligned with our efficiency goals• A penny saved is a penny earned

• Challenges:

• We must follow through this time • There is a time and place for campus autonomy• Cost-cutting cannot mean quality-cutting

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#3: Revise ICR policy for non‐federally funded research

• Rationale:

• Total cost recovery is our principle• Core funds subsidize research• Significant revenue potential

• Challenges:

• State-funded research (it’s less than half that charged to federal)

• Understanding among the faculty• Differing effects on different disciplines

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#4: Improve ICR rates with federal agencies

• Rationale:

• Total cost recovery is our principle• Successful comparators have a dedicated negotiating team• Significant revenue potential

• Challenges:

• Multiple funding agencies involved (and huge disparities among them) • Understanding among the faculty• Tendency towards campus autonomy

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#5: Develop multi‐year tuition planning framework

• Rationale:

• Creates an integrated planning framework• Change misleading nomenclature• Simultaneously maintain focus on state funding (and exhibit

interconnectedness with the state)• Utilize market headroom• Increase predictability

• Challenges:

• Continue to pursue state funding • Enrollment and other impacts• Complex implementation• Avoid guarantee misunderstanding (and continue to address

affordability)• Avoid Reg Fee misunderstanding

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#6: Increase nonresident enrollment

• Rationale:

• Significant revenue generation• Positive impact on the state (and undergraduate experience)• Market headroom• Success at comparator institutions

• Challenges:

• Recruiting infrastructure • Revenue potential limited by return-to-aid• Perception issues• Protecting racial diversity

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#7: Advocate federal Pell PLUS augmentation grants

• Rationale:

• Preservation of quality• Graduation rate component• Core operations precedent• Combat economic stratification

• Challenges:

• Identifying available federal funds• Feasibility• Avoid a program that is too self-serving (aim for true “Race to the

Top” type program for all of higher education)

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#8: Examine faculty compensation plans

• Rationale:

• Existing precedent• Use of non-core funding • More extensive use of contract and grant funds • Would augment/replace core funds for instruction

• Challenges:

• Equity issues among disciplines• Cultural shift• Faculty resistance

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#9: Allow possibility of differential tuition by campus

• Rationale:

• Increase revenue capacity• Existing cost differentiation • Precedent in other states • Discounts rather than add-ons

• Challenges:

• Perception issues• Inclination to move to the maximum• Integrate with resource allocation efforts