The UC Board of Regents has formally approved a final 2008-09 operating budget for the UC system totaling $3 billion in state funding for core operations. In total, UC received $48 million less in state revenue than in the prior year. Furthermore, the adopted state budget does not provide funding for increased student enrollments or inflationary increases in fixed costs such as utilities or health benefits. The university must achieve $100 million in savings to cover these cost increases.

Although UC fared better than other entities, the final state budget for 2008-09 essentially provides no increased funding for core costs, including employee compensation and benefits. With funding remaining flat relative to last year, the University will not be able to offer systemwide salary increases to employees. In addition, UC will have to defer progress on changes to the faculty salary scales for 2008-09. Wages for union-represented employees are subject to collective bargaining, however, and obligatory merit increases for faculty will follow UC policy.

Given the immediate and near-term projections regarding the state economy, the state Department of Finance recently informed UC that, as part of the state’s effort to achieve $340 million in additional savings across all agencies, the University will need to achieve another $33 million in savings to offset reduced state funding, creating a total of $148 million in budget reductions the University will need to make in the 2008-09 year as a result of the final state budget. Cost savings of $28 million in the Office of the President in Oakland are also included in the budget.

“It is evident that the turmoil in the international and national equity, housing, and credit markets will cause continuing erosion in the state’s economy,” said UC President Mark G. Yudof. “As such, we must view this budget as just the beginning of potential further state budget reductions this year or next year.”

The Regents act each year to formally incorporate the elements in the final state budget into the proposed UC budget adopted by the board earlier. Student fees for the 2008-09 year were established in May and are unchanged by the board’s current action.

— UCOP