This story is from UCLA Today, a discontinued print and web publication.

UCLA leaders explain how they will handle $200 million shortfall

While the final outcome of the state budget may still be many weeks away, UCLA is proceeding with budget planning for 2010-11 based on a conservative assumption that the cash-strapped state will not be restoring any money that was cut from last year’s budget.
Although Gov. Arnold Schwarzenegger’s May revised budget holds out some hope that the state may restore $305 million to UC — UCLA’s share would amount to $55 million — the university cannot count on that possibility, campus leaders told faculty during a June 3 meeting of the Legislative Assembly of the Academic Senate. Nor will campus leaders base the budget on the hope of retaining the $51 million the governor put in his plan for UC to cover unfunded student enrollment.
Photos by Stephanie Diani.
With the state deficit estimated to be $19 billion for 2010-11 and legislators weighing the prospect of gutting important health and welfare programs, campus leaders said they have to be realistic and are strategizing on how to deal with a likely $200 million budget shortfall at UCLA. That shortfall, which represents 20 percent of UCLA’s core revenues, reflects a $117 million cut in state funds as well as $84 million in unfunded costs such as utility cost increases, benefits, retirement contributions and faculty merits — costs that the campus will have to pay.
To make up for the $200 million shortfall, the current scenario is that $33 million in budget cuts will have to be made by UCLA’s operating units. That comes up to about a 5 percent reduction in operating costs, explained Steve Olsen, vice chancellor for finance, budget and capital programs.  The departments also will have to pay for $40 million in unfunded cost increases, further decreasing the resources available for academic or administrative programs.  “All units, whether academic or administrative, have been asked to bear the brunt of those reductions and cost increases.”
And campus leaders are planning on making $19 million in targeted budget cuts to specific programs or activities. The cost of faculty merits and undergraduate instruction will be supported by $28 million in central funding.
”This is the overall situation facing us right now,” Olsen said.
A potential source of income
To alleviate some of the pain, campus leaders are considering other factors to increase revenue or cut costs.
One potential source of revenue that is being explored is enrollment of more nonresident students in order to protect the academic program for California residents, said Olsen, who added that this strategy has been widely discussed campus- and systemwide.
“While I can’t represent that there’s a unanimous view,” he said, “it does appear to me that there is at least a broad-based consensus that this is the right direction the university needs to go in, and that UCLA, in particular, could take advantage of.”
However, he noted, it cannot happen instantly because there needs to be infrastructure in place to recruit such students. But, Olsen said, “I’m confident that UCLA could do this in a way that would maintain the overall character of our academic programs, provide additional diversity for the undergraduate student body and attract high-quality students in the hope that they will not only study here, but perhaps stay in California after their education is completed.”
For the 2010-11 academic year, 50 more resident freshmen will be enrolled. There will also be 75 more resident transfer students starting in September as well as 150 more nonresident undergraduates.
Diffculties of restructuring
To find additional ways to save money, a campuswide restructuring committee of administrators, faculty and staff is sifting through more than 100 suggestions that have been submitted by the campus community over the course of the year. Executive Vice Chancellor and Provost Scott Waugh noted that UCLA is so well-managed currently that it will take more than one or two bold steps to save millions of dollars. “We have to think broadly and creatively, and we must take many steps in order to save the money we need to save,” he said.

students.outsideAnother reason that administrators are proceeding carefully with restructuring is that most of UCLA’s state funding goes to salaries. In the academic units, faculty salaries account for 75-80 percent of those costs. “You are talking about people — jobs … So this has to be done in a very careful way so that you are not going to unduly harm people’s lives, and you’re not going to cause irreparable harm to the organization,” Waugh said.
In some cases, the university has found itself caught in a dilemma where restructuring is good for the organization but doesn’t result in large savings in a short time period. For example, restructuring has made UCLA’s research organization more efficient and effective. “We now run it according to metrics,” Waugh said. Yet making these improvements has cost the campus more money because “we’re bringing in a lot more research than we did before … That’s the kind of dilemma we face across the board.”
But the campus is moving ahead with restructuring on several fronts — consolidating data centers and business practices and changing departments’ buying habits. “We’ve been very good at strategic sourcing at UCLA — but we’re going to have to do better,” Waugh said.
Academic departments make progress
Waugh praised the academic departments in the College of Letters and Science for responding to Challenge 45, the initiative to review majors in order to ensure that teaching resources are directed toward the disciplinary core. This facilitates students’ timely progress while enabling to enroll in a wider array of courses.
Waugh also commended departments for holding the line on hiring. “We have to be careful in terms of maintaining the size of the faculty because faculty salaries are a huge portion of our budget.” Waugh added that there will come a time when the campus can start making selected investments in faculty hiring. The deans are working on formulating three-year hiring plans. Rather than filling a large number of vacancies, Waugh said there will be “steady steps” toward hiring replacements. 
While hiring has been extremely limited this past year, the campus has been able to make retention offers to faculty who have received offers from other institutions. Last summer’s dire predictions that many universities would take advantage of UC’s budget crisis and raid its faculty did not materialize.
“We have been very successful in retaining faculty who have gotten offers, and we are going to continue to make sure that there are resources available to retain faculty who are among our very finest,” Waugh said.
Highlights of the academic year
Also congratulating the faculty for their extraordinary dedication and collaboration to work for UCLA and its mission, Chancellor Gene Block reminded faculty members that this past year has been one of remarkable achievement.
Janss Steps fountainUCLA has set a new record for competitive research funding, bringing in 639 grants for more than $1 billion, Block said. “It’s a testament to your creativity and determination, and it speaks volumes about UCLA’s research infrastructure.”
UCLA faculty, including three professors who were elected to the National Academy of Sciences, continue to earn national and international honors. Another highlight of the year, Block said, was that UCLA has received $304 million in private giving so far — “a dazzling total in this economy,” he said.
“We know the challenges will continue, but I am excited about the work that has been done — and inspired by your achievements despite the past year’s adversity,” the chancellor said.
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