As Gov. Arnold Schwarzenegger attempts to solve the
state’s gaping budget deficit, the University of California
faces the possibility of midyear cuts and subsequent student fee
increases.
The Schwarzenegger administration might have to make $2 billion
in midyear cuts and reductions next year, said Lynn Podesto,
assistant manager in the education unit of the state Department of
Finance who also serves on Schwarzenegger’s transition
staff.
On the same note, UC Budget Vice President Larry Hershman said
at the UC Board of Regents meeting last week that the state can
expect a possible midyear cut of $2 billion.
Financial analysts also think midyear cuts are a likely
possibility.
“(Midyear cuts) could happen, because if
(Schwarzenegger’s) facing a tough situation … there could
be cuts to both the UC and Cal States, like what happened last
year,” said Anthony Fimbol, a senior fiscal and policy
analyst for the Legislative Analyst’s Office.
Cuts implemented last summer eliminated $410 million from UC
funding, and the regents raised student fees by 30 percent for the
2003-2004 academic year. Approximately $610 million is expected to
be cut for the UC system for 2004-2005.
“General aid programs will be affected … higher
education is going to be one of the general aid programs,”
Podesto said.
To buffer the cuts, the UC may have to become more student
fee-based, said Edward Leamer, director of the UCLA Anderson
Forecast.
He added that the UC will have to do everything that can be done
to get more funds, including the possibility of accepting more
out-of-state students to garner more fees.
Some fear reductions in funding could decrease the quality of
the education offered at the UC.
Non-instructive programs, including student services, research
and outreach, have already been cut drastically to balance the
UC’s priority of providing a quality education with the
decrease in state funding.
“Before, the UC system was rather well-funded,”
Leamer said. “Because there was a (state) surplus, there was
a growth in revenue in the UC system.”
Before the present budget crisis, student fees did not increase
for seven years in the mid-to-late 1990s.
The current budget problem in the recent years has put a crunch
on all state-funded programs.
“I think the UC system is going to be under distress for a
lot of years,” Leamer said.
“If the state economy improved, it’s a question of
if the UCs would benefit from that,” he added.
Leamer also said the UC’s future depends on “how
able they are,” referring to the new administration.
“If they put limitations on the state’s spending then
the UCs aren’t going to get out of it,” he said,
referring to the existing budget crunch.
Schwarzenegger’s efforts to fix the budget crisis have
received mixed reactions from legislators, though there has been a
wait-and-see attitude, given the recent transition of
administrations.
“The governor’s administration just took over here,
he’s making appointments, the discussions have just
begun,” Podesto said.
Last week, in his first act as governor, Schwarzenegger
rescinded the $4 billion car tax increase instituted by former Gov.
Gray Davis. The repeal is viewed by many as a widening of the state
deficit.
To buffer the loss of revenue, the governor proposed a
record-high $15 billion bond measure last week. The borrowed money
would allow the state to refrain from cutting some social and
health programs, but would also strap the state with a 30-year bill
that incurs an extra $20 billion in interest and fees.
“With the bond issuance, hopefully there’ll be some
treatment of the ongoing deficit structural problem,” he
said.
Still, the budget outlook is unclear and projections are
premature at this point, Podesto said.
“The structural problem in the budget is pretty
immense,” he said.