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Our Current Budget Status 

 

This budget information is current as of February 2024. This page will continue to be updated as we have more information and updates to share.

Similar to other University of California campuses, over the past few years UC Santa Cruz has developed a growing structural deficit in “core funds.” This deficit is the result of annual expenses increasingly outpacing our annual revenues. UC Santa Cruz leaders are working to develop a multi-year plan to address our structural deficit, which would otherwise continue to grow as costs increase and revenue remains mostly steady. 

Take a few minutes to learn about the UC Santa Cruz budget and our core funds challenges.

 

How have we invested in our future?

UC Santa Cruz continues to be on an upward trajectory and has invested in its future with both core and noncore funds. In support of student success and research excellence, over the past three years - FY20 to FY23 - the campus has strengthened and advanced its mission through efforts that include:

  • Increasing the total number of Senate faculty by 40 positions from FY21 to FY23
  • Growing the staff workforce by 14.4% from FY20 to FY23, and
  • Completing a three-year, $5.5 million salary equity program for policy-covered staff

Some non-core revenue sources have also increased with extramural research awards growing to $210 million in FY23, up 63% over the past five years; and fundraising commitments growing to $59.5 million in FY23, the second-highest in the campus’s history.

The campus also successfully navigated the COVID-19 pandemic and a $20 million cut in state funding in fiscal year 2021. We have mostly recovered from the COVID-related declines in student retention and graduation rates and we have established a trajectory for further improvement in the years ahead. 

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What are core funds? What are non-core funds?

“Core funds” make up approximately 50% of our campus resources and are primarily sourced from state funds, tuition, certain fees, indirect cost recovery, and investment income. These resources are named “core funds” because they are intended to support the core mission of the university.

Non-core funds make up the other half of our campus resources and are primarily sourced from auxiliary units, such as housing and dining, grants, contracts, awards, and philanthropy. Core funds make up a larger proportion of our total budget than most of the other UC campuses.

What’s driving the core fund structural deficit? 

UC Santa Cruz’s structural deficit developed in recent years and is growing based on a combination of factors.

Enrollment growth has been constrained for the past several years due to the limited availability of housing on campus and in our community. Enrollment of international and out-of-state students declined during the pandemic mitigations, and may not regain the same level for several years. These realities impact our revenue streams.

During the same time, annual cost increases have grown and will continue to grow. Higher education is a people business; therefore not surprisingly, approximately three-quarters of core funds are spent on employee salaries and benefits. Annually salaries increase in connection with collective bargaining agreements, merit and annual raises, experience step, etc. As everyone is experiencing individually, costs have risen dramatically over the past several years and continue to rise. Similarly, UC benefits costs—such as health insurance—are projected to increase 16.4% across FY24 and FY25. Total employee costs also grow as we increase our staff and faculty size, as we’ve done in recent years.  Our campus is also experiencing other cost increases, such as utilities, insurance, and more. 

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What’s the current status of UC Santa Cruz’s core funds deficit?

A structural deficit happens when annual expenses outpace annual revenue on a recurring basis. This causes us to draw from down on our reserves, something that is unsustainable, and will hinder us from being able to borrow in order to finance future capital projects.

UC Santa Cruz has experienced structural deficits from time to time (early-mid 1990s, during the great recession, etc.) and we have used one-time savings and/or budget reduction strategies to recover. The current structural deficit in core funds began in 2020 and has escalated quickly. What is different this time is that (1) many services initiated using one-time federal Higher Education Emergency Relief (HEERF) funds, during the pandemic, are of an ongoing nature such as those necessary to support student success, remote work, and mitigate increasing cyber threat, and (2) employee costs are increasing at a faster pace than revenues (annual costs between FY20 and FY24 grew by $100 million in core funds and by $160 million across all funds) while core funds revenue increased only $33M over the same time span.  

 

The estimated structural deficit in our core funds has been growing more significantly since 2023.

The 2023–24 budget (based on anticipated revenue) for UC Santa Cruz is just over $1 billion, of which approximately $537 million is in core funds. The projected annual budget gap for this fiscal year (FY24) is projected to be -$96 million and may grow to -$122 million in FY25 if we don’t take timely action. 

FY24 expense reduction steps include reducing discretionary spending; shifting core funds spending to non-core funds where possible; conducting further analysis of year-end (carryforward) balances; and proceeding with staff hiring for only the most critically needed positions. Non-core funds (contracts and grants, auxiliaries, sales and service, student fee referenda, miscellaneous fees, etc.) and formal state funded line-items (climate initiative, basic needs, etc.) are not held to these measures.

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How does the state budget shortfall affect UC Santa Cruz?   

The Governor’s January Preliminary FY25 Budget for the State of California included a $37 anticipated billion shortfall, while the state Legislative Analyst’s Office recently pegged the shortfall at $73 billion. For this reason, the University of California’s proposed state budget was held at the same level as FY24 in the Governor’s preliminary budget, meaning no proposed increase to keep up with increasing costs. This preliminary budget is considered a best-case scenario for UC. Although the governor’s preliminary budget proposes the University of California may receive a retroactive increase the following year (FY26), the state government cannot guarantee this since they are prohibited from authorizing future year budgets. More information about the evolving state budget will become available in the coming months as we anticipate the Governor’s May Revised Budget and the legislative actions required to deliver a budget 

The structural deficit projections for FY25 include an assumption the state budget will be held flat, and mandatory costs, such as salaries and benefits, would increase.

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How are we planning to address the situation? 

The campus is actively taking steps to close the structural deficit gap so that we can sustainably support the campus mission into the future:

  • Principal officers are working to reduce spending in the current fiscal year, such as by placing more scrutiny on core funds discretionary spending, such as hiring, contracting, travel, etc.
  • Those officers have been asked to provide scenarios as part of the FY25 budget development process that reflect various levels of spending reductions.
  • Chief Financial Officer Ed Reiskin and Vice Provost for Academic Affairs Herbie Lee are leading a budget advisory committee to make recommendations to the chancellor and campus provost and executive vice chancellor.
  • A task force, led by Vice Chancellor for Student Affairs and Success Akirah Bradley-Armstrong and Associate Vice Chancellor for Financial Affairs Biju Kamaleswaran is being established and charged with developing ideas to increase revenues and soliciting and reviewing suggestions from the entire campus community.

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