This budget information is current as of August 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 the 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.
Overview
- What’s driving the core fund deficit?
- What’s the current status of UC Santa Cruz’s core funds deficit?
- How does the state budget shortfall affect UC Santa Cruz?
- How are we planning to address the situation?
Latest Updates
- Update on campus budget (August 20, 2024)
- Latest budget update (August 6, 2024)
- Update on 2024-25 Budget (July 2, 2024)
Additional Information
- VCFOA and CFO Ed Reiskin’s Budget and Spending Guidance and Best Practices (March 6, 2024)
- Annual Budget Process
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 intended to support the university’s core mission.
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 UC Santa Cruz’s 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 due to a combination of factors.
Salaries and benefits. About 80% of our operating expenditures are related to employee compensation — our faculty and staff are essential to our core mission. Salaries increase annually due to collective bargaining agreements, merit-based raises, experience-based step increases, and other factors. Similarly, UC benefits costs — such as health insurance — are projected to increase by an additional 16.4% across FY24 and FY25.
Enrollment growth has been constrained for several years due to the limited housing availability on campus and in our community. Enrollment of international and out-of-state students (who pay higher tuition rates) declined during the pandemic mitigations and may not regain the same level for several years. These realities impact our revenue streams. Other mandatory costs. Our campus is also experiencing other cost increases, such as utilities, insurance and more. Natural disasters, such as fires and floods, are driving up insurance costs across the state. Similarly, utility costs are rising significantly. In addition to the cost of lighting, heating, and powering our classrooms, offices, and residence halls, many of our scientific activities require ongoing energy use. It is important to understand that UC Santa Cruz uses energy efficiently. Actual energy use has decreased while our total square footage has grown. The campus’s sustainability efforts have played a key role in mitigating the impact of these rising utility costs.
What’s the current status of UC Santa Cruz’s core funds deficit
A structural deficit occurs when annual expenses consistently exceed annual revenue, resulting in a recurring shortfall. This gap requires us to draw 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 combined with 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 Funds (HEERF), during the pandemic, are of an ongoing nature such as those necessary to support student success, remote work, and mitigate increasing cyber threat, (2) total employee costs (including benefits) are increasing at a faster pace than revenues, and (3) our reserves have been depleted and are no longer available to bridge the deficit.
The estimated structural deficit in our core funds has been growing more significantly since 2023.
The 2024-25 budget anticipates revenue for UC Santa Cruz at just over $1 billion, of which approximately $556 million is in core funds. The projected annual expenditures in core funds total $667 million, resulting in a FY25 core funds budget gap of -$111 million.
How does the state budget shortfall affect UC Santa Cruz?
The Governor’s FY25 Budget for the State of California remained generally committed to the multi-year funding compact with the UC (+5% general fund increase), even in the midst of a $46.8 billion anticipated state budget shortfall . This was a positive development in the budget, resulting in an estimated $8.2 million in additional funding to our campus. While many state agencies took close to 8% reductions this year, the Governor has signaled the UC will receive a 7.9% reduction in FY26, along with deferral of the funding compact to FY27.
Preliminary estimates provided by UCOP indicate we should anticipate a $16.6 million budget reduction in FY26, which will increase our budget deficit next year. It is important to note that salary and benefit costs will continue to increase even with this anticipated reduction in state funding, which will further exacerbate our structural deficit issues. We are actively working to incorporate these planning assumptions into refined multi-year projections which will inform multi-year reduction plans under development this fall.
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:
- Reductions totaling $17 million were implemented as of July 1, 2024.
- Principal officers continue to reduce spending in the current fiscal year by placing more scrutiny on core funds discretionary spending, such as hiring, contracting, travel, etc.
- Vice Chancellor for Finance, Operations and Administration Ed Reiskin and Vice Provost for Academic Affairs Herbie Lee are leading a budget advisory committee to make multi-year reduction plan recommendations to the chancellor and campus provost and executive vice chancellor.
- A committee led by Vice Chancellor for Student Affairs and Success Akirah Bradley-Armstrong and Associate Vice Chancellor for Financial Affairs Biju Kamaleswaran has been established and charged with developing ideas to increase revenues and soliciting and reviewing suggestions from the entire campus community.