Finance, Operations, and Administration

Overview and FAQ

Students and Faculty walking on Kresge Bridge

This budget information is current as of October 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.

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Additional Information

Overview

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.

Frequently Asked Questions


Why did the campus only begin to address the structural deficit last academic year?

UC Santa Cruz had experienced a relatively small, ongoing structural deficit in the past but we had been able to use one-time savings combined with budget reduction strategies to manage it. 

The campus has been working to implement budget models and practices that both provide better forecasting and allow unused allocations to be returned, such as the Academic Budget Resource model that was developed in 2022.

The current structural deficit in core funds began in 2020 as the campus worked to protect jobs during the pandemic. The deficit rapidly escalated with a confluence of cost increases across many different areas in 2023. The campus began taking more concerted action in 2023 and in early 2024 began working with divisional leaders to reduce discretionary spending and slow hiring. 

How is the campus working to address the structural core funds deficit? 

UC Santa Cruz is working hard to ensure long-term financial sustainability for the campus and we recognize our role as an anchor employer in the region. UC Santa Cruz is focusing both on increasing revenues and reducing expenses. 

We are a people-first organization, and every effort is being made to mitigate the need to reduce filled positions. Every organization manages the size and composition of its workforce, and we anticipate that, like in all organizations our size,  there will continue to be new hires, reorganizations, and separations for a range of operational reasons. Staff Human Resources provides a wealth of information for employees and managers about employee benefits and support. 

  • The campus has implemented “position management” to limit hiring to only the most critical positions. 
  • Only three faculty positions were authorized for the 2024-25 hiring cycle and faculty hiring will continue to be limited to only the most critical positions.
  • All discretionary spending has been targeted for reduction, including travel, entertainment and supplies, and limitations on this type of spending have been implemented across the divisions. 
  • The benefits model changed to give division leaders and hiring managers a better understanding of the full cost of each employee. Under this new benefits model, benefits costs will no longer be held centrally, but rather will be allocated out to division budgets, just as salary costs are, requiring units to account for the cost of benefits for all positions. 
  • Principal Officers submitted expenditure reduction scenarios that were reviewed by the Budget Advisory Committee (BAC) resulting in savings of almost $17 million. Additional savings targets for FY 25 will result in savings of around $13 million. Academic divisions received lower targets, whereas administrative divisions received higher targets, in an effort to minimize the impact to units directly connected to our core mission.
  • Carryforward spending authority has been reduced in each division to help return nearly 50 percent of unrestricted carryforward. 
  • The Budget Advisory Committee has recommended a multi-year budget balancing framework to chart a path to fiscal sustainability.
  • Multiple campus committees are working collaboratively on ideas around revenue generation, restructuring, and efficiency to improve our financial position while maintaining our work to support our teaching and research mission.

How is the campus exploring re-organizations or realignments?

Campus leadership is working collaboratively to develop plans to continue progress toward campus goals while also reorganizing or realigning areas. The primary driver in considering reorganizations is to maintain and enhance critical functions to meet the campus’s core mission. Teaching, learning, and research are core to the campus mission and the campus will remain a high-impact university committed to student success. Multiple campus committees are collaborating on ideas around revenue generation, restructuring, and efficiency to improve our financial position while maintaining our work to support our teaching and research mission.

How will the campus plan to adapt workloads as organizations evolve?

Campus leadership has developed Principles for Adapting Workloads during Budget Realignment to support staff, maximize efficiency, and help us continue to meet our campus mission as we adapt our workloads and work collaboratively across units.

How will the STAR program be impacted by budget constraints? 

Due to budget constraints, the campus made the difficult decision to pause the program for the 2024-25 fiscal year. UC Santa Cruz remains committed to retaining a talented workforce, recognizing high-performing individuals, and recruiting for critical positions.

What measures are being implemented to increase non-resident enrollment and summer enrollment to pre-pandemic levels?

During and after the pandemic, UC Santa Cruz experienced a sharp decline in enrollment of international and out-of-state students. Students from other countries and states enrich our campus community and are exploring opportunities to restore international and non-resident enrollment to pre-pandemic levels. Summer enrollment has more than rebounded, thanks to a number of deliberate strategies to attract more students.

Is the campus exploring any new financial tools to help with more effective budgeting/tracking, either in the near or long term?

Yes, the campus is actively developing several new financial tools to help with budgeting and tracking, including: 

  • a five-year interactive budget planning model to support proactive planning and improved understanding of the financial impacts of budget decisions over a multi-year planning horizon; 
  • quarterly reports/projections to monitor year-to date performance, flag potential issues as they arise, and project remaining resources available at year end; and
  • monthly tracking to monitor progress on spending curtailment and other reduction measures.

In addition, the campus is exploring an enterprise budgeting system to enhance and automate budget processes, support greater transparency and visibility, and improve planning, forecasting, reporting, and decision making.

Why is UC Santa Cruz more impacted than other UC campuses?

Seven of the nine undergraduate-serving UC campuses have been public about managing a structural deficit. UC Santa Cruz does not have a medical school or professional schools that return funds to campus cover some core-funded expenses. 

Enrollment growth, through state support and tuition, also provides additional financial resources for campuses. Responsive to the state’s need to provide educational opportunities for California’s students, UC Santa Cruz is committed to increasing educational access and has a holistic framework to guide future physical planning on the campus with its 2021 Long Range Development Plan. The campus has held enrollment relatively flat while additional student housing is built. Delays to housing development not only increase the cost of the housing, but prevent growth that could support our budget. UC Santa Cruz has also recovered more slowly from a decline in international student enrollment during the pandemic.

Is UCSC considering implementing staff furloughs?

Not at this time. While furloughs can be a tool to address a discrete one-time budget challenge, they are not the first choice in solving a structural challenge and would not create permanent cost savings.  

What tools are available to help me manage my campus budget?

The Budget Analysis and Planning Office has published Best Practices and Expectations for Budget Management, guidance to help you and your team navigate the current budget environment.

How can staff and faculty provide input and ideas throughout this situation?

UC Santa Cruz is soliciting ideas from staff and faculty for revenue growth and operational efficiency. Please visit https://foa.ucsc.edu/revenue-generation/your-ideas-matter/ to submit your ideas!

How can I learn more and stay informed? 

UC Santa Cruz will continue to share updates in various ways, including posts on the budget website, employee town halls, and campus messages. 

Last modified: Jan 14, 2025