University of California Accountability Report 2013

Goals
Totaling $23 billion in 2011-12, the University's revenues fund its core mission activities, as well as a wide range of support activities, including teaching hospitals, the Lawrence Berkeley National Laboratory, UC Extension, housing and dining services, and other functions.

Prior to 2010-11, state funding was the largest single source of support for the education function at the University. Over the past ten years, state educational appropriations have fallen over $1 billion in inflation-adjusted dollars despite the fact that UC has added students over this period. As a consequence, state educational appropriations constituted only 9 percent of UC's operating budget in 2011-12 compared to 23 percent in 2001-02. Since 2007-08, the State has cut UC's budget by $900 million, including $750 million in 2011-12 alone.

To help mitigate declines in state funding, the University has sought to increase revenues from other sources, such as student tuition and fees, federal indirect cost recovery and private giving. The University has also moved aggressively to reduce operating costs. Chapter 13 identifies some of the cost savings the University has achieved. Yet even under the most optimistic assumptions, efficiency improvements and alternative revenue generation can offset only a portion of the budget shortfalls projected over the next few years.

This chapter summarizes the financial challenges that the University has faced up through the 2011-12 fiscal year. Revenue and expenditure data show changes in both the amounts generated (or expended) over time and their distribution across various areas. Development data cover trends in private support, donor restrictions on private giving, alumni donations and endowment per student. Other chapters in this report describe the impacts of budget cuts on the University's core mission activities and on its ability to balance its objectives of academic quality, access and affordability.

Looking forward
The November 2012 passage of Proposition 30 by California voters combined with improvements in the California economy promise to bring some stability to the state budget and thus to the UC budget. UC met the recent budget challenges by reducing operating costs and identifying alternative sources of revenues. In addition, the University is making comprehensive changes in the way funds flow within the University.

Historically, certain revenues have been collected centrally by the UC Office of the President and redistributed across campuses to promote systemwide priorities. Following lengthy consultation with campus leadership, and beginning in 2011-12, all campus-generated funds tuition and fees, research indirect cost recovery, and patent and investment income have been retained by or returned to the source campus. To support central operations, the University has established a broad-based, flat assessment on campus funds. The University anticipates that these changes referred to as the Funding Streams Initiative will simplify University financial activity, improve transparency and motivate campuses to maximize revenue.

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