Update on 2024-25 budget

Dear Campus Colleagues,

I am so proud of all that we have accomplished this past academic year. We
are continuing along an unprecedented trajectory as we support our students
in their academic pursuits, conduct cutting-edge research and creative
scholarship, and support the state of California as one of the nation’s
leading universities.

As you know from previous communications, we came back strong from the
pandemic by hiring more faculty and staff to restore regular campus
operations, teach, mentor, and support our students, and undertake
important research. That growth was beneficial, but the rise in core funds
expenditures has been increasingly outpacing the revenues we receive to
cover those expenditures. We closed this past fiscal year with a spending
gap of more than $100 million, which is about 20 percent more than our core
fund revenues.

Structural deficits occur when the campus collectively spends more than the
revenue received each year over a number of years for various reasons,
including unfunded mandates. Because we have been spending more than our
revenues support, we have been drawing down our reserves, which is not a
sustainable solution. Just as the structural deficit developed over time,
we plan to reduce our spending over the coming years to once again put the
campus on a sustainable fiscal path. As we do so, we must remain focused on
maintaining our academic mission of delivering a quality education,
producing impactful research, scholarship and creative activities, and
advancing our region and the state through community and public service.

Earlier this year, I asked senior campus leaders to propose expenditure
reductions that are future-focused and position the campus for longer-term
success in achieving our goals and executing on our mission. Those proposed
spending reductions were reviewed by the Budget Advisory Committee (BAC)
and their recommendations were shared with me. As a result of this process,
I am authorizing core fund expenditure reductions for fiscal year 2024-25
on the order of $17 million, as a first step toward closing the gap. The
fiscal year 2024-25 core funds budget (based on anticipated revenue) for UC
Santa Cruz is expected to be approximately $560 million of the campus’s
just over $1 billion total budget.

In addition to spending reductions, we are looking holistically at our
budget and processes to support long-term planning. I have been reviewing
commitments of central funding for various purposes and have asked Ed
Reiskin, VC FOA and our Chief Financial Officer, and the campus budget
office to recommend other centrally-based solutions. Additionally, I am
asking the co-chairs of the BAC and the Revenue Augmentation Committee to
establish a small subcommittee to work over the summer to develop initial
ideas for cross-divisional or whole-campus level reorganizations the campus
should consider. I also anticipate receiving recommendations from the BAC
in the near future on how we should manage carryforward funds moving
forward.

All of those steps, together with somewhat better news from the state
budget process—at least for FY25—represent progress, yet we need to
continue our collective efforts to bring our expenditures in line with our
revenues. It’s likely that the campus will need to make further budget
reductions this fiscal year. The Budget Advisory Committee has been tasked
with developing a multiyear plan to balance our core funds budget, and the
Revenue Augmentation Committee I also charged earlier this year is
undertaking its work to develop ideas to increase revenues. I’m grateful
for the work of those serving on those committees as well as the many
others across the university who are working to help address this situation.

I have tasked senior campus leaders with continuing to look thoughtfully at
their units to identify strategic solutions to achieve a more efficient and
cost-effective operation and produce additional cost savings in the 2024-25
budget year, while keeping focus on the core mission of the campus. This
work will not be easy yet it is necessary to position our university for
future success. As we address our structural deficit we will work
collaboratively with campus leaders, the Budget Advisory and Revenue
Augmentation Committees, and in consultation with the Academic Senate
Committee on Planning and Budget, to ensure thoughtfully executed
decisions.

I am confident that, working together, we will get through this current
budget challenge and emerge stronger, supported by better budget processes,
and spending and revenue practices. I appreciate the work each of you do
every day in support of our mission, and look forward to continuing our
work as we confront this and other challenges together.

Sincerely,
Cindy

Cynthia Larive
Chancellor