The university is gambling on the future upswing of the state
budget ““ an upswing analysts say is far from certain ““
by entering into a compact with the governor over funding.
The compact, announced Tuesday, says the state will cut the
University of California’s budget by about $372 million in
exchange for assurance from Gov. Arnold Schwarzenegger that he will
increase funding starting in the 2005-2006 academic year.
The governor also has promised to limit future student fee
increases, fund enrollment growth, and look into funding outreach
programs, according to the compact.
But with the state facing a $7 billion structural deficit next
year and with the status of California’s economy unclear, the
governor may find it difficult to keep his promise not to trim
funding from the UC in the future.
“The nature of the deal that has been cut is (that) we
won’t protest what we’re going to get next year, but,
in the out years, somehow things are going to get better,”
said Daniel Mitchell, a professor in the Anderson School of
Management. “But no one knows what those out years are going
to look like.”
“If things don’t come out as expected, the governor
could say, “˜Well, that was then, but this is how things look
now,'” and cut the university again, Mitchell
added.
“Like all of these things, you don’t want to bet the
ranch on it,” said Archie Kleingartner, a professor in the
Anderson School.
University officials have said the compact guarantees public
higher education some fiscal certainty after years of budget cuts
and student fee increases. “From the university’s
standpoint it’s probably making the best of a pretty gloomy
situation,” Kleingartner said.
This is not the first time the UC has entered into a compact
with California’s governor. The university had unofficial
funding compacts with both former Govs. Pete Wilson and Gray Davis,
though neither governor fully funded the compact for the duration
of his term.
The most recent compact between the UC and Davis, known as the
Partnership Agreement, fell apart after a couple of years because
of a downturn in the state economy. The compact was supposed to
ensure the university a certain level of funding, but, in the last
four years of Davis’ administration, the governor underfunded
the compact by 16 percent.
The Legislative Analyst’s Office, a nonpartisan group, has
recommended the state Legislature not enter into compacts with
universities because compacts are too speculative about future
state budgets.
“We’ve always advised the Legislature that you
should look at funding every year and not lock yourself into
something,” said Anthony Simbol, senior fiscal policy
director for the analyst’s office.
UC Budget Vice President Larry Hershman has no guarantee
Schwarzenegger will follow the rules of the compact, said Margie
Pryatel, budget officer for UC San Diego.
“The message he’s sending us is (that) this is the
governor’s intention to stand behind us, so we’ll have
to take (the governor) at his word,” she said.
But the governor’s word may not mean much if the state
economy does not recover. The state’s multibillion-dollar
structural deficit will not be removed by future growth in the
state’s revenue. Schwarzenegger’s stance against
increasing taxes means the state will have to cut spending levels
further to make up for the deficit, and it is unclear from where
those cuts will come.
The Legislature also is not legally bound to follow the
governor’s compact. Though it likely will use the compact as
a guideline, it will have its own priorities when it comes to
setting funding levels.
Much of state funding for areas such as K-12 education and
health care and welfare is determined by law or federal regulation,
which limits the amount the state can spend on discretionary funds.
So, even if the state budget improves in the next couple years, the
university still will have to compete for funding with other
programs.
“There’s only so much you can slice up,”
Mitchell said.
The compact also does not solve the budget problems the
university will face this year because it would let
Schwarzenegger’s proposed $372 million in cuts go through
without opposition, which will lead to cuts in academic services
and increases in student fees.
“It brings some predictability to the budget future of the
university,” Kleingartner said. “But it’s going
to be a struggle. Student fees will go up, and certain things will
not be funded.”
Said Mitchell of the university, “They’ve gotten an
assurance, not a contract.”