California is projected to see a budget reserve of about $5.6 billion at the end of the 2014-2015 fiscal year, money that could be used to support the University of California.
The projections were published Wednesday in a report by the Legislative Analyst’s Office, which provides nonpartisan policy analysis for the state and creates annual reports containing budget projections based on current law and policy.
The projected surplus funds might allow the state to pay down existing debts, build up a reserve fund to mitigate the financial effects of potential future recessions or help fund the UC’s pension liability, as the University hopes, said Paul Golaszewski, analyst for the Legislative Analyst’s Office.
Currently, state funds are used to contribute to the pensions of the California State University and California Community College systems but not the UC, said Daniel Mitchell, a professor emeritus of the UCLA Luskin School of Public Affairs and the Anderson School of Management.
Gov. Jerry Brown proposed steady funding increases to the UC for coming years, but since future increases have not yet been written into law, they were not included in the office’s analysis, said Golaszewski.
The projected surplus can largely be attributed to Proposition 30, which levies temporary taxes on households earning incomes of $250,000 or more and a temporary increase in the sales tax to fund education and balance the state budget, said Ryan Miller, an analyst for the Legislative Analyst’s Office.
Golaszewski said the Legislative Analyst’s Office does not expect to see further enrollment increases at either the California State University or UC systems, and predicts state funding will not increase for either system on the basis of enrollment growth.
Mitchell said the growing numbers of transfer students in the UC could cause enrollment increases, and with it growing costs for the University.
In May, Brown proposed giving the UC up to a 20 percent total increase by 2016-2017. An increase of 5 percent was approved this summer for the 2013-2014 fiscal year.
At its bimonthly meeting in November, the UC Board of Regents voted to request an additional $120 million from the state for the next fiscal year, including money that would go toward paying for the UC’s pension liability.
Brown and Lt. Gov. Gavin Newsom expressed concerns that the UC should not expect the state legislature to grant the University substantial state funding increases in addition to a base increase.
When the UC Board of Regents endorsed Proposition 30 in July 2012 – a rare move because the UC’s governing board typically abstains from engaging in political issues – it did so with the implicit understanding the UC would receive a portion of the funds raised in return for not raising tuition, Mitchell said.
Much uncertainty surrounds the future of California’s finances, as the Legislative Analyst’s Office’s projections can’t take into account unknown future events that could impact the budget, such as another recession, Golaszewski said.
This raises the need for caution with state finances, Golaszewski said. If the nation goes into a recession, Golaszewski said that the surplus could disappear or even become another deficit.
UC spokeswoman Brooke Converse said the University cannot comment on the report at this time since officials have not yet reviewed the projections.