LOOKING INTO THE UC BUDGET  -- Report #19a       (email version)

by Charles Schwartz, Department of Physics, University of California
Berkeley, CA 94720.        510-642-4427          January 28, 1997


                             SUMMARY

     Two weeks ago I met with UC's Vice President Larry Hershman, who 
was designated by President Atkinson to provide explanations for several 
criticisms I had raised about the amounts of money spent for 
administration throughout the University of California.  During the 
nearly 40 minutes of discussion I did get some helpful new information 
and several new areas of inquiry were opened up.  These will be 
summarized in the second part of this Report.

    The most contentious issue, which I shall cover first, is the 
continuing question whether UC administrators kept or broke their 
promises, made during the recent years of budget crisis, that budgets 
for administration were being cut more severely than other budgets, and 
that those cuts in administration would amount to at least 27% of their 
previous level.

     I have carried out a new analysis of UC's financial records, 
following a more restricted methodology demanded by Hershman, and I find 
three conclusions that completely contradict the stated claims of UC 
officials:
> The actual total budget cut suffered by UC over the past five years is 
only one-fourth the amount claimed by UC officials; student fee revenues 
have replaced three-fourths of the loss in state funding.
> The largest percentage loss in this budget was suffered by 
Instruction.
> Within this "General Funds" budget, administration has not been cut at 
all.



          Where are the Promised Cuts in Administration?

     When I raised the complaint, "Where are the promised cuts in 
administrative spending?", in 1993, 1994, 1995, the response that I 
received in letters from Budget Director Hershman was that these cuts 
were in the process of being "phased in" and that is why the numbers I 
quoted at that time - actual expenditure data from UC's own accounting 
reports - did not yet show the promised cuts.  In this recent meeting 
that excuse was never mentioned.

     When I pointed to the updated figures on total expenditures for 
Institutional Support through fiscal year 1995-96, listed in my Report 
#19, Hershman had an entirely new response. 

------------------------------------------------------------------------
CS:  ...  Now, let's go on to the other topic.
LH:  OK
CS:  That is, the promised cuts in Institutional Support Expenditures, 
that were made during the midst of the recent budget crisis.That is a 
major topic, we have had a lot of discussion on it before.
LH:  Every campus reports to us as we have asked for these reports that 
that is exactly what they have done.  And they have all cut 
administration more, in terms of real cuts.
CS:  Show me the figures on that.  Because the figures that I looked at 
in this book, in your own accounting book ... campus by campus, all I 
see are increases.
LH:  Because you are mixing up inflation and other kinds of things in 
it.  In terms of real cuts, permanent real cuts out there in 
administrative budgets.That's what the campuses report to us they have 
done.
CS:  I want to see the numbers.
LH:  OK
CS:  Here are the numbers of the actual spending results. ... Now I can 
take these 3 or 4% inflationary figures off of that and then we will see 
how much they went down.  The point is, there were these claims and 
promises made to the regents, made to the public, in your own 
documentation, and I have cited this many times, 27% reduction was 
claimed in 1994, in the Institutional Support area.
LH:  As a percentage
CS:  That was not stated as a percentage of overall expenditure. That 
was stated as 27% of the expenditures for administrative services.  And 
those cuts, I have asked you about year and year again.  They are 
nowhere to be seen in the data.
LH:  Those cuts relate to the General Fund part.  While other parts of 
the budget have gone up, they have to deal with the workload related to 
that.  But on the General Fund part, related to how we took the cuts in 
the General Fund, we had 400 million dollars of cuts to take.  The 
campuses have all reported to us that they have disproportionately taken 
cuts in administration.
CS:  Out of the General Funds part.
LH:  Well of course,
CS:  Is that what you tell me?
LH:  Yes.
CS:  OK. So they have not reduced spending. They have just replaced 
student fee money and other monies [for the lack of state money]
LH:  No, these are real cuts.  I am not talking about student fees.  
That's a General Fund thing too from our point of view.  No, these are 
real
CS:  So, you are agreeing with me.
LH:  No, I am not agreeing with you.  I am absolutely disagreeing with 
you.
CS:  Then where has the money come from?
LH:  I have said all along that the state General Fund part of our 
budget was cut and Institutional Support has been cut 
disproportionately to that on every single campus.  That is what they 
report to us.
CS: But you haven't cut spending you have just taken money from one pot 
and moved it to another
LH:  They haven't cut spending on federal contracts and grants, that 
hasn't gone down.  They didn't cut spending related to hospitals, that 
didn't go down.  They didn't cut spending as it related to auxiliary 
enterprises, that didn't go down. They reduced it related to General 
Funds.  The state.  That's where we made the cuts, on the state General 
Funds.
CS:  What a fraud.  What an absolute fraud
LH:  That is not.  You know, You don't know what you are talking about.  
Now you are going to get me angry here.  I don't want to get angry.
CS:  I am quite angry myself.
LH:  What I said all along is that the General Funds part of the budget, 
that's where the cuts were made.  The state cut our budget.  And we made 
400 million dollars worth of cuts.
CS:  Larry, we had many letters back and forth on exactly this topic; 
I've got them in my file, I refer to them in my reports
LH:  And everything I said in those letters is correct
CS:  And you never said, you never said that this was just the General 
Funds part.
LH:  That is what got cut.
CS:  You never said that in any of your letters.
LH:  Of course I did, that's what we cut, was the General Funds
CS:  It's not there, It's not there in your letters.
LH:  You think we cut federal funds? Did we make cuts related ... to the 
federal funds?
CS:  You couldn't make cuts on federal funds.
LH:  OK We didn't.  We didn't make cuts on auxiliary enterprises, did 
we?  All the cuts were made on the General Fund.  That's where the 
budget cuts occurred.... We never told anybody we were cutting federal 
money.  We never told anybody
CS:  You told everybody you were cutting expenses for administration.
LH:  And we did.  For that part of the budget related to the General 
Fund.
CS:  What a double talking lie that is !
LH:  What are you talking about?
CS:  You promise you are going to cut expenditures
LH:  You know something, I am not going to have a conversation
CS:  And then you are cutting only the portion that is funded from this 
pot 
LH:  That is what we did cut
CS:  but you don't say that you are replacing it with money from another 
pot.
LH:  No, I didn't say we are replacing it.  I never said. No I didn't.
CS:  The overall spending for Institutional Support has not gone down.
LH:  I said  the federal funds were going up and there were costs 
related to federal funds going up.  That's one thing you could look at.  
On the General Fund part, that's where we made our cuts.  Those were 
real cuts, on the General Fund part. Real cuts.
CS:  Show it. ...  Show me how the expenditures have gone down for 
Institutional Support.
LH:  Those were real cuts related to General Funds. 
------------------------------------------------------------------------

     What we were arguing about is, Which numbers should one look at in 
discussing the budget cuts in administration?  We both look at the 
accounting category called Institutional Support (IS) but we disagree on 
what part of this to look at.  In all my previous Reports on this topic 
I took the Total Expenditure of Current Funds for Institutional Support 
(and sometimes added in the Transfers/recharges in that category.)  
Hershman never criticized my choice of that data before and he had 
plenty of opportunity to do so. Now he says that only the General Funds 
portion of this expenditure for IS is relevant and claims that this has 
been his position all along. 

     I have reviewed all of Hershman's past letters to me on this 
subject: they are dated 1/14/94 (4 pages), 11/8/94 (5 pages) and 1/13/95 
(2 pages); and I find no mention anywhere of General Funds.  I looked in 
past issues of the Regents Budget document and found varying statements.  
The one dated October 1993, on page 94, reports some administrative cuts 
from "the General Fund budget" and other administrative cuts coming 
"from all fund sources," and makes the following statement on budget 
cuts:  "By 1994-95, the University estimates that Institutional Support 
budgets will have been cut by about 25% overall." 

     Rather than just fighting over who said what and when, let me now 
take Hershman's position - separate out the General Funds portion - and 
see what the numbers have to tell us.  The University's published 
accounting tables include a consolidated display of annual expenditures 
by category and by fund source.  See Table 1, below.


Table 1.   Total UC Expenditures from General Funds and from 
                         Tuition & Fees                ($ in Millions)

Fiscal Year       89-90   90-91   91-92   92-93   93-94   94-95   95-96

General Funds     2,238   2,295   2,175   2,000   1,853   1,867   2,029
Tuition & Fees      372     406     492     640     704     821     821

Add GF and T&F    2,610   2,701   2,667   2,640   2,557   2,688   2,850

[Source:  UC Campus Financial Schedules; Schedules 11-D]


     Table 1 presents the gross data on UC expenditures of General Funds 
over the years 1989-90  to 1995-96. From a high of $2.295 Billion in 
fiscal year 1990-91 the expenditures of General Funds fell to $1.867 
Billion in 1994-95 - a drop of $428 million.  This fact is well known 
and incessantly proclaimed by UC officials.  The latest issue of the 
Regents budget says, "Due to the State of California's fiscal problems, 
the University experienced severe budgetary shortfalls during the early 
1990s.  As a result, University budgets were cut by $433 million, or 
about 20 percent of the 1989-90 State-funded budget." The budget 
document repeats this statement, in varying form, a dozen times.  The 
data in Table 1 confirms the large drop in state funding to UC - that 
fact is not in dispute.

     However, it is also well known that student fees at UC were raised, 
raised dramatically, in order to replace, in part, that loss of funds 
coming from the state.  Our purpose here is to look at that replacement 
quantitatively.  If Hershman really meant to claim that the $433 million 
loss in state funding resulted in that same magnitude of actual budget 
cuts, then he is talking nonsense.  I am sure that what he meant to 
claim was that the shortfall in state funding, after being partially 
made up by funds coming from increased student fees, still necessitated 
large cuts in the portion of the budget that was previously funded by 
the state General Funds.  We shall now look at available numbers that 
can illuminate this question; and this requires some care.  The data on 
total UC expenditures from Tuition & Fees, shown in Table 1, must not be 
taken at face value.  Comparing this data for 1990-91 with that for 
1994-95 shows an increase of $415 million, almost entirely cancelling 
out the decrease shown in General Funds.  But there are significant 
components of Tuition & Fees that should not be counted in this study of 
budget cuts - for example, fees paid to University Extension or the 
amount of student fee income which is turned around and paid out as 
financial aid.  

     To see how confused this matter can become, look at Table 2, which 
lays out the actual expenditures for Institutional Support 
(administration) on the Berkeley campus over these recent years.  Note 
what happened in the year 1992-93: almost all of the General Funds money 
for IS was replaced by Tuition & Fees money.  The following year, the 
pattern was reversed again.  These fluctuations are only an artifact of 
UC's bookkeeping system as large blocks of new money from student fees 
were added.

Table 2.      UCB Expenditures for Institutional Support - 
                    Selected Fund Sources               ($ in Millions)

                   89-90   90-91   91-92   92-93   93-94   94-95   95-96

Total Expend's      57.2    59.0    58.8    57.0    53.8    61.4    68.2

from General Funds  34.2    36.4    28.8     4.0    32.8    38.4    38.3
from Tuition&Fees    3.3     4.3    11.0    38.7     5.7     5.0     4.1

add  GF + T&F       37.5    40.7    39.8    42.7    38.5    43.4    42.4

[Source:  UC Campus Financial Schedules, Schedules 1-C and 1-D]


     Fortunately, in the last couple of years the University's budget 
and accounting departments have smoothed out this problem.  In the 
latest issues of Campus Financial Schedules one finds entries named 
"Educational Fee Expense Proration" (EFEP), which accounts for money the 
University receives from student fees and then explicitly designates to 
replace General Funds money in the areas of Instruction, Academic 
Support, Student Services, Institutional Support, and Operation and 
Maintenance of Plant (OMP).  Henceforward, when I speak of General Funds 
expenditures, it will be understood to include this EFEP, which was a 
total of $340 million last year.  Confirming this methodology, the 
latest Regents budget, on page 156, states: "In 1996-97, State General 
Funds and Educational Fee income totaling $269.8 million are budgeted 
for the operation and maintenance of the University's physical plant"; 
and the accompanying table shows "General Funds  $269,807,000."  As I 
said, this regularization of the accounts is a recent thing, and so I 
cannot show meaningful data for the intermediate years, as done in the 
previous Tables.  I will instead show comparisons for only two years:  
1990-91, the highpoint of UC expenditures before the budget crisis, and 
1995-96, the most recent data available.

     Table 3,  below, shows the facts of how the amount and the pattern 
of UC expenditures of General Funds (state appropriations plus the 
contributions of student fees designated as replacement for state funds) 
have changed from before the budget crisis to today. At the bottom of 
Table 3 one sees that the total dollar expenditure of General Funds has 
actually gone up, from $2.295 Billion to $2.369 Billion, or about 3%, 
over this five year interval.  As Hershman has pointed out, one must 
correct this data for inflationary increases in order to make this 
comparison.  I estimate this adjustment at 8%, covering the two fiscal 
years 1994-95 and 1995-96 in which the UC budget allowed such increases.  
Thus, the real change in UC's total expenditures of General Funds 
amounts to a decrease of only 5%.   Without counting the contribution of 
student fee money and just looking at the reduction in state funding, 
the overall budget reduction was 20%, as cited earlier.  Thus we learn 
the hitherto unspoken fact that increases in student fees have replaced 
three-fourths of the reduction in state funds!   Compare this fact with 
the information usually presented, for example, on page 7 of the latest 
Regents Budget, which asserts that increases in student fees made up for 
only one-fourth of the shortfall in state funds.

Table 3.    UC Expenditures of General Funds - Distributed by Function
                                                       ($ in Millions)

                      1990-91    %        1995-96*   %       Change in %   

Instruction           1116.3   48.6%      1099.6   46.4%       - 2.2
Research               175.8    7.7%       168.4    7.1%       - 0.6
Public Service          50.7    2.2%        43.9    1.9%       - 0.3
Academic Support       364.8   15.9%       386.7   16.3%        +0.4
Teaching Hospitals      58.0    2.5%        41.9    1.8%       - 0.7
Student Services        11.8    0.5%        69.5    2.9%        +2.4
Institutional Support  256.5   11.2%       307.0   13.0%        +1.8
Op.& Maint. of Plant   253.7   11.1%       243.6   10.3%       - 0.8
Student Financial Aid    7.5    0.3%         8.3    0.4%        +0.1
Auxiliary Enterprises    0.1    0.0%         0.1    0.0%         --

    Total             2295.1    100%      2369.0    100%

* Includes Educational Fee Expense Proration
[Source:  UC Campus Financial Schedules, Schedules B and 11-D]


     There is considerably more interesting information in Table 3. Look 
now not at the total expenditure of General Funds but at how that 
expenditure is distributed over the standard 10 categories of operating 
functions within the university.  Instruction gets the largest portion; 
almost half of the General Funds budget pays for faculty salaries and 
the departmental support for this basic academic mission of the 
University.  But look at how the percentage going to Instruction has 
changed from before the budget crisis to after the budget crisis:  it 
went from 48.6% to 46.4%, a drop of 2.2 percentage points. And this is 
by far the largest decline in share of all the categories shown in Table 
3.  (For this comparison one does not have to include any adjustment for 
inflation.)

     This is a another startling revelation.  Throughout the course of 
the budget crisis, UC's leaders declamed repeatedly that the academic 
program was to be given first priority and that budget cuts would be 
made preferentially elsewhere.  Not true.

     Furthermore, those same UC leaders repeatedly promised that 
administration would receive the largest portion of budget cuts. Look at 
the expenditures for Institutional Support, shown in Table 3:  it went 
up, from 11.2% to 13.0%, showing the second largest increase in 
percentage points of all the items listed in the table. This conclusion, 
reached by following Hershman's new proclamations about what to count 
and what not to count about administrative budgets, is in full 
contradiction with his claims.  There is still more of interest in 
Table 3, but right now I want to pursue more quantitatively this central 
question of budget cuts in the UC administration.

     The most definitive UC document on the details of budget cuts is 
the February 1994 report by the Office of the President to the Board of 
Regents, "Program Impact of Budget Reductions 1990-91 through 1994-95."  
The reports from each of the campuses were typically stated as follows: 
"The permanent budget cut in central administrative and support services 
is equivalent to X percent of the 1990-91 State and fee funded base 
budget for these activities."  The overall (weighted) average of X was 
27%; this is the "promise" number that I have repeatedly quoted.  Let's 
follow this formulation. In Table 4, below, is the official data on 
actual expenditures for IS when limited to funds from these two sources: 
General Funds and Tuition & Fees. (For IS expenditures, there is an 
insignificant difference between using total Tuition & Fee data and 
using the EFEP data in the most recent year.)

Table 4.     UC Expenditures for Institutional Support - 
                     Selected Fund Sources              ($ in Millions)

                  89-90   90-91   91-92   92-93   93-94   94-95   95-96

Total Expend's    369.7   393.9   394.3   384.7   387.7   407.4   454.3*

fr.General Funds  249.8   256.5   250.6   210.1   222.1   231.9   268.0
fr.Tuition&Fees    20.3    28.5    34.6    65.1    38.2    45.2    40.3

add GF+T&F  ===>  270.1   285.0   285.2   275.2   260.3   277.1   308.3

as a % of Total IS  73%     72%     72%     72%     67%     68%     68%

[Source:  UC Campus Financial Schedules, 11-D]
* Adjusted for Insurance Expense Accrual - as suggested by L. Hershman

     What they promised was a reduction by 27% from the 1990-91 
expenditure charged to General Funds plus Tuition & Fees.  Look at the 
row in Table 4 with the arrow.  The reference number is $285 million and 
a 27% reduction from this base would yield $208 million.  Here, we do 
need to make an adjustment for the inflationary increases.  So the 
number 277.1  for 1994-95 should be reduced by 4% to  $266 million; and 
the number 308.3 for 1995-96 should be reduced by 8% to  $285 million.  
Now we are properly prepared to look for the promised target of $208 
million.  Can't find it.

     The lowest point in this history of IS spending, limited to the 
General + Fee - funded portion, occurred in 1993-94, when the number got 
down to $260 million, less than one-third of the cut promised.  And by 
last year, this portion of IS expenditures, after being adjusted for 
inflation, had risen right back up to the 1990-91 level.  The net cut is 
ZERO.

     Vice President Hershman stated, again and again, that there were 
real cuts, permanent cuts, in this portion of the University's 
administrative budget.  I have followed his wishes on how to treat the 
data; and the numbers shown here prove him 100% wrong.  What Hershman 
has accomplished by insisting that I look only at this limited data is 
that the dollar magnitude of the scam is reduced from the approximate 
figure of $100 million, given in my Report #19, to a mere $77 million; 
but remember that this amount of default accumulates each year.

     Mathematicians write QED when they have finished proving something.  
I think that inscription is appropriate here regarding my previous 
charge that UC's administrators have been perpetrating a major fraud 
regarding their own budgets.


                    OTHER  TOPICS  DISCUSSED

 A.    On the question of the $66 million jump in expenditures for 
Institutional Support in 1995-96 I was told that there were two big 
nonrecurring items that accounted for this. One was insurance: the 
University has been told by its actuaries to make allowances on its 
books for future increases in liability.  There was a $19.3 million 
entry in the IS accounts (not from General Funds) which Hershman 
described as a non-cash expense and said it should be deducted before 
any comparisons are made (see Table 4.)  We discussed UC's overall 
insurance expenditures and I asked for more details.

B.     The second multi-million dollar special expenditure was described 
as an "investment in technology" for the administration.
------------------------------------------------------------------------
LH:   [P]art of our productivity improvements that we have committed to 
do, involves an investment in technology. And all the campuses are 
telling us that they have had to make temporary cost increases here in 
order to make an investment in technology so that they can get long term 
productivity savings, particularly in computing and that sort of thing, 
OK? So I think you are going to see some, and we pointed that out in our 
report to the regents on productivity, we have another report coming out 
for the regents on productivity
CS:  Is there any detail on this?  Is there a plan that someone has 
worked out on how
LH:  Each campus has their own.
CS:  Each campus has their own. Can you get me copies of some samples of 
those?
LH:  We'll give you our productivity report.
CS:  Because, you know, if it's just throwing money at people and 
saying, Here, improve your productivity, that's something 
LH:  No, we're not throwing money.
LH:  I wouldn't expect you to do that. So I would like to see what the 
plans are.  How much money is supposed to be spent, what it is supposed 
to achieve.
LH:  We'll give you the productivity report.
CS:  I am skeptical.
LH:  Well, that's OK.  One does have to make an investment in technology 
to get these savings.  I just want to make that comment.
CS:  But, that's not new.  That's been going on for decades.  There is 
always improvements in technology.
LH:  Yes, but it's been a lot more in recent years.
RY:  You have some campuses that are buying new financial systems.
CS:  Well, campuses have been buying new financial systems for decades.
RY:  No.
LH:  True.
CS:  Some have not kept up perhaps.  See, it's that level of detail that 
I would like to see instead of this vague theoretical statement. Because 
I am skeptical about that.
LH:  Well, we do report, we are doing a report every year on 
productivity. You can read that report.
CS:  I have seen them.  They are very blah.
LH:  OK.  Well, they are better than anybody else is doing, I have to 
tell you. I have read other productivity reports that
CS:  I have no doubt that there are a lot of bullshit reports put out by 
management organizations all over the world.  But, you know, I see a 
huge hunk of money going in that direction, at a time when lots of other 
parts of the University are concerned, and so I am asking for details.  
That's what I am asking for.
LH:  OK, That's why we do that report and we provide a lot of detail.
------------------------------------------------------------------------

C.     Defending the rise in total IS expenditures, Hershman made 
repeated reference to federal funds.
------------------------------------------------------------------------
LH:  All of our cuts were on General Funds. It didn't have anything to 
do with federal money, it didn't have anything to do with private money, 
it didn't have anything to do with any other kind of money.  All of our 
cuts were in the General Fund.
CS:  This means that more of other kinds of unrestricted funds within 
the university have been directed ... to Institutional Support.
LH:  No
CS:  Yes
LH:  No, you're not listening to me.  That is not true. I just told you 
that Institutional Support as a proportion of the total is going down.
CS:  No, I am sorry.  I am saying something else. ...
LH:  Your math doesn't work.
CS:  Why don't you shut up for a minute and listen to what I am saying.
LH:  It doesn't work and I have to leave ...  go to Sacramento.
CS:  What I am saying is, if you look at the distribution of funds that 
go into Institutional Support, the proportion of sources has sharply 
varied.  The General Funds portion of Institutional Support spending has 
certainly gone down, what's gone up is student fee component, endowment 
[funds] component, other funds component.  By the way. I'd like to get a 
breakdown of the huge amount of money going into Institutional Support 
that comes from other sources, not specified.  It's a huge amount and 
I'd like to get some details to know where that money is coming from.
LH:  Any other topics?  Before I go to Sacramento here.
------------------------------------------------------------------------

     Let's first look at some more data on this topic, going beyond the 
General Funds and Fees part that we have already studied.  See Table 5.

Table 5.    UC Expenditures for Institutional Support - 
                   Detailed by Fund Sources          ($ in Millions)

                       1990-91           1995-96

General Funds           256.5             268.0
Tuition & Fees           28.5              40.3
Other Gov't               1.2               2.2
Private Sources          45.1              43.3
Enterprises               0.7               3.5
Other Sources            54.0             102.5
Reserves                  8.0              13.9

Total Expenditures      393.9             473.6

[Source:  UC Campus Financial Schedules, 11-D]

     The data for 1995-96 in Table 5 have not been adjusted for 
inflation or for the insurance accrual item.  The purpose of this 
display is to identify where other large components of IS funding come 
from.  "Private Sources" means Private Gifts, Grants and Contracts and 
also Endowment funds.  I think there are very very few donors who give 
the University of California gifts of money expressly for the purpose of 
supporting administrative operations. This money (over $40 million/year)
probably comes from the pool of unrestricted gifts and other 
discretionary funds.  This is a very important pot of funds in any 
university, allowing Chancellors and Presidents to encourage all kinds 
of innovative academic endeavors.  My question is, Why is so much of 
this discretionary pool siphoned off to administrative budgets?  Then 
there is the mystery of "Other Sources" (over $100 million) which I 
asked Hershman to explain in detail.

   Now, let me try to respond to Hershman's repeated claim that 
increases in federal funds coming into UC justifies the increase in IS 
spending.  The total Research component of UC's overall financial 
activity certainly has increased through this period:  $1.170 Billion in 
1990-91  and $1.518 Billion in 1995-96.  It is plausible that this 
increase might necessitate some increase in administrative expenditures 
to support this activity.  But how much?  Hershman offered no numbers.  
Looking through the Financial Schedules I was able to identify one 
category of expenditures that directly relates to outside (mostly 
federal) funding for research:  Contracts and Grants Administration, 
which is a line item under Institutional Support/Fiscal Operations.  In 
1990-91 this item accounted for the expenditure of  $11.9 million, or 
3.0% of the IS total; and in 1995-96 it was $14.7 million, or 3.1% of 
the IS total.  There is very little here to support Hershman's claim.

D.     Another topic that arose:
------------------------------------------------------------------------
LH:  There are a lot of factors involved in how much administrative cost 
you have.  ...   Look at the legal costs.  You raised the legal cost
CS:  uh hu
LH:  All of a sudden you have got everybody out there suing for this, 
that and the other thing.  That's what's happened to the whole society.  
That costs money.
CS:  I want to see where that cost is in the accounting system, so I can 
make that kind of adjustment and correction.
LH:  I am telling you, look at the court system.  You look at how the 
regents are engaged in litigation continually, where somebody is coming 
in and suing us.  That is a cost.
CS:  I am asking that you quantify it, Larry. Get me the numbers.
LH:  We can show you what the General Counsel's budget was, how many 
lawyers we had at one point how many lawyers we have now. It's gone up a 
lot.
CS:  I have pointed out that myself in my very first report. 
LH:  OK
CS:  I think they are doing lots of featherbedding there.
LH:  I don't think its featherbedding.  People sue us.  If you don't 
believe that people sue us, then you are not looking at what's going on.
CS:  I don't doubt that people sue us.  The question is how that 
business is handled.
LH:  It is handled by lawyers,
CS:  Yes, thank you, exactly.  And who looks
LH:  Somebody out there hires a lawyer and we need to have a lawyer to 
defend the interests of the university.
CS:  Who looks, from a critical outside perspective, at the efficiency 
of the operation of the General Counsel's Office?  [silent pause]  The 
answer is, nobody.  Nobody ever has, it's never been done.
LH:  That isn't correct. They have to go and defend their budgets to our 
vice president for administration, here in the Office of the President.  
Just like campuses have to go and defend their budgets.
CS:  Good. I am requesting the documentation for that.
LH:  There is a system for reviewing budgets on every single campus
CS:  I would like to see the documentation.
LH:  People make decisions about budgets on every campus.  That's what 
we have Chancellors for and in the Office of the President we have a 
vice president for business and administration, Wayne Kennedy, ... who 
reviews the budgets here.
CS:  I am making a specific formal request.  I am asking for the 
documentation on the budgetary review of the General Counsel's Office.  
Now you may want to forward that request to someone else.  That is a 
formal and specific request
LH:  Of course I would have to forward it to someone else.
CS:  Yes, it's been submitted.  Now, let's go on to the other topic.
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E.     If we look back at Table 3 and ask which other categories, aside 
from IS, gained in their percentage of General Funds expenditures over 
the past five years, we see it was Student Services and Academic 
Support.  The number shown for Student Services in 1995-96 is really a 
mirage, since this is all paid for by student fees, with no state funds 
at all.  Looking into the Academic Support category, on the other hand, 
gave some interesting results.  The largest subcategory here is 
Libraries, which, now at $154 million, has risen by $7 million since 
1990-91; the next largest subcategory is Academic Administration 
(covering the expenditures of the immediate offices of Deans on each 
campus) and this expenditure, now at $121 million, has risen a 
surprising $19 million.  Once again, examining the numbers in detail 
reveals much about the true priorities of those in charge of UC's 
finances.

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I have made a transcript of the tape recording of the entire meeting; it 
is 14 pages long and available in hard copy ($1 please) or via email. 
Send requests to  schwartz@physics.berkeley.edu.
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The UC publication Campus Financial Schedules is now available online, 
along with the UC Financial Report,at www.ucop.edu/ucophome/cao/reports/