LOOKING INTO THE UC BUDGET  --  Report #2    (e-mail version)

by Charles Schwartz, Department of Physics, University of California
Berkeley, CA 94720.       510-642-4427	          January 4, 1993


An independent study of the University of California's financial 
records reveals an enormous expenditure for administration, and 
estimates that a large portion of this money is being wasted on an 
excessive bureaucracy that has grown steadily over the years.

The total expenditure for administration - central management 
offices set up by the UC President and by the Chancellors on each 
campus - amounted to at least $523,508,000. for the year 1991-92. 
(UC's published financial documents contain ambiguous data which 
implies that the actual total expenditure may be significantly larger.)

This figure may be compared with the amount that UC spent for 
Instruction - $1,635,934,000. - covering the costs of faculty and their 
support staff at the departmental level throughout the University.  The 
total expenditure last year, covering all UC enterprises except for the 
DOE laboratories, amounted to $6,792,044,000.

By examining the record of UCUs budget allocations over a 25 year 
history, this study reveals a persistent pattern of growth in the 
administrative bureaucracy.  Analysis of this detailed numerical data 
leads to the estimate that perhaps one-half of the present 
administration is excess fat that can be trimmed.  A  saving of 
this magnitude - $262 million per year (which averages out to $1600 
per student) - would completely cover UC's present budget deficit.

It is recommended that outside management experts be brought 
in to assess this problem in detail.

Report #1 in this series, dated December 10, 1992, dealt with a single 
administrative unit: the Office of the General Counsel of the Regents, 
which consists of 37 attorneys, plus staff, and spent  $9,174,000  in 
fiscal year 1991-92. Over the past 15 years, this office has grown two 
to three times more than the clientele it is presumed to serve. In 
addition, 7 out of the 12 campuses and major laboratories run by UC now 
have their own legal officer(s) as Assistant Chancellors, etc., while 
there was only one such officer 15 years ago. This indicates a severe 
case of bureaucratic bloat that ought to be questioned.

     While I alone am responsible for everything contained in this report, 
I wish to acknowledge the invaluable help received from a number of UC 
experts.  Donald Alter, Director of Corporate Accounting, and Ralph Young,
Director of Resource Administration, both situated in the Office of the
President, have been generous in giving me instruction and advice on the 
University's accounting and budgeting systems; William Roberts, the 
University Archivist, has been a great help to me in getting hold of 
the needed documents; and a number of other UC staff members have assisted
me throughout this project.  Professor Wallace Smith, of Berkeley's School 
of Business Admninistration, read a draft of this report and gave me his 
very helpful comments and advice.

Charles Schwartz, Professor Emeritus



     Last year the University of California suffered a protracted scandal 
over the issue of excess compensation for its top executives.  In addition,
the severe budget crisis which continues to confront the university 
provides an impetus for all its friends and its critics as well to take a 
thorough look at other areas where money may be wasted. 

     Many people who have been in UC for a long time have expressed the 
belief that the upper management levels have grown unjustifiably large 
and ought to be severely cut back.  President Peltason has recently 
announced that he will apply a 10% reduction in the funding of his office, 
so as to "share the pain" with the university's staff and students who are 
presently being saddled with the burden of making up the budget deficits 
with pay freezes and layoffs and increased fees.

     The question addressed by this study is, Has there been a long-term 
growth in the size and cost of UC's administration which exceeds the real 
needs of the university - its faculty and students - and therefore presents
us with a bloated bureaucracy that ought promptly to be trimmed?


     The University of California's financial system is very complex, and 
its record system is immense.  While formally open to public inspection, 
the several layers of financial records are not readily found or easily 

     Two summary reports are presented each fall by the Office of the 
President to the Board of Regents.  The most recent volumes are:
"The University of California Financial Report 1991-1992," and
"1993-94 Budget for Current Operations" (often called "the Regents' 

     Behind these are two much more detailed documents (computer print-
"The University of California Campus Financial Schedules 1991-1992,"  and 
"1992-93 Departmental Allocations, University of California Budget for 
Current Operations" (in one-volume and two-volume versions.)

     The underlined phrases will be used as shorthand names for these 
documents. These annual reports (with only a few missing)  may be found at 
the University Archives, located in the Bancroft Library on the Berkeley 

     In addition, the UC "Accounting Manual" and the "Planning and Budget 
Manual" provide detailed information that is helpful in decoding these 
financial records.  Advice from a number of knowledgable people on the 
university's staff has also been of great value to me in exploring this 


     In order to study trends over many years, it is best to focus on the 
number of people employed, rather than dollars spent, so as to avoid the 
complications of allowing for inflation.  This leads me to use Departmental
Allocations, which contains details of FTE (full time equivalent) employees
budgeted for the many sub-units of the university.

     The data in these documents are grouped and tallied by function, 
according to a numerical classification code.  The outline of this scheme 
is as follows.

40  Instruction (faculty and supporting staff at the departmental level)
41  Summer Session
42  Teaching Hospitals
43  Academic Support (museums, clinics, labs, shops, academic computing)
44  Research
60  Libraries
61  University Extension
62  Public Service (Arts and Lectures, Cooperative Extension)
64  Maintenance and Operation of Physical Plant
66  General Administration (campus- and system-wide management)
68  Student Services (cultural, recreational, counseling, placement, 
	admissions, health)
72  Institutional Support (campus- and system-wide supervision and services)
76  Auxiliary Enterprises (stores, cafeterias, residences, parking, 
	intercollegiate athletics)
78  Student Financial Aid
80  Provisions for Allocation

     What the document Departmental Allocations presents is not a complete 
budget for the University, but only that portion which is called "permanently 
budgeted." This includes positions supported by State General Funds and other 
funds under the control of the University itself; but it excludes "Extramural 
Funds" - federal and private funding for research and some other sources.

     The data which I will use is that denoted as Current Year allocations,  
compiled at the close of a given fiscal year, on June 30.  Categories 66 
(General Administration) and 72 (Institutional Support) are the ones of 
interest, representing the administrative functions of the university.  
Category 40 (Instructional Staff)  as well as the Total Staff numbers will 
be taken for comparison.

     The document also gives total allocations by "Subaccount Code",  from 
which I select the total of those employees who are on Academic Salaries 
("Academics"), mostly faculty but including teaching assistants and librarians.

     Finally, for further comparison, I take numbers for student enrollments 
each year as given in the Budget document.  These are Actual, Year Average, 
FTE, for students at all levels in General Campus and Health Sciences 
enrollments. [For 1971-72 enrollment data I could not find this particular 
document, so I took data from another source, the "Statistical Summary, 
Students & Staff", adjusted by comparing the two data sources for 1966-67.]


     The raw data on budgeted numbers of total U.C. employees in the selected 
categories and students (as FTE = Full Time Equivalent), from Departmental 
Allocations  and the Budget over 5 year intervals, is presented in Table 1.


YEAR	 Total Staff  Instr.Staff  Gen.Admin.  Inst.Supp.   Academics  Students
1991-92	   68024	21375	     4000	   4629	     16629	156371
1986-87	   61986	19573	     3361	   3959	     15268	141846
1981-82	   57454	17873	     2991	   3441	     14001	127985
1976-77	   52625	16452	     2710	   3137	     13157	119369
1971-72	   41348	14168	     2274	   2826	     11273	 98904
1966-67	   33305	13301	     1795	   1642	      9908	 79293

     I have processed this data to let us see more clearly how much the numbers 
in each category have grown over the years.  See Table 2.

            	Increase over the last 5 years
Students    	*****  10%
Academics   	*****  9%
Instr.Staff 	*****  9%
Total Staff   	*****  10%
Gen.Admin.  	**********  19%
Inst.Supp.  	*********  17%

            	Increase over the last 10 years
Students    	***********  22%
Academics   	**********  19%
Instr.Staff 	**********  20%
Total Staff   	*********  18%
Gen.Admin.  	*****************  34%
Inst.Supp.  	******************  35%

            	Increase over the last 15 years
Students    	****************  31%
Academics   	*************  26%
Instr.Staff 	***************  30%
Total Staff   	***************  29%
Gen.Admin.  	************************  48%
Inst.Supp.  	************************  48%

            	Increase over the last 20 years
Students    	*****************************  58%
Academics   	************************  48%
Instr.Staff 	**************************  51%
Total Staff   	*********************************  65%
Gen.Admin.  	**************************************  76%
Inst.Supp.  	********************************  64%

            	Increase over the last 25 years
Students    	*************************************************  97%
Academics   	**********************************  68%
Instr.Staff 	*******************************  61%
Total Staff   	****************************************************  104%
Gen.Admin.  	******************************:::************************  123%
Inst.Supp.  	******************************:::************************  182%

     First, let's consider the data displayed above for the university's staff 
devoted to General Administration.  The increase in this category is seen to be
about twice the increase in Instructional Staff or Academics, both over the full
25 years as well as in the most recent 5 years.  This finding immediately 
attracts our concern.

     The proper question to ask about the size of the General Administration 
staff, however, is not, Why does it grow faster than the other categories?, 
but rather, Why does it grow at all ?

     As the number of students increases, the number of teachers and 
departmental support staff should increase in proportion; and there may be 
corresponding increases in the need for other staff that perform direct support 
functions for students and other employees.  But this reasoning does not apply 
to the top management.  The theory of large organizations relies on the concept 
of "economy of scale", meaning, among other things, that the size of the top 
management in a hierarchy is not supposed to depend on the size of the 
productive workforce it oversees.

     A familiar phenomenon, however, is the inclination of management in a  
large organization to take on bureaucratic characteristics and to develop its  
own internal growth dynamics apart from the needs of the rest of the  
organization; and it appears that our data makes a prima facie case for a large 
amount of this sort of bureaucratic bloat in UC's General Administration.

     Now turn to the other administrative category, Institutional Support.  The 
growth here parallels that of General Administration over the past 20 years, 
then shows a big jump in the 25 year history.  Many of the services provided by 
this category - such as personnel, accounting, duplicating, purchasing & 
materiel - duplicate, at the campus-wide level, services that are already 
provided within the individual academic departments.  There is probably 
justification for these staff numbers to grow somewhat along with the general 
growth of the university, but the data above shows a considerable excess in 
the actual growth:  182% increase in Institutional Support over 25 years 
compared with 61% growth in Instructional Staff over that same period.

     It should also be remarked that the last couple of decades has seen a 
revolution in office work -the widespread use of computers - and the university 
has invested much in this new technology throughout its administrative offices.  
On this basis, one would expect to see a decrease over these years in the staff 
size for many of the services provided by the Institutional Support category.

     On the other hand, there have been certain new management tasks which 
the university has had to assume in recent decades, and these requirements 
will mitigate the severest conclusion one could draw from the above data and 
analysis concerning unwarranted growth in the university's administration.  

     To conclude this discussion, I should attempt a rough estimate of the 
questionable portion of the university's administrative budget, combining the 
two categories of General Administration and Institutional Support.  Looking at 
the 25 year history, I offer an estimate that 100% of growth in each of the two 
categories is suspect of being "fat" that should be trimmed.  In other words,  

I estimate that perhaps one-half of the present total administrative 
budget of the University of California is unnecessary.

     Obviously, to obtain a complete and authoritative verdict on this charge 
and, more importantly, to pinpoint just where and how deeply the cuts in excess 
administration should be made, will require a detailed investigation by 
independent experts.  This leads to the following.

RECOMMENDATION.   Outside management efficiency experts must 
be brought in to make a thorough assessment of the university's 


     In order to get a full dollar amount for current administrative 
expenditures in the university, we need to look not at the budget document 
used above, but at the accounting document Financial Schedules.  The accounting
category Institutional Support combines both categories 66 (General 
Administration) and 72 (Institutional Support) used in the budget document 
Departmental Allocations.  This larger accounting category, as defined in the 
Uniform Accounting Structure [Accounting Manual, Chapter U-751-17], is 
comprised of five main sub-categories, as follows:

7201  Executive Management (Regents', President's and Chancellors' Offices, 
7203  Fiscal Operations (accounting, auditing, cashiers, contracts & grants 
	admin., insurance)
7205  General Admin. Services (admin.computing, env. health & safety, info. 
	sys., personnel)
7207  Logistical Services (business mgt.,duplicating, transp., mail, materiel, 
	police, telecomm.)
7209  Community Relations (development, public information, publications)

     The separate categories 66 and 72 used previously do not translate neatly 
into these new sub-categories, and indeed there are even variations from one 
campus to another in how the detailed assignments are made.  After considering 
various alternatives, in the light of the discussion in the previous section 
of this report, it seems best to simply take the entire new category 72.

     The tabulation of Current Funds Expenditures By Uniform Classification 
Category (Schedules 1-B  to 10-B  in Financial Schedules ) gives the following 
totals for these sub-categories, for the most recently completed fiscal year, 


				Current Funds		Distribution
Executive Management		$102,186,000		$106,365,000
Fiscal Operations		$ 59,991,000		$ 74,402,000
Gen. Admin. Services		$117,735,000		$231,938,000
Logistical Services		$ 42,140,000		$307,031,000
Community Relations		$ 61,267,000		$ 79,655,000
Other				$  1,026,000		$ 11,430,000

TOTAL      			$394,345,000		$810,821,000

     Two sets of numbers are given.  The second column ("Distribution") is the 
total of the actual expenditures listed for "Salaries and Wages" plus "Other 
Expenditures."  The difference between "Distribution" and "Current Funds" is 
made up by "Transfers", also called Recharges, that is, funds expended by one 
unit but charged to the account of another unit.

     Which number should be used ?  The correct answer lies somewhere between 
the two; but trying to figure out just where would require much more detailed 
data as well as a much more complex analysis. To simplify, and to be 
conservative, I shall simply take the lower number.

     There is one additional category of administrative expenditures that is 
tabulated in Financial Schedules : "Academic Administration" is a sub-category 
of "Academic Support", and it covers expenditures by Deans for their immediate 
offices.  This level of administration stands between the individual academic 
departments and the Chancellor's office on each campus.  For 1991-92 the total
Current Funds Expenditure for Academic Administration was  $129,163,000  and 
the total of the Distribution was $141,132,000.

Thus, our final tally of UC's Expenditure for Administration for 1991-92, 
using Current Funds values, is the following.

	Institutional Support    	$394,345,000 
	Academic Administration		$129,163,000  

			TOTAL		$523,508,000.