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

by Charles Schwartz, Department of Physics, University of California
Berkeley, CA 94720.       510-642-4427	          January 19, 1993


This paper concerns the first round of reactions to Report #2, which 
made the case that the University of California is burdened with an 
overgrown bureaucracy, wasting perhaps half of the $523,508,000 
spent last year on central administration.

Correspondence with UC President Jack Peltason is examined and 
leads to further insights.   New data is presented which shows that by 
far most of these administrative expenditures come from "General 
Funds," appropriated by the state and  allocated at the discretion of 
the Regents.

In addition, a constructive confrontation with the UC Board of Regents 
over this issue  is reported.

While many detailed questions about UC's "bureaucratic bloat" need 
still to be examined, this first interchange appears to bolster the 
charge that something is seriously askew in the university's financial 


						January 3, 1993
Dear President Peltason;

     Enclosed is my newest work, "Looking into the UC Budget - Report #2," 
which questions the legitimacy of hundreds of millions of dollars in annual 
expenditures by the UC administration.

     I ask that you invite me to present this report to the Board of Regents 
for discussion at their January 14-15 meeting at UCLA.  This subject matter is 
certainly germane to ongoing considerations of the University's finances; I 
will leave it to you to pick the appropriate point on the Regents' agenda for 
this discussion.

     It is unfortunate that you rejected my previous request to discuss related 
materials with the Board at their December meeting - my proposals for opening 
up the university's administrative decisionmaking process, and Report #1 in my 
ongoing series of budget critiques.  Please be reminded that I prefer to work 
cooperatively within the University, but that requires your willingness to open
up the now exclusive procedures of the administration.

     Of course, if you or your staff find any matters of fact or interpretation 
in my Report with which you disagree, I would be happy to sit down with you and
consider your criticisms in detail.

						Sincerely yours,
						Charles Schwartz
						Professor Emeritus



						11 January 1993
Dear Professor Schwartz:

I am writing on behalf of President J. W. Peltason to respond to your request 
to present your budget report at the January 14-15, 1993 meeting of the Board 
of Regents.

The University's budget is developed through extensive consultation with the 
Chancellors, Vice Presidents, and the Academic Council.  Your proposal does 
not treat the many complexities that are considered in the preparation of the 
University's budget (such as source of funds), and it is not feasible to assign 
staff the task of preparing a detailed critique of your document, particularly 
prior to the Regents' meeting.  Consequently, we are unable to devote time to 
your topic at The Regents' Meeting.

Thank you for your enquiry.

						Janet E. Young
					Special Assistant to the President


     The most striking aspect of the foregoing letter is that the UC President 
does not dispute or question any specific fact, allegation or interpretation 
contained in my Report #2; nor does he deny or reject the conclusions contained
in that study.  The letter makes only two points regarding the Report, and I 
shall examine them.

     First is the mention of extensive consultation with the Chancellors and 
Vice Presidents through which the University's budget is developed.   Logically,
this information is irrelevant to the question of whether the administrative 
budget is a bloated one or not.  However,  it does point a finger to the 
responsible parties if indeed there is something wrong with that budget; and 
this assignment of responsibility serves to bolster the theory that the top 
administrators of the university - those very Chancellors and Vice Presidents -
have used their influence in shaping the UC budget to feather their own 
bureaucratic nests.

     The second point in the letter from the president's office is the criticism
that my work "does not treat the many complexities that are considered in the 
preparation of the University's budget"; and indeed this is true.  But this is 
not a meaningful objection until some specific neglect on my part is pointed 
out: and this is done in the parenthetical phrase mentioning the "source of 
funds."  Now we have something substantial to look into.

     The money that the University spends each year comes from a multiplicity of
sources; and the accounting system keeps track of where each dollar comes 
from and where it goes.  The annual UC document, "Campus Financial 
Schedules," gives a quite detailed summary of this information; and in the 
following section I present the relevant data, gathered for the last complete 
fiscal year 1991-92.


This is defined as the sum of spending in two accounting categories:
"Institutional Support"  and 
"Academic Administration" (a subcategory of "Academic Support")

The SOURCES OF FUNDS for these expenditures are detailed as follows:

		General Funds..............	$354,477,000		68%
		Designated Funds...........	$136,487,000		26%
Sub-Total of Unrestricted Funds............	$490,964,000		94%

Restricted Funds..............................	$ 32,544,000		 6%
			TOTAL.................. $523,508,000	       100%

     "Unrestricted Funds" are those over which the Board of Regents has complete
control as to how they are spent.  There are two sub-classes of unrestricted 
"General Funds," composed of the State's lump sum annual appropriation to UC, 
plus University contributions to the State's General Funds appropriation, 
according to prior agreements - mostly Nonresident Tuition and a portion of 
Contract and Grant Overhead; and
"Designated Funds," all other income whose allocation is under the Regents' 
control - Student Fees, income from Teaching Hospitals and other Auxiliary 
Enterprises, etc.
(For more details, see the Table "Income and Funds Available" at the back of 
the annual Regents' Budget.)

     "Restricted Funds" are those from an outside source, such as the Federal 
Government or private donors, where the purpose of the funding is specified by 
the donor.

CONCLUSION:  Ninety-four percent of UC's annual expenditures 
for administration comes from sources of funds which are 
completely controlled by and spent at the discretion of the UC 
Board of Regents.

     Thus, the one attempt made in the President's letter to deflect or blunt 
the thrust of the conclusions in Report #2 has led to an even stronger case 
against the University administration for the misuse of public money.

     This question of the sources of funds arises repeatedly when the University
is challenged on its budget priorities.  At the January 15 meeting of the Board 
of Regents there was discussion of various options to deal with next year's 
budget deficit.  As reported in  The Daily Californian (January 19, 1993, pages 

     Tobin Fried, a UC Santa Cruz senior and president of the University of 
  California Student Association, addressed the regents Friday, offering 
  suggestions on how to maintain student access to the university in light of 
  the budget crunch.
     "There is room for administrative reconfiguration which will cut costs 
  without sacrificing the integrity of the University," Fried said.
     But Regent Designate Roy Shults said, "Money that is spent under 
  administration goes for essential functions."
     Regent Roy Brophy said the debate over what should be cut is a result of a 
  misunderstanding of UC's budget.
     "We have to explain where our money comes from and where it is spent. They 
  don't understand the non-transferability of the money to different funds," he 

     The data presented above directly contradicts Regent Brophy's statement. 

     As a matter of general interest I have appended to this report a table 
summarizing all the major categories of the university's Expenditures and all 
the major Sources of Funds.  This data is taken from Schedule 11-D of "UC 
Campus Financial Schedules 1991-1992."



     Although President Peltason turned down my request to speak to the 
Regents, I mailed each one of them a copy of Report #2 and then took myself 
down to the UCLA campus where they met on January 14.

     At the end of the Board's discussion of increasing Student Fees and 
inadequate Financial Aid, I attempted to present my Report #2 - acting as a 
dutiful "whistleblower" - but the regent in the chair (Brophy) turned off the 
microphone and called a five minute recess.  When they reconvened, Regent 
Hallisey made a motion that I be allowed to present my report; but his effort 
died for lack of a second.

     Later that afternoon, at the end of the session of the Regents' Committee 
on Finance,  Hallisey made the motion again, this time getting it seconded by 
Regent Campbell. Surprisingly, no other Regent objected and I was given five 
minutes.  Thus, the Board of Regents has now been presented formally with the 
allegation that the University of California is wasting great amounts of money 
on a bloated bureaucracy that has gone unchecked for decades.  This is money 
that is sorely needed right now to maintain the University's primary academic 
mission and to preserve students' access to an education at UC. I charged the 
members of the Board to recognize their responsibility and to undertake a 
serious and thorough investigation of this problem of administrative bloat.  
I also urged President Peltason to work with me on these issues, which are 
undoubtedly going to be of interest to the Legislature as the UC budget for 
next year comes up for hearings.

     Concluding my presentation to the Board, I asked if they had any questions. 
Regent Campbell had one question about some data shown on a graph I had 
handed out; but aside from that, there was utter silence.


University of California   Campus Financial Schedules 1991-1992
Schedule 11-D (condensed)
Current Funds Expenditures by Uniform Classification Category by Fund Source  
(Dollars in Millions)

EXPENDITURE			General	Tuition	Federal	State	Local
CATEGORY		Total	Funds  	& Fees	Gov't  	Approp.	Gov't
Instruction           $	1,636   1,082     155      40      16      4
Research		1,263	  169	   --	  705	   89	   9
Public Service	   	  148	   46	    4	   22	   19	   8
Academic Support	  642	  296	   76	    9	    9	  39
Teaching Hospitals	1,539	   57	   --	    1	   --	  --
Student Services	  229	   28	  150	    4	    2	   1
Institutional Support	  394	  251	   35	   --	    1	  --
Op. & Maint. of Plant	  268	  240	   17	   --	    1	  --
Student Financial Aid	  274	    7	   52	  104	   51	  --
Auxiliary Enterprises     399	   --	    3	   --	   --	  --
               Total  $ 6,792	2,174	  492  	  887	  189	  61


			Private	  Endowm.     Sales &
EXPENDITURE		Gifts &	  &Similar    Services  Other	 Re-
CATEGORY		Grants 	  Funds       of ***    Sources	 serves
Instruction            $    25	    17	       273	   22	    1
Research	  	   207	    38	        35	   10	   --
Public Service	    	    10	     3	        31	    6	   --
Academic Support	    15	     9	       167	   18	    2
Teaching Hospitals	     1	    --	     1,479	   --	   --
Student Services	     3	     1	         3	   35	    2
Institutional Support	    18	    13	         1	   65	   10
Op. & Maint. of Plant	    --	     5	        --	    4	    1
Student Financial Aid	    29	    21	         6	    3	   --
Auxiliary Enterprises        3	    --	       389	    2	   --
                Total   $  313	   107	     2,385	  166	   18

*** combines:
Sales and Services of Educational Activities
Sales and Services of Auxiliary Enterprises
Sales and Services of Teaching Hospitals

(Sums may not tally due to rounding.)