LOOKING INTO THE UC BUDGET -- Report #7 (e-mail version)
by Charles Schwartz, Department of Physics, University of California
Berkeley, CA 94720. 510-642-4427 November 28, 1993
SUMMARY
The charge of "bloated bureaucracy" is a familiar one to any public
agency, especially in hard economic times; and the University of
California, facing the worst fiscal crisis in its 125 year history,
has heard this criticism repeatedly.
The UC leadership - the President, Vice Presidents and Chancellors -
have repeatedly said that they have undertaken full-scale reviews of
their administrative activities in order to achieve greater
efficiencies. They claim that administration has suffered a
disproportionate share of the university's financial pain, with cuts
amounting to about 20% already having been made to their budgets.
A detailed examination of the University's own financial records,
presented in this Report, disproves that claim. Over the past
3-year period of the UC budget crisis, expenditures for all upper
level administration at UC have actually increased by 7%.
Although UC President Jack Peltason has received a formal inquiry
about the discrepancy between his public claims and the documented
data on administrative spending, he has failed to give any response.
This new study raises the most serious questions, not only about
the UC administration's budget priorities, but about the very
credibility of the University's top officials.
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October 7, 1993
President Jack W. Peltason
University of California
Dear President Peltason;
This is a request for specific information regarding the
University's budget and expenditures for administration.
Many times during the past year you and other members of your
staff have made claims about substantial cuts in administrative
budgets. For example, at the March 18, 1993, meeting of the Board
of Regents you issue[d] a report (titled, "A Summary Response to
Professor Charles Schwartz's Analysis of the University of
California Budget"), in which you made the following statement.
"As a result of recent budget cuts, campus and Office of the
President budgets for administration were cut by 5 percent in
1990-91 and again in 1991-92, for a total cut of 10 percent
or $25 million. An additional cut of 10 percent, or nearly
$20 million, has been made in 1992-93; further cuts will be
made in 1993-94. "
In my studies of UC financial documents, I have been unable to
find data that would support the claims made above. Therefore, I
request that you provide me with the specific data and references
upon which these claims are based.
Sincerely yours,
Charles Schwartz, Professor Emeritus
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At the Regents' February 18, 1993, meeting , UC Vice President
William Baker presented a report, in rebuttal to my first analysis
of overgrown administrative bureaucracy, in which he recited the
identical claims about cuts in administration that President
Peltason made in the statement quoted above.
At my November 2 meeting with Associate Vice President Lawrence
Hershman, UC's Director of the Budget, we discussed my alternative
budget proposal which called, among other things, for large cuts in
the administration. He responded that they had already taken
disproportionate cuts in administration. He first estimated the
amount at 25%, then revised his evaluation to: about 20 to 25% cut
to administration overall.
I have not received any response from President Peltason or his
office to my letter of October 7. Hershman, during our discussion,
acknowledged that he was familiar with that letter and, upon my
prodding, said that he would provide me with the substantiating
data which I requested; but nothing has come of that.
So let's examine the authoritative data, gathered from UC's
own financial documents, to see how the President's claim -- that
a 20% total cut in administration has taken place over the last
3 years -- stands up against the facts.
We shall examine UC's annual budget appropriations as well as
its annual accounting reports on expenditures; and we shall look at
the different ways in which the term "administration" may be
interpreted within the University's bookkeeping systems.
First, in Table 1, we have budget data taken from "Departmental
Allocations - UC Budget for Current Operations" for each of the last
four fiscal years. Here we have administrative activities divided
in two budget categories, #66 - General Administration and #72 -
Institutional Support, as well as the combined amount of these two
categories. The numbers in parentheses include recharges, thus give
the total budgeted expenditures. These data are "Current Year
Appropriations."
Table 1. UC Budget Allocations for Administration
($ in Millions)
Fiscal Budget Category#66 Budget Category#72
Year General Admin. Institutional Supp. Combined Amount
1989-90 $185.3 ($249.3) $152.1 ($430.9) $337.3 ($680.2)
1990-91 $187.7 ($257.6) $161.2 ($473.7) $348.9 ($731.3)
1991-92 $182.3 ($256.6) $164.1 ($498.5) $346.5 ($755.1)
1992-93 $183.1 ($260.2) $154.9 ($486.8) $338.0 ($747.0)
Next, in Table 2, we have data for the actual expenditures of
Current Funds, as given in the annual accounting documents "UC
Campus Financial Schedules." These accounting reports give a more
complete picture of actual expenditures than do the budget documents
considered above (which cover only what are termed "permanently
budgeted" items.) Here, the two previous categories of
administrative expenses (#66 and #72 in the budget scheme) are
combined into the single accounting category called "Institutional
Support"; and I also include an additional category, "Academic
Administration," which covers the expenditures of Deans on their
immediate administrative offices. As before, the figures in
parentheses include recharges (which are called "Transfers" in the
accounting reports.)
Table 2. UC Current Funds Expenditures for Administration
($ in Millions)
Fiscal Accounting Category Accounting Category
Year Institut. Support Academic Admin. Combined Amount
1989-90 $369.7 ($758.2) $118.3 ($131.5) $488.0 ($889.6)
1990-91 $393.9 ($793.1) $124.3 ($136.8) $518.1 ($929.9)
1991-92 $394.3 ($810.8) $129.2 ($141.1) $523.5 ($952.0)
1992-93 $384.7 ($809.3) $128.0 ($138.1) $512.8 ($947.5)
Tables 1 and 2 provide us with eight different possible
definitions for "administration" in the University; and here we have
the authoritative funding data for the latest three-year interval
referred to by President Peltason in his statement about recent cuts
in administration. We see that there is only one instance - the
first column in Table 1, showing data for the budget category General
Administration - that shows any decrease at all over this 3-year
period: and this decrease amounts to only 1 percent, whereas
President Peltason and his staff have claimed a decrease of 20
percent.
The most reliable data, showing actual expenditures rather than
budgeted amounts, is that given in Table 2. Vice President Baker,
in his February 18 report, measured expenditures for "administration"
in terms of these numbers for Institutional Support including
recharges. These numbers, in Table 2, show a 7% increase in
spending for administration over this 3-year period. In my own
previous work, I preferred to use the more comprehensive data given
in the last column of Table 2, which I called "Upper Level
Administration"; and we see that these expenditures have increased
over these 3 years by 5% (not counting recharges) or by 7% (counting
recharges.)
I should make clear what this Upper Level Administration covers
and what it does not cover. It includes administrative personnel
and services directly under the control of the University's
president, chancellors and deans. It does not include administrative
personnel and services at the operating levels of the University: in
the academic departments and research units, in the libraries, in
the hospitals, in operation and maintenance of plant, in student
services and in auxiliary enterprises.
****CONCLUSION: The authoritative data completely contradict the UC
President's claim of a 20% cut in overall administrative budgets
during the three-year period of this financial crisis. What the
data show, on the contrary, is a 7% increase in University spending
for upper level administration.
The difference between the President's claim and the facts,
when measured in dollar amounts, is very large. If there really had
been a 20% reduction in the figure at the top of the last column in
Table 2, the total expenditures for upper level administration in
1992-93 would have been $712 million instead of the actual
expenditure of $948 million. That would amount to a saving of $236
million in annual expenses for the University, an amount more than
enough to replace all of the revenue from student fee increases
imposed since 1989-90, including those added for 1993-94!
Absent any explanation from the President and his staff, what I
have presented above appears to be proof of an egregious lie
promulgated by UC's top officials. However, I have looked further
into available data, seeking some alternative interpretation of
their statements that might alter this judgment.
The annual document, "Budget for Current Operations," commonly
referred to as the Regents' Budget, gives numbers for expenditures
on Institutional Support; and these figures show a drop of 8%: from
$319 million for 1989-90 to $292 million for 1992-93. However, these
figures are intended for the consideration of the Legislature and
the Governor and do not represent the complete picture of UC funding.
We note, from Table 2, that the total UC expenditure for
Institutional Support in 1992-93 was actually $385 million, which is
$93 million more than the figure $292 million quoted for that year
in the Regents' Budget.
A second possibility is that when President Peltason speaks of
administrative cuts in a particular year, he really is talking
about cuts that will take effect in the following year. The data in
Tables 1 and 2 show reductions in the last one or two years; but
those reductions still amount to only 1, 2 or 3 percent, depending
upon which figures one chooses, nowhere near the ten percent that
should be evident if this "delayed action" hypothesis were correct.
Furthermore, in the most recent volume of the document "Departmental
Allocations" one finds prospective budget figures for the "New Year"
1993-94 and can compare these with the figures given for the Current
Year 1992-93 (shown in Table 1): but the amount of decrease found
there is only 1 or 2 percent -- and, again, a 10% reduction would be
expected if the claimed cut in administration was merely delayed a
year.
Thirdly, I have found some additional data that might account
for (but not justify) the discrepancy between President Peltason's
claim and the facts presented above. Table 3 presents numbers
gathered from the annual "University of California Financial Report,"
which is the university's audited financial summary. From the table
headed "Current Funds Expenditures by Resources Utilized," I took
numbers for Institutional Support given for each of these recent
years. (This data does not include Academic Administration, nor does
it include recharges; but it is the best I have found showing the
breakdown as to source of funds spent.)
Table 3.
Sources of the Funds Used for UC Expenditures on Administration
($ in Millions) State Approp. Student Endowments,
&General Fees & Private Gifts, Other
Year Total Funds Tuition Grants, etc. Sources
1989-90 $370 250 20 39 60
1990-91 394 257 28 45 64
1991-92 394 251 35 31 77
1992-93 385 210 65 33 76
The Totals shown in the first column of Table 3 are the same
numbers shown in the first column of Table 2; and the other columns
quantify where the money came from for this expenditure on
administration. The contribution from State Appropriations and
General Funds has indeed dropped sharply over this 3-year period:
a cut of $40 million, or 16% of its level in 1989-90. The statement
by President Peltason, quoted at the beginning of this paper, claims
that the total dollar amount of administrative cuts over this 3-year
period was slightly over $40 million; and so we find some
consistency here.
However, this is not the whole story: the total expenditure for
administration actually increased (from $370 million to $385
million), with a total of $55 million from other funds under UC's
control more than making up for the decrease in State & General
Funds. In particular, we note from Table 3 that the greatest
infusion of new funds feeding the operation of UC's administration
came from student fees: an increase over this 3-year period of
$45 million, amounting to a 225% boost in this contribution since
1989-90.
In January, 1992, then UC President David Gardner announced
that he was cutting 25% off the administrative budget for his office;
and a closer reading showed that he was merely shifting that portion
of his budget from State funds to "other funds." Could this be what
President Peltason and his associates mean when they say that
overall UC budgets for administration have been severely cut: that
State money for administrative salaries and expenses has been
replaced by money collected from students and their parents as
mandated increases in the Educational Fee?
Finally, in Table 4, I present data for each of the UC campuses
and the Office of the President (UCOP). This Table shows the
expenditures for upper level administration (as shown for the whole
university in the last column of Table 2), both with and without
recharges being counted. The dollar entries are for the last fiscal
year 1992-93; and the percentage entries show how these figures have
changed since 1989-90.
Table 4. 1992-93 Campus Expenditures for Upper Level Administration
Expenditures 3-year Expenditures 3-year
Campus w Recharges change w/o Recharges change
UCLA $ 190,470,000 - 3% $ 88,721,000 0%
UCOP $ 153,727,000 +27% $ 90,203,000 +21%
UCSF $ 131,162,000 +24% $ 52,236,000 +10%
UCB $ 112,329,000 - 3% $ 73,181,000 - 1%
UCD $ 102,185,000 + 3% $ 49,432,000 - 2%
UCSD $ 87,571,000 + 4% $ 50,836,000 + 9%
UCI $ 68,945,000 - 3% $ 41,606,000 - 4%
UCSB $ 42,245,000 0% $ 28,754,000 + 4%
UCR $ 30,876,000 + 8% $ 18,611,000 + 3%
UCSC $ 27,950,000 +10% $ 19,184,000 +13%
Total $ 947,460,000 + 7% $ 512,764,000 + 5%
While we see substantial variations in the performance of the
individual campuses, none of them has come anywhere close to
fulfilling the claim of 20% cuts in spending for administration.
This indicates that the problem pointed out in this report is
focused not only at the UC President, but at all the Chancellors as
well.
Concluding comment: At a time when the University of
California is struggling to survive a very severe cutback in State
support, and seeking to gain new revenues elsewhere - primarily by
continual increases in student fees (tuition) - the issue of public
confidence and trust in the leadership of this institution becomes
of paramount importance. The information presented in this report
poses a critical challenge not only to the values and priorities of
UC's top administrators - the President, Vice Presidents and
Chancellors - but to their very credibility. Whose responsibility
is it now to act upon this situation?