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. ------------------------------------------------------------------ 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 ------------------------------------------------------------------ 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?