On Friday, the Governor released the May Revision, which serves as the update to his January budget proposal. The May Revision includes updated revenue figures based on the most recent data on tax collections and the latest economic projections from the Department of Finance. It also includes the Governor’s most recent proposals to balance the budget. Traditionally, the May Revision signals the beginning of serious budget negotiations between the Governor and the Legislature. There can be no firm prediction of how long it will take elected officials to fashion the final budget. However, given the severity of the state’s fiscal problems and the controversies surrounding many of the Governor’s proposals, the negotiations are likely to be protracted.
The magnitude of the fiscal challenges facing the state is remarkably unchanged from the January budget. By the Department of Finance’s calculations, the General Fund faces a combined potential shortfall of $18 billion in 2009-10 and 2010-11. On an annual basis, General Fund spending before any proposed cuts would be about $100 billion.
Steve Olsen, Vice Chancellor for Finance, Budget, and Capital Programs, earlier shared the recent news reports about a large revenue shortfall in April. The Department of Finance now estimates that General Fund revenues in 2009-10 will fall about $1.5 billion short of the January forecast. However, the Governor has proposed revenues in 2010-11 that are $2.1 billion higher than the January estimate. Other areas of the budget have increased the fiscal challenge. Most notably, the Governor is estimating that new federal funding will fall considerably short of the $7 billion estimated in January. As a result of these and other factors, the Governor has proposed additional program eliminations and reductions, principally from health and human services programs.
The May Revision continues and modestly strengthens the Governor’s January funding commitments to higher education. Specifically, the May Revision:
- Retains the proposed restoration of $305 million from the one-time cuts in 2009-10.
- Retains the proposed $51 million in new enrollment funding, and eliminates the previously proposed tie to federal funding.
- Restores funding for the Cal Grant Competitive Grants program, which had been proposed for elimination in January.
- As in January, there is no funding for contributions to the UC Retirement System.
Clearly, the May Revision is good news for the University of California, or at least the absence of further bad news. While the Governor’s support is vital, these additional funds must be approved by the Legislature. While legislators have been supportive of the University’s advocacy message, any new funding for higher education would effectively come at the expense of cuts to other areas of state government. It is notable that the President Pro Tempore of the Senate, Darryl Steinberg, stated on Friday that he would not support additional funding for higher education. While the UC advocacy effort will continue, UCLA’s budget planning for 2010-11 will continue to be based on the assumption that the state will not provide any new resources in 2010-11. As a result, UCLA will experience a permanent reduction in state funding of $117 million in 2010-11. While increased student fee will offset a portion of this loss, all UCLA operating units should plan, as was communicated in February, that this year’s 5% General Fund reduction will continue and become permanent in 2010-11, and that no new funds will be available to cover retirement costs, benefit increases, or rebalancing costs. The one-time cuts associated with the furlough/salary reduction program will expire, as previously planned.
Campus leadership will continue to communicate with campus leadership, faculty, students, and the broader community about the further development of UCLA’s budget strategy for the upcoming year. If you are interested in more information about the state budget, please refer to the following links.
Link to May Revision:
Statement by VP Patrick Lenz: