Future Funding Strategies for the University of California Presented by Peter J. Taylor

1. Future Funding Strategies for the University of California Presented by Peter J. Taylor April 12, 2010

2. Table of Contents • The Budget Gap • Commission on the Future • Funding Strategies Workgroup: • Develop advocacy campaign for state funding for UC • Identify, promote, and adopt best practices in admin efficiencies • Revise ICR practice & policy for non‐federally funded research • Improve ICR rates with federal agencies • Develop multi‐year tuition plan • Increase nonresident enrollment • Advocate for federal Pell PLUS augmentation grants • Examine faculty compensation plans • Allow for possibility of differential tuition by campus

3. Section I: The Budget Gap

4. The University faces an ongoing budget challenge $1,223.4 Gap Fillers $1,223.4 Gap Causes

5. The State budget is not getting any better • According to the LAO: • There is no way CA can avoid reprioritizing its finances • Link between state funding and enrollment has been disrupted • Fees projected to continue rising • Federal funds provided only a one-time budget solution Billions… • Key choices facing Legislature: • How much enrollment should be accommodated? • How much should higher-education cost? • How should the universities reduce operating costs? …for at least the next five years

6. Section II: Commission on the Future

7. “Reimagining” the University • On July 16, 2009, Board of Regents Chairman Russell Gould announced UC Commission on the Future • The Commission was charged with developing a new vision for the University within context of UC’s mission and budget, and its commitment to quality, access, and affordability • Five workgroups were established: Funding Strategies Education & Curriculum Funding Strategies Size & Shape of UC Access & Affordability Research Strategies

8. Section III: Funding Strategies Workgroup

9. Funding Strategies Workgroup Submitted nine recommendations to the Commission on March 23: • Develop grassroots advocacy campaign • Implement a best practices system • Revise ICR practice/policy for non‐federally funded research • Improve ICR rates with federal agencies • Develop multi‐year tuition planning framework • Increase nonresident enrollment • Advocate federal Pell PLUS augmentation grants • Examine faculty compensation plans • Allow possibility of differential tuition by campus

10. #1: Develop grassroots advocacy campaign • Rationale: • Public institutions must have backing of those who pay taxes to support it • Activism is strongest at the local level • Political leaders can gain from a relationship with UC • Challenges: • Development of an adequate campaign infrastructure • Development of campaign messaging • Doing it the UC Way (not just another political campaign) • Internal constituencies need to be educated and “buy in” to the campaign

11. #2: Implement a best practices system • Rationale: • Administrative activity pervades any large organization, and especially complex public research universities • Our funding model may be misaligned with our efficiency goals • A penny saved is a penny earned • Challenges: • We must follow through this time • There is a time and place for campus autonomy • Cost-cutting cannot mean quality-cutting

12. #3: Revise ICR policy for non‐federally funded research • Rationale: • Total cost recovery is our principle • Core funds subsidize research • Significant revenue potential • Challenges: • State-funded research (it’s less than half that charged to federal) • Understanding among the faculty • Differing effects on different disciplines

13. #4: Improve ICR rates with federal agencies • Rationale: • Total cost recovery is our principle • Successful comparators have a dedicated negotiating team • Significant revenue potential • Challenges: • Multiple funding agencies involved (and huge disparities among them) • Understanding among the faculty • Tendency towards campus autonomy

14. #5: Develop multi‐year tuition planning framework • Rationale: • Creates an integrated planning framework • Change misleading nomenclature • Simultaneously maintain focus on state funding (and exhibit interconnectedness with the state) • Utilize market headroom • Increase predictability • Challenges: • Continue to pursue state funding • Enrollment and other impacts • Complex implementation • Avoid guarantee misunderstanding (and continue to address affordability) • Avoid Reg Fee misunderstanding

15. #6: Increase nonresident enrollment • Rationale: • Significant revenue generation • Positive impact on the state (and undergraduate experience) • Market headroom • Success at comparator institutions • Challenges: • Recruiting infrastructure • Revenue potential limited by return-to-aid • Perception issues • Protecting racial diversity

16. #7: Advocate federal Pell PLUS augmentation grants • Rationale: • Preservation of quality • Graduation rate component • Core operations precedent • Combat economic stratification • Challenges: • Identifying available federal funds • Feasibility • Avoid a program that is too self-serving (aim for true “Race to the Top” type program for all of higher education)

17. #8: Examine faculty compensation plans • Rationale: • Existing precedent • Use of non-core funding • More extensive use of contract and grant funds • Would augment/replace core funds for instruction • Challenges: • Equity issues among disciplines • Cultural shift • Faculty resistance

18. #9: Allow possibility of differential tuition by campus • Rationale: • Increase revenue capacity • Existing cost differentiation • Precedent in other states • Discounts rather than add-ons • Challenges: • Perception issues • Inclination to move to the maximum • Integrate with resource allocation efforts