UC Berkeley leaders outline plan to address financial challenges

Facing mandatory pay increases for staff, faculty and graduate students, plus the rising costs of goods and services and a potential $82 million budget deficit, UC Berkeley leaders on Friday said they were implementing plans and processes to maintain access and excellence, pay the current bills and create a new, more sustainable financial model for the campus.

In a live-streamed Campus Conversations event, Chancellor Carol Christ said the latest budget crisis is not unlike others she’s encountered during her time as chancellor. Berkeley in 2018 overcame a $150 million deficit, and financial recovery efforts have been ongoing since the COVID-19 pandemic upended daily instruction and campus operations.

Christ said she was confident in Berkeley’s ability to confront these challenges, but added that this latest effort has left her feeling like Sisyphus, the character in Greek mythology who was forced for eternity to shove a boulder up a hill, only to have it roll back down each time he neared the top. 

“We have done this before,” Christ said. “We can do it again. But that doesn’t mean that it isn’t a challenge.”

In the upcoming fiscal year, Berkeley will be responsible for approximately $108 million in pay raises, including a 4.6% increase for faculty and unrepresented staff mandated by the UC Regents, and a $20 million increase for graduate student instructors, the result of last year’s UAW contract negotiations. 

Referring to faculty and staff salary increases, Christ said, “This is wonderful. It’s putting money in all of your pockets. But it also poses a financial challenge to the campus. Our revenues don’t nearly match that.”

Increases in tuition and state funding — the campus’s two primary streams of operating revenue — have not kept pace with the increased cost of education and, as a result, have left Berkeley’s financial foundation fragile.

Berkeley spends about $33,000 per undergraduate student on instructional costs, yet receives, on average, only $25,000 in tuition and state support for each student enrolled. Despite a projected $23 million increase in state funding and a $12 million boost in tuition revenue next year, officials at the event said the budget shortfall remains “untenable and unsustainable.”

“We do have some significant financial challenges,” said Ben Hermalin, executive vice chancellor and provost. “But the money we are spending we’re spending on our people.”

Despite the challenges, layoffs are not on the table, said Rosemarie Rae, vice chancellor for finance and chief financial officer.

Instead, in the short term, Berkeley plans to realize investment gains valued at some $82 million. Given the difficult situation, she said, it is the most effective, available option.

“It works in the short term,” Rae said. “It’s a strategy that we can use for two, perhaps three, years.”

The longer-term solutions come from what campus leaders have called the Financial Sustainability Initiative, which is aimed in part at growing and diversifying funding streams. Instead of a core budget remaining so heavily dependent on state funding and tuition, officials are working to increase revenue from sources such as non-degree enrollment, summer programs and intellectual property. 

“I hope what folks hear is that we’re able to address our shortfall,” Rae said. “That we are acting in a prudent and responsible way as a campus. And that we have such a bright and hopeful future, and that we are preparing for the financial sustainability of the campus over the next decade.”

For some who watched Friday’s discussion, the talk of expanding Berkeley’s revenue sources raised questions about whether Berkeley could maintain its public character and identity. 

Christ was unequivocal in saying that Berkeley will not move away from its state-supported mission to broadly serve the people of California. “I’ve always said that the state is the most important donor,” she said. 

“When you face challenges like this, it’s easy to think about the glass as half-empty,” Christ said.

“But I think it’s more than half-full. We will solve this budget problem. We have done it before, and we can do it again. I think the future is bright for Berkeley.”