Dear Friends of UC:

I am writing to provide you with an update on the state budget for the University of California, which has been signed into law by the Governor.  While State revenues fell far short of January projections, leading to a tighter than expected budget environment, we are pleased with the budget agreement the Governor and the Legislature reached. This budget provides critical new funding for important UC priorities including student outreach and support, efforts to improve diversity, increasing California enrollment, and innovation and entrepreneurship activities at our campuses.

This year the state will provide UC with $3.312 billion toward our overall $28.5 billion operating budget. This State funding reflects an augmentation to the UC budget of $125 million ongoing funds consistent with last year’s agreement with Governor Brown. In addition, it reflects significant one year increases to support UC activities such as $20 million to expand student support services, $22 million for innovation and entrepreneurship activities, and $5 million to establish a firearm violence research center. UC will also receive $18.5 million in ongoing funds to enroll 2,500 additional California students, and the State will also make major one-time funding investments that are not reflected in UC’s main budget appropriation to include, $171 million of Proposition 2 funds for unfunded liabilities associated with UC’s retirement system, $35 million for deferred maintenance, $10 million for Precision Medicine, $4 million for developing more online college preparation courses, and $3 million for transportation research.

We are particularly gratified that the budget agreement’s $22 million investment in innovation and entrepreneurship reflects the crucial role of UC research in the California economy. In 2015, UC research led to 85 new startups and 1,756 new inventions – roughly five inventions every day. This innovation directly boosts the California economy with UC based startups generating over $21 billion in revenue and employing 18,000 Californians. The additional investment by the State to focus specifically on innovation and entrepreneurship will allow the ten UC campuses and the Lawrence Berkeley Laboratory to build upon this incredible track record, fostering even more economic development for the benefit of Californians.
While the budget agreement is positive, we have still not made up all the cuts suffered during the great recession, and there are some areas that must be addressed going forward. First, the State’s funding of $18.5 million to enroll 2,500 additional California resident students is far less than the agreed upon marginal cost rate of $10,000 that the State needs to contribute to educate a student. The University of California appreciates the extra funding and the support for our desire to increase the enrollment of California residents, but it is critical that the State return to full per student funding next year to ensure that UC can maintain access and excellence for the next generation of California students. In addition, the State also rejected UC’s request for $6 million to enroll additional graduate students, who are critical to our research programs and the education of undergraduate students.  Accordingly, graduate student enrollment must increase to keep pace with undergraduate enrollment growth, and this effort will need to be revisited next year.

In closing, given the financial constraints facing the state, the budget deal is a very positive outcome for UC and will allow us to advance many of our significant priorities over the next year. We still have much work to do, and I want to thank all of you for your ongoing support of the University of California.

Yours very truly,

Janet Napolitano