The Effects of a Changing Financial Context on the University of California

California’s loss of capital gains and stock options revenue during the recent economic downturn was one of the worst in the nation, and the resulting fiscal crisis led to reductions in State appropriations to the University of 15% over the past four years, while enrollments grew by 19%. This article examines the effects of this reduction in State funding and outlines the actions taken by the University of California to minimize the impact of these reductions in State funding. Despite sharp increases, student tuition and fee increases offset less than one-third of the total cut. Those additional tuition and fee revenues were, however, targeted and offset much of the impact on instructional programs, though there were large cuts in other areas. The University took steps to streamline administrative processes and to make better use of limited State funds by utilizing technology and leveraging the power of a multi-campus system to minimize the impact on academic support budgets. Nevertheless, the quality of the educational program has been affected, graduate student support levels are below those of the University’s competitors, and salaries for both faculty and staff are well below market. In the short run, the University of California seems to have avoided some of the more serious effects of the loss of State funds on the academic program; the long term prospects, however, are less clear.