A stronger financial foundation helps us respond to challenges while advancing our mission
Updated as of July 15, 2026
In July 2026, the chancellor and provost issued the 2026-27 Budget Status and Decisions letter (PDF). The associate vice chancellor for Budget and Institutional Analysis followed up with the 2026-27 Budget Process Decision and Outcomes letter (PDF). Previous budget letters can be found on the Budget Process webpage.
Since 2020, UC Davis has set savings targets and made strategic reductions to address a structural deficit in our core funds. In 2026-27, a previously planned reduction of 4.2% will continue to be implemented for Common Operating Funds and Student Service Fees.
In 2026-27, these collective efforts are projected to eliminate the core funds structural deficit that has challenged UC Davis’ budget since 2020 and achieve a balanced budget for core funds. The current outlook anticipates a small surplus, but the final budget outcome will continue to be subject to external factors beyond the control of the university – which warrants conservative management of our resources, in order to continue advancing our mission.
Eliminating Our Core Funds Deficit in 2026-27
Student tuition and unrestricted state funding are called “core funds,” and are the primary financial resources for our campus educational mission, while only being about 15% of the UC Davis budget. Over the years, the state has provided a shrinking share of our core funds, while our employment costs have continued to rise. Increases in state funding and tuition revenue, while helpful, were not sufficient to cover our increasing costs, so the university allocated a series of savings targets to reduce reliance on core funds.
Since 2020, UC Davis units have worked together to manage this core funds structural deficit. We have reduced our cumulative core fund spending by more than $218 million and allocated more than $267 million to mitigate accrued core fund debt (in one-time funds, primarily from centrally managed sources).
Current projections and plans for 2026-27 include:
- The 2026-27 state budget includes funding that is currently anticipated to provide approximately $60 million to UC Davis, based on preliminary University of California allocation information.
- Tuition revenue is anticipated to increase in 2026-27, after receiving $25 million less than expected in undergraduate tuition revenue from an unanticipated reduction in international student enrollment in 2025-26. In 2026-27, total tuition revenue is anticipated to increase from approximately $678 million to $693 million, pending final enrollment numbers.
- Previously planned budget reductions will continue to be implemented for the 2026-27 budget, based on the plan established in August 2025. These amount to a combined reduction of $52.8 million, or a 4.2% reduction, in Common Operating Funds and Student Service Fees.
- Central funds will also be allocated to strengthen reserves, including $15 million in one-time funding that will go to core funds reserves for future uncertainties. Central funds will also be used to mitigate a structural deficit in F&A funding ($5 million ongoing and $24 million one-time).
By the end of fiscal year 2026-27: We expect to eliminate the core funds structural deficit and instead achieve a modest core funds structural surplus of approximately $12.2 million, 1.1% of total core funds expenditures, and a one-time reserve for uncertainties of approximately $29 million, 2.6% of total expenditures.
Although state funding and tuition are expected to increase in 2026-27, the additional revenue will be needed to cover increased compensation costs on core funds. Continued uncertainties in federal funding and other policy changes could further impact our financial outlook.
Continued Uncertainty Requires Cautious Financial Management
Our budget outlook is stronger today than it has been in recent years, but the environment in which we operate remains highly dynamic.
UC Davis now faces a structural deficit in the Facilities and Administration cost recovery, or F&A, based on reduced contracts and grants awarded in 2025-26. It is possible that F&A could decline further due to reductions in federal grants and potential federal policy changes. Central allocations of F&A funds support research infrastructure, including costs such as debt service on research buildings, support for core facilities, and research administration staffing in central offices. This revenue has now fallen below these ongoing costs.
Total F&A funding received in 2025-26 is approximately $195 million, a decline of almost 6% and the lowest level since 2022-23. UC Davis leaders chose to apply $5 million in ongoing and $24 million in one-time adjustments from central funds to help mitigate the structural F&A deficit and accrued debt. Even with those adjustments, the central campus F&A is facing a structural deficit of approximately $20 million in 2026-27 and accrued one-time debt of almost $21 million.
Undergraduate enrollment targets in fall 2026 aim to stabilize total undergraduate enrollment close to approximately 30,000 students (based on a three-quarter average for the academic year, including new and continuing students). Meeting these targets will help us adjust after an unanticipated reduction in international student enrollment in 2025-26 that stemmed from federal policy changes and significantly impacted our tuition revenue. Current numbers indicate that international and out-of-state enrollment may improve in fall 2026 enrollment.
These are situations we will continue to closely monitor, and we will adjust financial planning as needed to protect the long-term success of our mission.
Rising Costs of Employee Compensation Impact Core Funds
UC Davis is people-driven, and so are our costs. At UC Davis, employee compensation costs — including salaries and benefits for both faculty and staff — accounts for the vast majority of the campus's operating expenses. Excluding the medical center, where supplies and equipment make up a larger share of costs, employee compensation represents an even greater proportion of campus expenditures.
Costs of salaries and benefits in the 2026-27 budget increased by approximately $70.6 million. This includes increases from collective bargaining, from faculty merits, and from the UC systemwide salary program for policy-covered academics and staff.
See How Rising Employee Compensation Costs Compare to Funding Source Increases
Using current information and assumptions about salary programs, here are the estimated increases in funding sources and compensation costs on core funds:
| $ in 000's | 2021-22 Actual |
2022-23 Actual |
2023-24 Actual |
2024-25 Actual |
2025-26 Estimate |
2026-27 Estimate |
|---|---|---|---|---|---|---|
| Tuition Revenue Net of Aid | $15,240 | $958 | $6,074 | $17,358 | $988 | $8,852 |
| State Appropriations | $24,281 | $30,584 | $22,418 | $13,095 | ($1,992) | $60,495 |
| Annual Change in Sources | $39,521 | $31,542 | $28,492 | $30,543 | ($1,004) | $69,347 |
| Ladder Rank Faculty | $18,520 | $29,097 | $28,107 | $29,032 | $21,574 | $34,608 |
| All Other Faculty and Academic Employees | $2,642 | $2,106 | $11,171 | $11,203 | $5,279 | $5,481 |
| Staff | $13,035 | $14,456 | $16,316 | $17,039 | $17,793 | $30,484 |
| Annual Change in Salary and Benefits | $34,197 | $45,659 | $55,594 | $57,274 | $44,647 | $70,573* |
| Funding (Surplus or Shortfall) | $5,324 | ($14,117) | ($27,102) | ($26,731) | ($45,651) | ($1,226) |
*$18 million of this is due to increased employer benefit costs.
This table shows the annual incremental increases in revenue sources for core funds and the annual incremental increases in costs for employee compensation assigned to core funds. After funding compensation costs, the difference is estimated to be approximately $1.2 million in fiscal year 2026-27. The 2026-27 estimate accounts for state funding from the approved budget and increased tuition revenue expected due to tuition rate increases and enrollment changes.
Salary costs usually increase each year and vary based on a faculty member's or staff member’s union representation, merit or experience step, performance or other salary program changes. The amount of increase is not the same for every individual.