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Budget Framework

Our core funds deficit compounds each year it's not resolved. We must make strategic changes in how we fund our mission.  

Take a few minutes to learn about the UC Davis budget and our core funds challenges.

April 2024: This webpage has been updated to reflect current estimates and expectations, based on the 2024-25 budget framework letter. Except where otherwise noted, the 2024-25 estimates assume that the state provides the promised 5% funding increase and that salary programs proposed by the UC Regents in November 2023 are implemented.


 

What is the current status of UC Davis' core funds deficit?

Updated as of April 3, 2024 

Student tuition and unrestricted state funding are called “Core Funds,” and are the primary financial resources for our campus educational mission — but only make up about 16% 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. Recent increases in state funding and tuition revenue, while helpful, have not been sufficient to cover our increasing costs. 

  • The estimated structural deficit in our core funds has grown since last year.
  • Estimates already reflect $79 million in savings targets that have been allocated, a process started in 2020-21.
  • Every year that we do not address the structural deficit, it compounds, accumulating a one-time debt that must be addressed with one-time resources. We have already applied $138.2 million in one-time funds from central campus and carryforward funds from administrative units to manage this debt since 2020 — an option which limits investing in other needs. 
  • Estimates assume annual 5% increases in state funding from the compact between the University of California and Gov. Gavin Newsom, and that UC Davis does our part to meet the terms of that agreement — including increase undergraduate enrollment of California residents and do more to help our students succeed. It is unclear if the 5% increase in state funds will occur in 2024-25 given the state’s budget deficit.

Core funds multi-year projections: The graph shows the structural deficit is projected to be $60 million in fiscal year 2024-25, but the deficit would grow by an additional $23 million in 2024-25 if the state does not provide the promised 5% funding increase and if salary programs are unchanged.

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What are the drivers of the core funds deficit?

Updated as of April 3, 2024 

1. Salaries and benefits 

UC Davis is people-driven, and so are our costs. At UC Davis, employee compensation — including salaries and benefits for both faculty and staff — are about 75% of our total operating expenditures. If we exclude the medical center’s budget, which has higher costs for supplies and equipment, then our employee-driven costs are closer to 80%.   

Here are the actual increases in funding sources and increases in compensation costs on core funds: 

 
$ in 000's 2020-21
Actual
2021-22
Actual
2022-23
Actual
2023-24
Projected
2024-25
Estimate
Tuition Net of Aid $1,924 $15,240 $958 $8,666 $19,248
State Appropriations $0 $24,281 $30,584 $22,415 $23,135
Annual Sources $1,924 $39,521 $31,542 $31,080 $42,383
Ladder Rank Faculty Merits/ Range/ Equity $8,371 $18,520 $29,097 $28,107 $28,260
All Other Faculty and Academic Employee Salary Programs $425 $2,642 $2,106 $11,171 $21,203
Staff Represented and Non-Represented Merit/Range $6,025 $13,035 $14,456 $16,316 $19,726
Annual Costs of Salary and Benefits $14,821 $34,197 $45,659 $55,594 $59,189
Funding (Surplus or Shortfall) $12,473 $1,980 $16,722 $14,098 $16,806

Compensation is a key driver: This table shows the annual increases in revenue sources for core funds and the annual increases in costs for employee compensation assigned to core funds. The difference is estimated to be at least $16 million in fiscal year 2024-25. The 2024-25 estimate assumes that the state provides a 5% increase and that the salary programs implemented are as proposed by the Regents in November 2023.

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. In 2024-25 individual salary increases may range from 3-18%.
 

 

2. Utility costs

By 2026-27, purchased utilities costs are projected to increase over $7 million annually compared to 2021-22 levels, due to price increases and renewable energy goals. The university incurred nearly $13 million of additional costs in 2022-23 due primarily to gas and electricity commodity rates. Clean energy investments included below are initial estimates of what UC Davis needs to invest to meet the 2025 UC Clean Energy Goals

$ in 000’s 2022-23 2023-24 2024-25 2025-26 2026-27
Increase over 2021-22 $12,852 $173 $6 $6,381 $7,059
 

Comparing utility costs: In 2024-25, utility costs are estimated to be just $6,000 more than 2021-22 costs, though investments to meet UC goals will further impact costs in future years.

It is important to understand that UC Davis uses energy efficiently. In fact, actual energy use has gone down while our total square footage has grown. However, the cost of energy is increasing.

In addition, many campus facilities house animals and scientific activities that require ongoing energy use, which accounts for significant energy use during the pandemic when many students and employees were not physically on campus.

Using less energy, even with more building space: While total campus energy use has steadily declined, our building space served by campus energy systems has increased.

 

3. Capital and infrastructure 

UC Davis has grown to the size and complexity of a small city, with significant capital, deferred maintenance and seismic challenges. We are using our operating budget to support debt service and leases, about $41 million annually. In the past, this was supported by the state and general obligation bonds.


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What are we doing to fix the core funds deficit?

Updated as of April 3, 2024 

Since January 2020, the campus has made progress toward the goal of reducing ongoing reliance on core funds (state funds + tuition revenue) by $80-100 million by 2025. The campus is on track to achieve the initial five-year savings targets. However, additional cost pressures have emerged that exacerbate the need to make fundamental, long-term changes in business practices and fund management strategies across all facets of UC Davis. These pressures include: 

  • Systemic inflationary pressures
  • Significant increases in our utility costs
  • Growing salary and benefit costs due to salary programs established or negotiated by the University of California
  • Uncertainty that the state will be able to continue providing 5% annual increases to the university. 

 

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