We must make strategic changes in how we fund our mission.
February 2026: The 2026-27 Budget Planning Framework for Financial Sustainability letter (PDF) and the 2026-27 Budget Framework Planning Guidelines letter (PDF) have been released.
Take a few minutes to learn about the UC Davis budget and our financial challenges.
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What is the current status of UC Davis' core funds deficit?
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How is our core funds deficit impacted by increasing employee compensation costs?
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What are we doing to address our budget challenges?
What is the current status of UC Davis' core funds deficit?
Updated as of February 13, 2026
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At UC Davis, if approved, the Governor’s proposed state budget for 2026-27 could result in a $40 million increase.
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We enrolled fewer international students than expected this fall, resulting in approximately $25 million less in undergraduate tuition revenue than anticipated.
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We will stay the course established last summer and continue to implement the 2025-26 and 2026-27 reduction plans.
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After accounting for the reductions and other changes in core funds revenue and expenses, the structural deficit in UC Davis core funds is estimated to be approximately $23 million at the end of fiscal year 2025-26 and we might achieve a small core fund structural surplus by the end of 2026-27.
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 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. Recent increases in state funding and tuition revenue, while helpful, have not been sufficient to cover our increasing costs.
In 2025-26, the state budget keeps University of California funding essentially flat by deferring $129.6 million of the UC’s appropriation to 2026-27 while also restoring a one-time reduction of $125 million from 2024-25. The Governor’s proposed budget for 2026-27 provides the 5% increase promised in the compact between the Governor and UC for 2026-27 and partial funding of the deferred increase from 2025-26.
State funding and tuition increases continue to be outpaced by operating cost increases and there continue to be uncertainties in federal funding and policy changes that could impact our financial outlook.
How is our core funds deficit impacted by increasing employee compensation costs?
Updated as of February 13, 2026
Rising costs of salaries and benefits: 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 — are about 71% 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 75%.
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 | $780 | $5,744 |
| State Appropriations | $24,281 | $30,584 | $22,418 | $13,095 | ($1,992) | $40,000 |
| Annual Change in Sources | $39,521 | $31,542 | $28,492 | $30,453 | ($1,212) | $45,744 |
| Ladder Rank Faculty | $18,520 | $29,097 | $28,107 | $29,032 | $21,574 | $32,423 |
| All Other Faculty and Academic Employees | $2,642 | $2,106 | $11,171 | $11,203 | $5,345 | $1,188 |
| Staff | $13,035 | $14,456 | $16,316 | $17,039 | $16,199 | $31,185 |
| Annual Change in Salary and Benefits | $34,197 | $45,659 | $55,594 | $57,274 | $43,119 | $64,796* |
| Funding (Surplus or Shortfall) | $5,324 | ($14,117) | ($27,102) | ($26,821) | ($44,331) | ($19,052) |
*$18M of this is due to increased employer benefit costs. Accounting for most of the year-over year change of $21.7M.
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. The difference is estimated to be approximately $46.8 million in fiscal year 2025-26 and $16.5 million in fiscal year 2026-27. The 2025-26 estimate reflects the state budget reduction and a reduction in tuition revenue due to lower than anticipated enrollment, primarily by international students. The 2026-27 estimate accounts for the level of state funding proposed in the Governor’s Budget and increased tuition revenue expected due to the tuition stability plan. Both years reflect the implementation of salary programs when approved by the Office of the President. In 2026-27 there was a significant change in the employer benefit costs, which accounts for approximately $18 million of the increased costs. The fact that our cost increases outpace our source increases contributes to the core fund structural deficit and the need for budget reductions.
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.
What are we doing to address our budget challenges?
Updated as of February 13, 2026
Since January 2020, the campus has made progress toward the goal of reducing ongoing reliance on core funds (state funds + tuition revenue). We have allocated savings targets to campus units totaling $108 million. The campus is on track to achieve these targets. However, continuing cost pressures and an expected reduction in state funds exacerbate the need to make fundamental, long-term changes in business practices and fund management strategies across all facets of UC Davis.
In 2025, the campus completed an effort to develop strategic reduction plans that identified prioritized program or service reductions, eliminations or consolidations that equal 10% of prior year expenditures on Common Operating Funds (COFI), which includes both core funds and F&A funds. Campus leaders reviewed these plans and requested that each dean, vice chancellor or other unit leader address specific, proposed reductions in their annual budget meetings. In these meetings, the selected reductions were discussed with the provost and/or chancellor as well as Academic Senate representatives. The Academic Senate Committee on Planning and Budget also provided campus leadership with feedback on the topics discussed in the academic unit meetings.
Final decisions about which reductions will move forward were made by the chancellor and provost. Units are implementing strategic budget reductions of $41.5 million in 2025-26, which represents approximately 3.3% of COFI and student services fee and an additional $52.8 million reduction in 2026-27, which is an additional 4.2% of COFI and student service fee. The exact timing of when specific reduction actions in units take place and are communicated will vary based on local needs, transition planning, and other factors.
Leadership also identified changes to centrally managed funds and programs to address our budget challenges. Combined, in 2025-26 these changes will reduce the structural deficit by $29.6 million and one-time debt by $41.5 million. These decisions limit campus leadership’s ability to invest in strategic priorities and campus needs.
Since 2020, we have worked together to resolve and manage a core fund structural deficit through a combination of expenditure reductions, efficiencies, net revenue generation, and leveraging other appropriate fund sources to replace core funds. With the additional strategic budget reductions and other actions outlined above, by the end of fiscal year 2026-27, we will have reduced our cumulative core operating expenditures by over $226 million since 2020. We have also allocated over $250 million of one-time funds, primarily from centrally-managed sources, to mitigate our accrued debt during this period.