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.
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What is the current status of UC Davis' core funds deficit?
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What are the drivers of the core funds deficit?
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What are we doing to fix the core funds deficit?
What is the current status of UC Davis' core funds deficit?
Updated as of June 29, 2023
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 17% 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 $115 million in one-time funds from central campus to manage this debt since 2020 — an option which has been exhausted from central sources and 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.
Core funds multi-year projections: The structural deficit in core funds will continue to grow as the gap between funding sources and funding uses persists. This graph shows the structural deficit is projected to be $45 million in fiscal year 2023-24.
What are the drivers of the core funds deficit?
Updated as of June 29, 2023
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:
| $K | 2020-21 Actual |
2021-22 Actual |
2022-23 Actual |
2023-24 Estimate |
|---|---|---|---|---|
| Tuition Net of Aid | $1,924 | $11,896 | $395 | $19,392 |
| State Appropriations | $0 | $24,281 | $30,584 | $22,103 |
| Annual Sources | $1,924 | $36,177 | $30,979 | $41,496 |
| Ladder Rank Faculty Merits/ Range/ Equity | $8,371 | $18,520 | $28,104 | $28,200 |
| All Other Faculty and Academic Employee Salary Programs | $425 | $2,642 | $2,106 | $10,100 |
| Staff Represented and Non-Represented Merit/Range | $6,025 | $13,035 | $17,491 | $17,294 |
| Annual Costs of Salary and Benefits | $14,821 | $34,197 | $47,701 | $55,594 |
| Funding (Surplus or Shortfall) | $12,473 | $1,980 | $16,722 | $14,098 |
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 $14 million in fiscal year 2023-24.
The video used an example of a 4.5% increase in UC salaries, but the reality is more complex.
2. Utility costs
Over the next four years, purchased utilities costs are projected to increase $10 million annually on average, compared to 2021-22 costs, due to price increases and renewable energy goals. Clean energy investments included below are initial estimates of what UC Davis needs to invest to meet the 2025 UC Clean Energy Goals.
| 2022-23 | 2023-24 | 2024-25 | 2025-26 | 2026-27 | |
| Increase over 2021-22 | $12,560 | $3,318 | $3,156 | $9,056 | $10,066 |
Rising utility costs are a driver: Utility costs in 2022-23 are estimated to be $12.5 million higher than in 2021-22, primarily due to higher rates.
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.
What are we doing to fix the core funds deficit?
Updated as of June 29, 2023
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
These added budgetary pressures require that we provisionally increase unit savings targets by an additional $9 million collectively by 2026, bringing the total target (including the central campus target) to $79 million over six years.
UC Davis must address this challenge with our combined strategies of multi-year actions. To help guide these efforts, the Revenue Generation and Institutional Savings Task Force collected almost 2,000 suggestions from the campus community through the IDEA$ at Work campaign. The task force is reviewing each of the suggestions and will share a final report in summer 2023.
What's next
In spring 2023, Provost Mary Croughan charged a new task force — called Sustaining Teaching And Research Task Force, or START — to "develop transformative and strategic changes in how we achieve our education, research, and service missions, including possible new operating models that are financially sustainable while maintaining, if not increasing, our ability to achieve our mission and desired goals."
Initial recommendations are expected in December 2023, for changes that will be implemented for the 2024-25 academic year or earlier. The work of this task force will also complement the work of the Revenue Generation and Institutional Savings Task Force and the Student Success and Equitable Outcomes Task Force. Additional details about this year’s plan for core funds are available in the 2023-24 Budget Status and Decisions Letter (PDF) and the 2023-24 Budget Framework Letter (PDF).