Budget Lies (A Letter to the President of UC)

April 11, 2009

Mark Yudof, President
University of California

Dear Mark;

Yesterday I found a new document, titled “The UC Budget: Myths & Facts”, posted at the top of the NEWS column on the web site of the University of California Office of the President, WWW.UCOP.EDU Are you the person responsible for that load of lies and half-truths?

Many of the misstatements in that document are things that I have pointed out before in my writing and speaking to top officials of this University.  My earlier critiques have not been answered; they have just been ignored as your team continues with their program of misinformation. Here are the worst examples. (Quotations are indented below.)

Myth: UC doesn’t really have a budget problem because it has so many different fund sources it can dip into.
Fact: UC’s budget is made up of many different fund sources, but most of them are restricted to specific uses and cannot be used for other purposes. A federal grant for laser beam research can’t be used to fund a deficit in the English Department. A payment for a surgery in a UC hospital can’t be redirected to fund graduate students.

Here is the true picture of restricted and unrestricted funds coming into UC (originally published in my paper “Financing the University – Part 17” on 12/15/08.) Unrestricted funds are those monies over which The Regents have full authority to designate use.

Table 1: UC Expenditures of Current Funds 2007-08   (in $ Millions)

Fund Source Unrestricted Restricted
General Funds 3,378 0
Tuition & Fees 1,591 0
Federal Government 0 2,200
Special State Appropriations 0 426
Local Government 0 190
Private Gifts, Grants & Contracts 12 1,255
Endowment & Similar Funds 235 167
S/S Educational Activities 1,477 0
S/S Auxiliary Enterprises 785 0
S/S Medical Centers 4,459 0
Other Sources 1,763 0
Reserves 14 0
TOTALS 13,713 4,238

General Funds means state money. S/S means Sales & Services of.
Source: UC Campus Financial Schedules, Schedules D

In the latest Budget, one reads of $5.4 billion in “core funds”, which are defined as General Funds plus Student Fees.  But we see that this accounts for only 39% of all Unrestricted Funds spent by the University last year! So your claim about “restricted” funds is a lie.

You say “A payment for a surgery in a UC hospital can’t be redirected to fund graduate students.” That is a half-truth. In fact there is a surplus income from the UC medical enterprises, amounting to around $1 billion a year, which is distributed to faculty in the Medical Schools as “bonus pay”, on top of their regular academic salaries. A portion of that money could be redirected to other pressing academic needs in these times of budget stringency: that would be called shared sacrifice. You and The Regents have authority to implement such a strategy.

Myth: The real problem is the salaries being given to UC senior managers.
Fact: Senior management salaries represent less than 1 percent of the total payroll at UC. Salaries have been frozen for the 340 members of the Senior Management Group, and bonuses or incentive payments have been canceled or deferred as well.

In previous papers, “Financing the University – Parts 12-14”, I have demonstrated that there is a much larger constellation of management bureaucracy throughout UC, which has grown enormously over the past decade and is now estimated to waste some $600 million per year. The Senior Management Group, which you talk about here, is just the tip of that iceberg.

The primary reason student fees rise is related to the level of state funding UC receives – or doesn’t receive – from the state. The decline in the state’s funding for per-student education at UC – from 78% of the total cost of education in 1990 to 58% today – has been partially addressed by student fee increases. No one likes it, but it has been
necessary to maintain the quality of the academic program and student services.

What you call the “funding for per-student education at UC” is a piece of accounting fraud that I have repeatedly criticized. The numbers you use to calculate that actually cover all of the costs for faculty research work throughout the academic year as well as undergraduate plus graduate educational programs. When I disaggregate that bundle of expenses, it turns out that undergraduate student fees now cover the full per-student cost for UC to provide undergraduate education. So the reduction in state funding is really a cutback in the faculty’s research program. That is a lamentable loss, but it is totally unjustified to dump that cost onto undergraduate students (and their families). These same facts also eradicate the justification for your claim that the state has failed to provide funds for “enrollment growth”, since the student fees cover all of that cost.

I look forward to your response.

Sincerely yours,

Charles Schwartz
Professor Emeritus of Physics
UC Berkeley

The papers referred to above may be found on my web site,


  1. Karl Hufbauer said,

    April 11, 2009 @ 6:04 pm

    Dear Charlie S,
    In the above, you are–as almost always–right on the mark. Thanks for your extraordinary work.
    Best wishes, Karl H

  2. Scott Gabara said,

    April 15, 2009 @ 8:55 am

    Thank you for spending your time to try to get things right and honest.

  3. Carl Friehe said,

    April 16, 2009 @ 8:50 am

    Prof Schwartz, Thanks for your continued analysis and attempts at communicating with UCOP. Carl F.

  4. Philip Johnston said,

    April 21, 2009 @ 12:32 pm

    Thank you for your dedication to truth and fairness. Your work is of incalculable value to all UC employees in our fight against UC disinformation campaigns.

  5. Charlie Schwartz said,

    April 23, 2009 @ 8:52 am

    William R. Frazer, Professor Emeritus of Physics and formerly Senior Vice President for Academic Affairs at the University of California, sent me this comment and agreed that it could be posted here.

    You and i have often disagreed; e.g., on UC management of Los Alamos and Livermore (I’m still deeply involved in the LLC’s). But I read your critical response on the UC budget with interest and admiration. You are raising points I never thought of, such as that tuition should never exceed the actual cost per student of undergraduate education. And the point about taking one percent of the pay of those over 100K. Thanks for provoking some thought!


  6. Dan Lewis said,

    April 23, 2009 @ 10:42 pm

    As a 38 year staffer at UC Davis, and an alumnus (BS Zoo/Genetics 1974), It is most welcome to see a reasoned and critically thought out approach to the financial woes of what was once the country’s finest institute of higher education. It seems to have begun in the late 1970’s and early 1980’s, when management thought they ought to be running UC as if it were a business instead of an educational institution. It has lately seemed to be even more emulative of some of the nations largest businesses, by which I mean they are driving the whole thing into the ground while holding it down and pillaging it for the profit of the upper management. Unfortunately, again like the larger businesses, they have forgotten the pirates’ credo: “First you pillage, then you burn!” One can only hope to see their feathers get singed in the process.

    Dan Lewis

  7. Henry Tsai said,

    April 27, 2009 @ 1:36 pm

    As a new employee only a little over a year old, I have heard consistently that this campus was top heavy. Seeing as to how we are getting vice chancellors and associate vice chancellors (to me, that equals vice vice chancellors, ridiculous…) all the time, I truly appreciate the detail and research that this letter goes into. This definitely clears up a lot of hearsay and rumors. I hope UCOP has a good response to this. Or, we can always change our university name to UC AIG.

  8. Sherrill Futrell said,

    April 29, 2009 @ 6:28 pm

    Dear Prof. Schwartz,

    I would love to have your permission to reprint this superb letter in the Davis Enterprise, Davis, CA. Students as well as staff and faculty need to know its contents!

    Many thanks,

    Sherrill Futrell
    History Dept.
    … My Response:
    Yes, of course you may reprint this letter.

  9. UCB Professor Blasts UCOP « the New UC said,

    May 3, 2009 @ 3:23 pm

    […] and inaccurate. Physics Professor Emeritus of UC Berkeley, Charles Schwartz, recently produced this response to the UCOP’s propaganda. What you call the “funding for per-student education at UC” is […]

  10. Carolan Buckmaster said,

    May 8, 2009 @ 10:00 am

    20 years as a Cancer Research at UCSD. Stewards like myself in the workplace call management on their BS; but you have the intelligence to call UCOP on their BS – we bow to you and THANK YOU!

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