Senior University of California administrators described for the UC Board of Regents  a new regimen of administrative and financial efficiencies that so far has allowed the university to redirect hundreds of millions of dollars to its core academic and research mission and promises to yield even greater savings in the next several years.

“In order to preserve this university’s traditions of academic excellence and broad access into the future,” Nathan Brostrom, UC’s newly installed executive vice president for business operations, told the regents at the May 19 meeting, “it is imperative that we re-examine now the ways we operate both as a system and on campuses.”

Russell Gould, chair of the UC Board of Regents and UC President Mark G. Yudof directed Brostrom and Peter Taylor, chief financial officer, to work with the campuses and return to the regents in two months with a fully developed initiative that will set a target and timeline for greater savings.

“It is essential we operate as efficiently as possible, and I am 100 percent behind this initiative,” said Yudof. “But it is imperative to understand that this will defray only a small portion of our shortfall. There has been a decline of roughly 50 percent in state-appropriated funds per student since 1990, resulting in higher student fees, furloughs and stagnant salaries for faculty and staff, as well as reductions to the academic program.”

Efficiencies a top priority for Board of Regents
Gould said that the efficiencies push is a top priority, not only for the regents, but also for UC’s Commission on the Future.

“The commission, which is charged with developing a new vision for the university within the context of our mission and budget, has called on UC to maximize efficiencies by seeking out and implementing the best administrative practices across the UC system,” Gould said. “I look forward to seeing a more detailed plan in July.”

The commission’s work builds on the past efforts of the board to achieve administrative efficiencies, he added.

Taylor, in response to a question about possible job losses, said that implementing operational changes would take time, and give UC a chance to rethink the best way to deploy staff.

“The goal here is not to reduce jobs. This over time will allow us to look at how we use the people we employ,” Taylor said. “We may be running systems very differently in the future. We lose about 10,000 people a year to retirement and attrition. Perhaps in years to come, there will be some repositioning of jobs that can be accomplished.”

UC building on work already underway
Brostrom and Taylor outlined the ways that UC has already cut costs. They said they have begun working with leaders from across the UC system to leverage the power of the university’s 10 campuses and five medical centers to better share resources and consolidate services.

“Every dollar we save in operating costs is a dollar that can go toward preserving the academic and research mission,” Brostrom said. “We’ve done a lot in the past few years to cut costs, and now we’re looking more broadly.”

Administrative restructuring first began in fiscal year 2007-08, when UC’s Office of the President underwent downsizing and a reorganization that resulted in annual cost savings of roughly $55 million. Other streamlining efforts, including the deployment of new financial, procurement and risk management tools resulted in another $177 million in annual cost savings, as well as $388 million in avoided costs and new revenues.

Campus innovation will drive systemwide best practices
UC campuses have also been engaged in restructuring efforts. Some have been long underway and have proved models for other campuses. UC Berkeley’s human resources information system, for example, is so efficient and effective that it could become the standard for the entire university, Brostrom said.

Campuses have also begun looking at ways to share administrative resources among multiple locations, such as shared research computing, regional data centers and the creation of service clusters where multiple campuses can avoid duplication of student services and other administrative functions.

In addition to campus restructuring, university leaders say there are additional operational efficiencies that, when fully implemented, will improve how UC operates and generate significant savings.

The university is also exploring automated procurement processes, common payroll and human resources systems, and centralized employee service centers, Brostrom said.

Campuses embracing culture change
“We are looking at every facet of our operation systemwide to see how we can streamline business practices,” Brostrom said. “From the outside looking in, one might think we should have had these systems in place years ago, but each UC campus evolved separately. There is a long history of UC campuses operating in a decentralized and fairly autonomous way.”

As a result, creating unified operations for the entire UC system will require significant technological and business innovation, Brostrom said. The good news is that there is strong consensus among the campuses on moving toward shared business operations.

UC’s Office of the President will help facilitate decisions and lend support for implementation. It will also help ensure that campuses are sharing best practices with one another, so that effective changes can be replicated at all UC locations.

“We want to harness all the innovation going on at the campuses for the betterment of the whole,” Brostrom said.

“In addition to restructuring the Office of the President, UC has worked aggressively over the past several years to make additional operational improvements,” Taylor said.

Operational improvements at UC’s Office of the President
The university increased the size of its commercial paper program, allowing campuses to fund capital projects without the cost of using a third-party bank, and it created a new asset management tool that has allowed campuses to achieve higher income on invested funds.

In addition, it has begun more effectively leveraging the university’s combined buying power, establishing a strategic sourcing initiative and a travel management program, both of which allow UC to purchase goods and services at reduced rates. Annual savings are estimated at $51 million.

The university has also broadened its philanthropic base. Under a new model for parent giving, for example, UC now raises more than $9 million annually from the parents of UC students. Additionally, UC has begun expanding the use of payouts from endowed chairs so that the endowments can now support not only research and teaching, but also faculty salaries and graduate fellowships.

Finding additional ways to improve services while cutting costs is essential if UC is going to be able to funnel more resources to its academic and research programs, Taylor said.

UC budget gap remains, even with administrative cost savings
Brostrom presented budget projections to members of UC’s Commission on the Future in March that show UC faces revenue shortfalls of nearly $237 million just for the current fiscal year, even with the most optimistic revenue projections, including restoration of $305 million in state funding.

“We have to find ways to direct more of our budget to academic programs, research, and student support,” Brostrom said. “Through ingenuity, creativity and determination we believe we can redirect hundreds of millions of dollars a year to our core mission.

— Carolyn McMillan

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