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President Yudof testifies before State Assembly Budget Subcommittee

As prepared for delivery

Madam Chair and Members of the Committee:

I am here today to offer my assessment — and answer any questions you might have — about the University of California’s immediate fiscal situation, especially as it relates to the reductions proposed by the governor.

But, before the wailing and gnashing of teeth begins, I’d first like to look beyond the horizon a bit, to talk about the needs of California and the role that the three systems of public higher education must be able to play if this state is to move forward and thrive.

California was given one great Gold Rush, and that was a long time ago. Since then, we climbed our way to the top by out-thinking and out-creating and out-innovating the world.

To succeed — (and I would say building the world’s eighth-largest economy is a pretty good marker of success) — has required topflight systems of education, public education.

And that will be even more critical in the future, as the world flattens and human capital becomes king. This is just a fact.

I know I don’t need to sell any of you on the importance of education and the need to invigorate our economy and society with an educated populace and game-changing research.

Madam Chair has taught school. Other committee members have led school districts. Most of you came up through the Cal State or community college systems.

So you know how the pieces that Chancellors Reed and Scott and I represent all fit together under the California Master Plan. And you know that Master Plan for 50 years has served as the state’s not-so-secret ingredient in its formula for success.

Of course, the Master Plan, for all its wonders, has a problem.

The problem is that it has not been adequately funded for years. Adjusting for inflation, state investment in UC students is less than half of what it was 20 years ago.

Here’s another way of looking at what’s happened: The governor’s proposed budget will ratchet back state support for UC to a level it last saw in fiscal year 1998-99 — and since that time we’ve added 73,000 more students to our universe. Same amount of money; enough additional students to fill UC Berkeley — twice.

Now the governor says that he wants to quit kicking cans down the road and instead engage Californians in an honest conversation about just what scale of government they are willing to support with their tax dollars.

I take him at his word and I am eager, along with my colleagues at the table, to join that conversation. We think we have a pretty good story to tell.

In the meantime, though, we must act. At UC, I’ve given our campuses targets for cutting their budgets. Our central office in Oakland also will be looking at significant cuts, even as it leads a systemwide effort to wring $500 million in savings through innovative operational efficiencies.

These proposed cuts will be put before our governing Board of Regents in mid-March. While this is still a work in progress, it’s already clear that this process won’t produce a pretty picture.

The low-hanging fruit was picked long ago. We are looking at layoffs. We are looking at program elimination, at shrinking the enterprise.

We undertake this exercise not to monger fear. We can’t scare anybody into giving us money that isn’t there. We also have to remember that, under the governor’s proposal, the numbers we are dealing with represent only the best-case scenario.

And the numbers don’t lie. When additional mandatory costs are factored in, along with what we are now paying into our pension system and the cost of educating 11,000 students who are unfunded by the state, the fact is that we will be looking to slice $1 billion out of our 10-campus system.

This will be the second time in three years we have done so.

The last time around, we looked to student fee increases and systemwide furloughs to squeak by. These will not be my first choices this time. But, as you know, the first rule in this environment is to never say never.

As a public university, we pride ourselves on access, affordability and excellence. These are our lodestars.

With the cuts as proposed, we are moving perilously close to the point where we can no longer do all three.

We can be accessible (with our doors wide open to all eligible students) and affordable (with tuition levels that compare well to those of our peers). But we cannot do so and ensure excellence.

We can be excellent and fully accessible, but it will mean chucking affordability out the door.

And we can be affordable and excellent, but we can’t do so and maintain the enrollment promises enshrined in the Master Plan.

Unless we find a way to reverse this trend of disinvestment, something simply must give.

In my view, we can’t give up on excellence. Generations of Californians invested in this university and watched it grow into an envy of the world. You can destroy what took 15 decades to build in a matter of a few short years, and never get it back.

I’m also not going to surrender on the question of preserving our standing as a public university.

Nearly 40 percent of our students come from families earning less than $50,000 a year, many of them the first in their family to attend a university.

The reach of our research stretches from strawberry fields to the farthest stars.

These sorts of things are what a public university must do, and I’m determined to do everything in my power to ensure that at the University of California this doesn’t change.

But consider this: If the governor’s proposed cuts are enacted, it will mean that for the first time in our shared history, the students and families of the University of California will be contributing more to our core operating budget than California taxpayers.

That should be worrisome to anyone who believes that what we provide is a public good, and not a private one.

So all this leads me to a pretty sobering conclusion. If we must preserve excellence, and we must strive to remain affordable, that leaves us with access.

If trends are not reversed, we will soon approach the day when we will be forced to tell qualified California high school graduates that there no longer is a place for them at a UC campus.

That is where we are headed.

So how can we avoid this?

Let me leave you with a few ideas.

First, we need to work out with you and your colleagues in Sacramento a long-term arrangement (compact, I know, has become a dirty word in this context.)

We will emerge from this budget process with a new floor and find a way to live with it. We will push a reset button.

In exchange, though, we need commitments going forward of stable, sustainable funding increases, so that we can plan and grow in an orderly fashion and prepare to serve a California populace that inevitably is going to grow and place greater pressure on our public universities.

Structured properly, this arrangement also could allow California families to make college plans with greater clarity when it comes to their costs.

The California Dream need not die with the baby boomers. There is a new California coming forward, and it deserves to be served.

More immediately, I ask for flexibility. Universities, especially research universities, are complicated. One size never fits all. So we ask for the legislature to support the governor’s request for an unallocated reduction to the UC Budget.

In this vein, I’d also ask for support of legislation that would leverage the university’s borrowing power and its $400 million in shovel-ready projects into a job stimulus initiative, providing a boost for a construction industry that faces 20 percent unemployment.

I ask for fairness. Should further cuts become necessary or, more happily, should fiscal conditions improve, I would ask you to compare proportionately the cuts made to higher education to those of other state entities.

As an aside, I would point out here that, for every dollar invested by the state in the University of California, we return four dollars in tax revenue to the state general fund. And for every dollar the state invests in our research, we generate another eight dollars from non-state sources.

Finally, I would ask you to engage with us, to consider us your partner in working through these dark and dreary times. With the expertise that populates our campuses, with alumni rolls filled with some of California’s most innovative minds and, of course, with the passion and people power that our 230,000 students represent, we can be an effective ally.

And we stand willing to serve.

Madam Chair, this concludes my testimony.

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