The UC Office of the President recently released its annual report on UC system-wide employee compensation, highlighting the decline in state funding but also showing an increase in revenue generated by medical centers and research sources.

According to the report, the total system-wide payroll saw an unusually small increase from $9.88 billion to approximately $10 billion, continuing a slow trend in workforce development. In addition, the report revealed a $174 million slash in state funding and a $76 million increase in revenue from hospitals, meaning that less than 30 percent of funds for the payroll come from the state’s budget.

The UC administration has downsized its workforce and relies heavily on private fundraising to compensate for the dwindling supply of funds from the state, according to UCOP Media Specialist Dianne Klein.

“We’ve handled the decline through a series of administrative efficiencies, layoffs, cutbacks and tuition increases,” Klein said. “What we are endeavoring to do now is increase private fundraising and revenue from outside sources.”

Klein said the administration hopes to engage state officials in the budget drafting process as part of an attempt to stem the decline in funding.

“We are looking at a new approach to the budget where we sit down with state officials and try to work out these problems so that we don’t have erratic declines like this,” Klein said. “We are basically at the bottom of a 20-year slide in funding right now.”

Many UC workers’ salaries are significantly lower than those at other similar institutions and the report estimated that cash compensation is about ten percent lower than the average market rate.

According to the report, “Market positions have eroded and are expected to worsen due to lack of salary increases, rising employee medical benefit premiums, the resumption of employee contributions to the UC retirement plan, and a system-wide 12-month furlough program which reduced faculty and staff pay beginning in September 2009 and continuing through August 2010,” the report said.

In an effort to retain its top faculty despite waning pay, the UC Board of Regents approved a pool for merit-based salary increases as part of the 2011-2012 budget. In a campus memo released last month, UCSB Chancellor Henry T. Yang said the amount of money in the pool will be a percentage of overall pay.

“…[T]he merit program is aimed at helping campuses recruit and retain faculty, who are the source of UC’s academic and research quality, and also to acknowledge non-represented staff for their ongoing dedication and service despite not having received general pay increases for the past several years,” Yang said in the statement.

Klein said UCOP has taken a firm stance against sacrificing the value of a UC education despite mounting budget problems.

“We will not compromise academic quality at all,” Klein said. “We are the best public university system in the world and we want to maintain that reputation.”