UC Board of Regents approved a basic budget for the 2003-2004 year in its second day of meetings yesterday.

In the budget, the regents requested state funding to fulfill its Partnership Agreement with the UC. The University’s current state-funded operating budget for 2002-2003 is about $3.15 billion.

UC President Richard Atkinson said cuts would probably have to be made due to the current state budget crisis. UC Vice President for Budget Larry Hershman proposed several options for cutting the budget including increasing student fees, reducing funding to outreach programs and reducing funding for research, but asks for funding for staff and faculty salary increases.

“In this constrained budget environment, I have two priorities. First we must maintain quality and access in the core instructional programs. That means funding for enrollment growth and funding to maintain the high-quality educational experience that students expect of UC,” Atkinson said. “Second, we must provide salary increases for faculty and staff so that we do not fall further behind the market. Competitive salaries are key to quality – we must prevent further salary erosion and also begin to close the salary gap.”

The budget requests state funding for enrollment growth of 8,000 students in 2003-2004.

For short-term solutions to the expected budget reduction, Hershman gave a series of options for budget cuts. They included implementing student fee increases for undergraduate, graduate and professional school students, and revoking the 10 percent undergraduate fee reduction that has kept student fees low for UC students since the late 1990s. Funds for the fee reduction were previously provided by the state. He said UC would provide sufficient financial aid to preserve access to UC.

A student fee increase of 6.5 percent ($225 per year for resident undergraduates) will be included in the 2003-2004 budget unless the state provides equivalent funding under the Partnership Agreement. Without full state funding the budget will also include a 4 percent increase in nonresident tuition ($500 for undergraduate students and $445 for graduate students).

Hershman said this budget is not final and it may be changed based on the state’s budget plans. If a student fee increase is required, one-third of the revenue from the increase would be allocated to financial aid to lessen the financial impact on low-income students, he said.

Other budget cuts might also include the reduction budget for outreach services and research, Hershman said.

“None of these options is attractive,” Hershman said. ” We are going to work very hard in Sacramento to make the case for the University’s budget priorities and minimize the need for cuts. But, given the seriousness of the state’s fiscal challenge, we also need to consider carefully how the University might best absorb a budget reduction while maintaining the standards of quality that have always defined UC.”

Budget also calls for 4.5 percent salary increase for eligible faculty and staff, along with funding for merit increases for eligible employees.

Coalition of University Employees and UC-American Federation of Teachers members have been working without contracts for over a year.

C.U.E. and UC-AFT rejected UC Office of the President’s final contract proposal in late October.

UC-AFT wants more job security for lecturers, salary increases and the option of arbitration when UC fires a lecturer. C.U.E. is primarily asking for a 15 percent wage increase over the next two years, to bring their wages up to market level.

The two unions went on strike at several UC campuses Oct. 13, 14 and 15 to protest UC’s alleged bad-faith bargaining. Employees at Berkeley went on strike Aug. 26 through 28.

UCOP is currently waiting for counterproposals from both unions.

The regents approved a $316 million capital improvement budget for 2003-2004 that would fund projects to retrofit buildings against earthquakes, construct new facilities to handle enrollment growth and modernize outdated infrastructure. State funding for these projects will be provided by Proposition 47, which passed Nov. 5.

Most of Hershman’s proposed budget cuts come from funding provided under the Partnership Agreement which UC made with the state in May 2000 for an annual 4 percent budget increase from the state’s General Fund. In exchange, the University promised to make progress in eight areas and work toward meeting 22 objectives aimed at improving access to education and overall academic quality. Most funds were not designated for specific purposes.

Hershman, said in the long run UC will continue to seek full funding from the Partnership Agreement, and retain its commitment to make progress on a number of specific accountability measures. A recent state accountability audit, requested by Assemblywoman Jenny Oropeza, found the UC was not entirely accountable to the state on all measures outlined under its Partnership Agreement with the state. Auditors recommended UC take on several accountability measures including providing specific goals for every area of the Partnership Agreement.

The 2002-2003 state budget authorizes Gov. Gray Davis to make $750 million in reductions to state operations in the current fiscal year; he has not yet announced any cuts to the budget. The state is facing a possible $10 million deficit unless budget cuts are made. State proposals on balancing the budget are expected in January when Davis presents the state budget for the 2003-2004 fiscal year.

“I have great confidence in the long-term economic vitality of California and, therefore, in the university’s long-term fiscal prospects,” Atkinson said. “However, we face a very challenging short-term budget situation.”