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‘We’re Fragile’: UC Berkeley Officials Battle Budget Woes

The Bay Area’s flagship public university, UC Berkeley, is trying to work its way out of an unprecedented $340 million deficit due to the pandemic. And that means some of the hardest-hit departments and individuals on campus are having to fend for themselves.

The campus has seen plunging revenue on several fronts, including $35 million gone in tuition fees.

“We had about 800 students that decided not to come back to the fall,” said Rosemarie Rae, Berkeley’s vice chancellor of finance and chief financial officer.

Rosemarie Rae, Berkeley’s vice chancellor of finance and chief financial officer. (Courtesy of UC Berkeley)

Then there’s the $100-$140 million anticipated loss in housing and dining income. Plus $33 million in revenue from sports events.

On top of all of the losses, Rae pointed to tens of millions of dollars in additional pandemic-related expenses — from COVID-19 testing and sanitization, to upgrading systems to accommodate remote learning and meetings.

That’s a lot of pain.

It’s been especially tough for Rae herself, who came in seven years ago to oversee the university’s complex $3 billion budget. She spent those years getting the campus out of a $150 million shortfall caused by declining state support, years of frozen tuition and substantial long-term debt.

“We’re fragile,” Rae said. “We were already running skinny as we came into COVID-19.”

The university isn’t reducing tuition costs — a pain-point for many students who decided to go ahead with their studies during the pandemic.

“A lot of students are frustrated with this because we have a lot of fees here at Berkeley, like campus service fees and student service fees,” said Victoria Vera, political science major and student union president. “Their argument is, ‘If I’m not on campus and I’m not in the area to utilize these services, why should I pay into them?'”

CFO Rae said the school’s strategy for getting back on financial track includes digging into reserves, taking out loans and relying on federal support. Berkeley has received approximately $30 million in Federal CARES funding. 

But she said revenue-generating areas like Athletics and Housing & Dining are supposed to be self-sustaining. So aside from some loans that Berkeley is making available to these areas, they’re largely on their own when it comes to navigating financial challenges.

“My goal is to solve as much of our shortfall as we can through our own internal controls, through reductions to our operating budget, controls on compensation,” said Tom Lowry, Berkeley’s senior associate athletics director and chief financial officer. “But depending on the way this football season plays out, we may need more or less of that borrowing authority to remain solvent.”

Just under one third of the athletics department’s revenue comes from televised athletics events — especially football.

Berkeley’s Nov. 15 game against UCLA, the first of the season, came after months of pandemic-related cancellations, delays and expenses that threw Cal’s athletics department into financial chaos. The original financial projections, based on an entirely canceled season, were harsh.

“You’re talking about losing 50% of your revenue just like that,” Lowry said.

Now that some competitive play has started up again, Lowry said the financial picture is looking less grim. But he said the projections could change again with COVID-19 cases now on the upswing.

“Our employees may sustain some unpaid time off in order to deal with this financial crisis,” he said.

Athletics isn’t the only part of campus taking a long, hard look at workforce costs.

“65 percent of our budget is related to salaries and benefits,” said CFO Rae. “So if we’re going to try to contain our costs, it primarily happens there.”

Rae said the entire campus has implemented a hiring freeze. Some top administrators and senior athletics staff took a 10% dip in pay. And there have been well over 100 temporary layoffs, mainly in the realms of Housing & Dining, and Cal Performances, the university’s performing arts presenter.

Omar Prevost is one of the people the university temporarily let go. He’s lead custodian at The Golden Bear Cafe, one of the few eateries currently open on campus.

The Golden Bear Cafe. One of few eateries currently open on Berkeley’s campus. The school’s housing and dining operations have sustained enormous losses as a result of the pandemic. (Chloe Veltman/KQED)

“We’re doing simple stuff like coming out every 30 minutes and doing wipe-downs on all high contact point areas inside and outside,” he told KQED while making his rounds one recent lunch time as students chatted and ate around him on the Golden Bear’s sunny patio. “Just trying to stay on pace.”

Prevost said he was out of work for five months while The Golden Bear was shut. According to UC Berkeley’s media relations office, just over 100 campus dining services employees were temporarily laid off as a result of the pandemic.

“It was the most challenging time,” Prevost said. “I definitely learned something about budgeting.”

Prevost said since he’s come back to work, he’s been sharing his hard-earned financial know-how with his co-workers.

“Especially with some of the newer people that are working here,” he said. “Like, a lot of us don’t make a significant amount of money.”

UC Berkeley reports no permanent layoffs so far. However, that doesn’t take into account the roughly 100 lecturers — non-tenure-track teaching staff, also known as “adjunct professors” — who were on payroll last academic year, but not this one.

“They’re usually hired on one-semester or one-year contracts that often aren’t renewed,” said Mia McIver, president of the University Council American Federation of Teachers (UC-AFT), the union that advocates for non-tenure-track instructors in the UC system, and a lecturer in the writing program at UCLA.

Berkeley has set aside $10 million to minimize COVID-19-related layoffs, especially for low-income staff, funded through faculty and non-union staff pay freezes.

Though they praise the administration’s handling of COVID-19-related health and safety measures, some of Berkeley’s tenure-track professors are not happy with this type of approach to solving the university’s short- and long-term financial woes.

“We’re concerned that the already uncompetitive salaries that we have — that don’t really sustain a reasonable quality of life in the Bay Area for many — are going to be furloughed,” said history professor and Faculty Association co-chair James Vernon.

His concerns will not be unfounded if Berkeley moves ahead with further proposed cuts.

Berkeley’s financial challenges mirror what’s happening in the UC system overall. Since the onset of COVID-19, the 10 campuses have sustained around $1.4 billion in lost revenue and other costs, according to the UC Office of the President.

Campuses are using Federal CARES Act funding and reserves to mitigate the negative impacts of some of the losses,” said Office of the President spokesperson Stett Holbrook.

Many members of the Berkeley community are saying all of this belt-tightening points to a deeper systemic problem with how we fund higher education.

“We need support as a public institution,” said student union president Vera. “We need support from our state government and we need support from our federal government, too.”

Three decades ago, the state provided half of Berkeley’s revenue. Today, it covers roughly one-seventh. Vernon said instead of focusing on cost-cutting measures and pursuing more commercial income streams, Berkeley should redouble its efforts to make the case for increased public funding.

“Our campus leaders haven’t done a good enough job articulating why UC Berkeley education is a public good that should get publicly funded,” Vernon said.

Rae said the university is continuing to advocate for more state and federal funding.

The Budget Act of 2020 included a stipulation that would have enabled campuses to receive up to $169.2 million. According to the UC Office of the President, this would have represented a 5% increase in funding equivalent to the FY20-21 state budget allocation before the pandemic. But Congress did not approve those funds.

Rae said Berkeley alone would have received around $40 million from the state if the funding had been approved.

Meanwhile, arguably the main reason for Berkeley’s existence — its students — are getting hurt as a result of the longstanding drop in state support.

“When we don’t get the proper funding we need to maintain our university, that impacts marginalized students in particular,” Vera said. “Not having access to tutoring, to retention recruitment programing, to affordable housing, it really impacts what it’s like to be a current student, what it’s like to live in the Bay Area.”

Copyright 2020 KQED