Confronting a ‘New Normal,’ Berkeley Considers Cuts

Facing a $150-million budget deficit, leaders of one of the nation’s most prestigious public research universities on Wednesday announced an effort to provide long-term financial stability to the institution and become less reliant on state money.

Nicholas B. Dirks, chancellor of the University of California at Berkeley, released an open letter to his campus, saying that the “new normal” required the institution to embark on a broad strategic-planning process that will include overhauling the university’s work force and academic structures, improving fund raising, and expanding online-degree offerings.

Increasing costs of employee pensions and health care, a planned rise in enrollment, and a shrinking share of state money make it necessary to both cut expenses and look for new sources of revenue, said the chancellor.

“Every aspect of Berkeley’s operations and organizational structure will be under consideration,” Mr. Dirks said in his letter.

Members of Berkeley’s Academic Senate have already been involved in discussion of the strategic plan, the chancellor noted, but the scope of possible changes now requires campuswide discussion and cooperation.

“Even as some of the investments we make will be greeted enthusiastically, we also know that some of the changes we will undergo will be painful,” Mr. Dirks wrote.

How Berkeley Got Here

The conditions that led to Berkeley’s budget shortfall are familiar to public colleges across the country.

Tuition now makes up an estimated 30 percent of total revenue for the institution, according to figures from Berkeley, while state appropriations to the university have fallen to just 13 percent. And the cost of employee benefits has doubled since the 2008 budget.

But the university faces some special challenges in dealing with those issues, said Mr. Dirks and other campus officials. Unlike some other public universities in the state, Berkeley does not have a hospital to provide additional revenue, the chancellor said.

And the state has not issued any bonds for university construction since 2006, according to Berkeley. During that period, however, the institution has spent more than $2 billion on building projects, 60 percent of which were necessary to protect the campus from earthquakes, according to the university’s data. That cost has caused an increase in annual debt service from $25 million annually to $100 million.

On top of those challenges, a 2015 budget deal between Gov. Jerry Brown and the university system’s president, Janet Napolitano, froze tuition through the 2018 academic year in exchange for a 4-percent increase in state money annually for four years.

Some of the leadership and faculty on the Berkeley campus were disappointed at that result, though they avoided criticizing Ms. Napolitano directly.

“I would have hoped for a different outcome on a number of things, but I don’t know what the political realities were,” said Benjamin E. Hermalin. a professor of finance and economics at Berkeley and chair of the campus’s Academic Senate.

The chancellor said Ms. Napolitano “did a terrific job negotiating under very difficult circumstances.” The agreement “brought clarity to our budget situation,” he said.

In a written statement, Ms. Napolitano said the budget challenge “resulted from a variety of factors, some being well-intentioned campus choices made over time.”

While other campuses in the system do not face the same budget challenges, Ms. Napolitano added, the lessons of Berkeley’s strategic-planning process “will be useful to all of the University of California.”

Few Details

So far, however, Berkeley officials have had little to say about the next steps in the planning process or specific goals and actions, aside from assurances about maintaining the university’s academic reputation.

Some measures are already underway, such as improving the institution’s ability to raise money, which has paid off with record donations of $462 million last year, Mr. Dirks said.

The university is also considering ways to profit from its real-estate holdings and brand-licensing agreements.

Other possible measures, however, will be taken more deliberatively. In considering what academic programs or schools might be consolidated, the process could take several years, said Andrew J. Szeri, the university’s vice provost for strategic academic and facilities planning, during a phone call with reporters.

Although the chancellor’s letter to the campus said the process would consider “every aspect” of the university’s operations, some things will be off-limits. The “global campus” that Mr. Dirks proposed for nearby Richmond Bay in January 2015, for example, will be “entirely supported by philanthropy and external partnerships.”

The chancellor also said it was unlikely that any of the university’s athletic teams would be eliminated. Instead, the plan is to pay more athletic costs with help from donors.

The uncertainty and lack of specifics have already caused concern among faculty members.

Kurt Spreyer, a lecturer in environmental science, policy, and management at Berkeley, said adjunct faculty members like him, who make up about a third of the faculty, have not been involved in any of the discussions yet. “That doesn’t bode well for the future,” he said.

Mr. Hermalin said he was concerned but thinks the problems can be dealt with.

“It’s critical for people to understand that it’s a serious challenge,” he said, “but it’s something we are capable of solving.”

Eric Kelderman writes about money and accountability in higher education, including such areas as state policy, accreditation, and legal affairs. You can find him on Twitter @etkeld, or email him at eric.kelderman@chronicle.com.