UC San Diego Facing Potential Fiscal Disaster

Photo of Chancellor Khosla speaking overlaid with a chart of UCSD's deficit Kristina Stahl / The Triton

UC San Diego is facing a projected $24.2 million budget deficit in the 2021–22 fiscal year. According to Chancellor Pradeep Khosla, despite improvements in reputation and advancements in research, UCSD will need an additional $35 million in funding each year in order to stay financially afloat.

The $35 million in additional funding is the number of funds needed to sustain core university operations such as faculty salaries, increased union wages, utilities, financial aid, and infrastructure upkeep. According to Campus Budget Office Assistant Vice Chancellor (AVC) Sylvia Lepe, if the budget does incur a deficit, the university would most likely slow down their expansion efforts. Investments in hiring, construction, and new programs would potentially be slowed or halted until the funds are available.

For the 2018–19 budget, there was a $28.4 million surplus due to an increase in undergraduate enrollment, stronger grants and contracts, and income from self-sustaining departments such as the UCSD Bookstore, medical centers, and Housing Dining Hospitality (HDH). Despite the surplus, UCSD is expected to break even this year due to a decline in revenue growth caused by  an out-of-state student enrollment cap. If trends continue, the deficit could grow to $58.3 million in the 2022–23 fiscal year and continue to grow by $35 million per year, according to the Chancellor’s Office.

The Chancellor’s Office identifies union contract salary increases, competitive pay, and student success as key expenditures putting pressure on the budget. Meanwhile, industry partnerships, fundraising campaigns, real estate, educational innovation programs, and achieved out-of-state enrollment targets were identified as opportunities to increase revenue.

Over the past ten years, undergraduate applicants to UCSD have more than doubled while enrollment has increased by nearly 35%. UCSD has identified investments in faculty, advising, student services, academic infrastructure, and housing as key requirements to keep pace with increased enrollment.

Over the past 20 years, decreases in state funding and increases in enrollment have coincided with increases in tuition and non-resident enrollment in the UC system. Despite an increase in funding from the 2019 state budget and the possible approval of an education infrastructure bond, AVC Lepe told The Triton that the university needs to diversify revenue sources because it cannot depend on the state to provide recurring funds or the UC Board of Regents to continue increasing tuition.

Private donations are an increasingly important part of the equation for UCSD’s budget. The university endowment has increased by around $1.2 billion since 2012 and now provides over $48 million in operating funds annually.

In August 2019, UCSD reached its campaign goal of $2 billion in private donations three years early, and university administrators told The San Diego Union-Tribune they expect to raise another $1 billion by 2022. The rapid increase in private donations is largely thanks to the efforts of Chancellor Khosla and UCSD Chief Financial Officer (CFO) Pierre Ouillet, according to AVC Lepe.

Prominent UCSD donors include the Jacobs family, Qualcomm co-founder Franklin Antonio, and former Facebook engineer Taner Halicioglu. The Jacobs family donated $100 million to help fund the Jacob’s Medical Center. Halicioglu, a UCSD Computer Science and Engineering alum, donated $75 million in 2017 to fund a data science institute. Antonio donated $30 million to help fund a new engineering building set to begin construction in Earl Warren College January 2020.

Although UCSD has been successful at courting prominent wealthy donors, only around 4% of alumni donate to the university.

UC Berkeley raised $1.2 billion in private fundraising over the past two years which served as a significant new revenue source for ending a $150 million budget deficit. The most significant budget cut made to close the deficit included reducing administrative staff by 500 employees. If UCSD makes budget cuts to address fiscal difficulties, administrative staff would likely be the first to experience cuts, according to AVC Lepe.

While AVC Lepe says the chances of layoffs are slim, the university currently plans to reorganize administrative offices, implement new enterprise software, and grow full-time staff by 14% to meet the increased workload of managing an expanding university.

At the same time, UCSD is planning on adding between 150–200 tenure-track faculty and approximately another 200 adjunct faculty. This would reduce the student-to-faculty ratio to 24-to-1 by 2023. A competitive job market, capped out-of-state enrollment, and prolonged tuition increase freezes are identified as potential challenges toward increasing faculty numbers.

Chancellor Khosla told Associated Students of UCSD (ASUCSD) President Eleanor Grudin during their September meeting that the budget forecast is bad, but UCSD is better positioned than other UC campuses who are confronting fiscal difficulties now, whereas UCSD currently has two years to prepare for potential financial difficulties.

One solution the UC Board of Regents is exploring for increasing university funding is a cohort-based tuition system. Under cohort-based tuition, tuition costs would be fixed to the total paid during a student’s first year of enrollment. Tuition could still be raised for future incoming classes, and their tuition would be fixed at the new total.

“This is just tuition increases by another name. It’s looking to create a more palatable way to deliver those bills to students,” Jessica Thompson, director of policy and planning for the Institute for College Access and Success, told EdSource.

ASUCSD President Grudin believes funding difficulties across the UC system are the underlying reasons that the UC Board of Regents is considering cohort-based tuition.

“They, [UC leadership], should probably mention we are going to be in financial crisis if they are going to push so hard for cohort-based tuition, so that folks understand the reason,” ASUCSD President Grudin told The Triton.

The UC Board of Regents are expected to discuss cohort-based tuition during their November meeting at UCSF.

Mo Al Elew is a Senior Staff Writer for The Triton. You can follow him @SoloMune.