UC Budget Reliant on Tax Extension Approval

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With a $500 million reduction in state funding already signed into law, the UC could face even further cuts if $14 billion in state tax extensions are not approved - a scenario that could be possible given a recent survey showing that fewer than half of California voters favored the extensions.

As Republican legislators oppose the taxes and time is running out to place the extensions on a June ballot, the UC is facing the possibility of entering the next fiscal year $1 billion down if the extensions are not passed, forcing the campuses and the system's central office to contemplate unsavory fixes as mid-year stopgap measures.

Pushing the tax extension vote past June could wreak havoc on the UC budget, as it would hinder the university's ability to respond to an additional funding cut mid-year because of the loss of flexibility that comes with trying to generate revenue on such a short notice, according to UC Vice President for Budget Patrick Lenz.

"For a short period of time campuses would rely on reserves ... but I think that the fiscal crisis is so great that campuses are already looking at Plan B's," he said.

Such plans could include speeding up layoffs at the campus level or instituting a mid-year fee increase systemwide, Lenz said, although he added that such measures are purely hypothetical at this point in time.

Gov. Jerry Brown is committed to finding a bipartisan solution to the budget deficit, according to Evan Westrup, a spokesperson for Brown.

The extensions - which could raise an estimated $14 billion in revenue for the state by extending for five years increases enacted in February 2009 in income taxes, sales taxes and vehicle license fees, according to a state Legislative Analyst's Office report - face significant hurdles to being implemented. In addition to Republican opposition to the measure, public support for the measure appears to be dwindling.

According to a survey performed by the Public Policy Institute of California - a nonpartisan, nonprofit research group - only 46 percent of California voters approve of the tax extensions, an 8 percent drop from January.

Lenz said the low support figures could be a result of voters not having a "clear understanding of the repercussions" if the extensions are not passed because current polling questions are not tied to specific consequences - such as reduced enrollment levels at higher education institutions or shorter school years for K-12 - that could occur five years down the road.

If the tax extensions are not approved before July 1, the tax increases would expire, leaving a large amount of money to go unclaimed by the state and potentially having a significant effect on the passage of the tax extensions, according to Dean Bonner, a research associate at the public policy institute and co-author of the survey. If the 2009 tax increases expire before the vote, voters could come to view the tax extensions as tax hikes instead of a temporary measure, he said.

"It does allow the potential 'no' side of that campaign to really focus on the tax increase, whereas if you're trying to pass (the extensions) you may have a potentially better shot at that if you're talking about a temporary extension," he said. "Perception is reality on a lot of these ballot initiatives."

Because of the uncertainty surrounding the tax extension ballot initiative, both UC President Mark Yudof and the UC Board of Regents have not yet taken a position on the tax extensions, although they have both acknowledged that further funding cuts in the next fiscal year could be catastrophic for the university. Yudof has said he will not "sign a blank check" and will need to see the final form of the ballot initiative before endorsing it.


Jordan Bach-Lombardo is the lead higher education reporter. Contact him at [email protected]

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