TheCookieMonster

Hi, I've been accepted into UC Berkeley for next year, and I'm seriously considering going there. I'm sure everyone who doesn't live in a cave has heard about California's huge budget deficit of $50+ billion dollars. Apparently the new Cali budget plugs up that deficit, but I've read that one of the things they cut is funding for universities, though I don't know by how much. Being from the east coast, I don't really know about the situation over there other than from what I read in the news. So I'm wondering, how will Berkeley be affected by this funding cut from the state?

killthefifi

I second this.
Other than getting no aid, I want to know what's being hurt by the budget.

ethancc2

Tuition fees, housing costs have been increasing every year. With another budget cut fees will only increase again.

The campus has already instituted a salary freeze and slowed hiring of new employees. Many classes are already over enrolled and with budget problems different departments cannot hire as many GSIs/TAs to lead discussion sections. Fewer GSIs mean less space in a class. Departments may also cancel classes due to budget problems.

In my opinion: I would've looked into other colleges/universities if I knew about the recession. The quality of Berkeley's education is decreasing every year while costs continue to rise. Berkeley is one of the most over enrolled UCs and yet we continue to expand 1-2% per year while all other UCs (except Merced) are decreasing/maintaining enrollment.

All other UCs are feeling the impact of the recession, but I wish I took up the offer I had from UC Irvine. It would've been no tuition for 2 years with priority class/housing registration from regents.

TheCookieMonster

Wow, is it really that dramatic? If they're cutting classes and professors, it would mean much larger classes, lower quality professors, and less variety. This basically means quality of education goes way down. I dunno if Cal would still be worth it.

jshue

any other sights from current Cal students?
I'm starting to worry now...

LeftistHominid

The budget basically crashed on the high school class of 2008 (I was high school class of 2007; my year always tended to beat the budget cuts and ****ifications by one year).

Chem 3A and 3AL used to be required to be taken together, but due to budget constrains the Department of Chemistry decided to delink the courses. The budget is taking many casualties. It will affect science and engineering majors more than others because they have expensive lab courses (versus humanities and social sciences which are cheaper to run, but then again these guys are losing money faster).

effward

@THecookieMonster
I assume they would cut the worst professors first, which would actually increase the average quality of the professors... but maybe they aren't that smart.

TheCookieMonster

Well, just got rejected from Cornell today, so going to Cal for sure. =P

So yea, I guess the school will be affected by the budget shortage, but hey, it can't last for four whole years and it can't affect education THAT much, right? ...Right?

dragonelf

okay... the cookie monster, I think you need to slow down and re-read ethancc22's post. Nowhere does he mention professors getting cut. First of all, it's almost unheard of to lay-off tenured profs (and pretty much any prof for that matter). Second, the real visible effects of the cuts is on the GSI/TA which means there are bigger discussion and it's even harder to get into the classes you want. yes, it sucks that the budget is getting cut... but it doesn't suck THAT much. At least we're not looking for jobs

Seriously, for the average Cal students, other than struggling a little more than usual during class registration to get the necessary classes, it's not too big of a deal. I certainly wouldn't avoid going to Cal simply because of the budget issue. Yes, it is overcrowded, but you're still getting a great education, albeit in huge class sizes.

dreamspace

how many % of the UC budget are from donation? I think this part will be affected the most.

sakky

I'm afraid that layoffs of profs does indeed happen, including (in rare cases) of tenured profs. Not at Berkeley (at least, not yet), but it has happened at other schools.

FSU braces for massive faculty layoffs | tallahassee.com | Tallahassee Democrat

News: Turmoil Over 70 Faculty Layoffs at Clark Atlanta - Inside Higher Ed

Trustees tweak UF budget cuts | Gainesville.com | The Gainesville Sun | Gainesville, FL

Faculty layoffs loom - News

Actually, while Berkeley hasn't (yet) announced faculty layoffs, they are definitely reducing hiring.

However, the estimated $60 to $70 million cuts in UC Berkeley's budget this year will restrict campus hiring, officials announced yesterday. ...There are 25 searches for new faculty members this year, according to Executive Vice Chancellor and Provost George Breslauer-in contrast to the 131 searches that took place last year.

UC Berkeley to Restrict Hiring of New Professors - The Daily Californian

What that means is that the faculty will inevitably shrink due to inevitable attrition. Every year, some faculty members leave, either voluntarily because they either retire or take an offer from another school, or involuntarily in the case of junior faculty who are denied tenure and are hence terminated. Because of the reduced hiring to replace those who leave, the faculty size will shrink.

"If someone does leave voluntarily, I think the chances are very good that the positions will be left vacant," he said. "People do retire ... We're simply not replacing them."

UC Berkeley to Restrict Hiring of New Professors - The Daily Californian

sofla951

It will effect Berkeley but the school will survive. Berkeley is used to a lean budget. Berkeley got 115 in research from the government the other day and will also be helped out more so than privates by Pell Grant increases. Berkeley is not any worse off than the privates because they became so dependent on their endowments and increased spending so much that they are know cutting millions from their budgets. I expect that we'll see endowment losses in excess of 33% by the end of the year. Many of these universities are in deeper in trouble than just loss in endowment because many have contractual obligations to invest certain sums. Here is an article written about Duke's possible situation that I found and I expect the situation is the same at many other private schools.

In a way there was an "education bubble" the past few years as many school's budget grew extremely fast believing their endowments would continue to increase.

sofla951

Wednesday, February 25, 2009
Duke has now lost $3 BILLION in financial crisis

Duke University has so far lost a staggering $3 billion (yes BILLION with a B) in the world-wide financial meltdown. And if you are asking right away why you are learning this from us, and why you did not hear it from the Brodhead Administration, you have identified an additional dimension of the crisis on this campus.

The communications debacle began with an October e-mail from President Richard Brodhead. As other universities were reporting huge declines in endowment, Brodhead pronounced Duke's finances "stable" and "secure." Chair Robert Steel echoed this reassurance after the December Trustee meeting, repudiating the "no reporter's" rule he initiated just two months earlier and beaming "good news" to The Chronicle.

That's why we were so shocked nine days later to hear again from Brodhead, this time under cover of the exam period, when he admitted our endowment -- once $6.1 billion -- had lost 19 percent.

Executive Vice President Tallman Trask has now been sent out twice with updates: the decline tweaked to 20 percent in mid-January and by early February it arrived "in the mid 20's." We'll say 25 percent to make our work easier, though our source tells us it's closer to 27.

Trask's percentages equal a loss of $1.5 billion in the endowment. Unfortunately, Steel, Brodhead and his administrators have given no nuggets of information about other classes of assets, which have also been hit hard. So we will calculate.

There are additional billions in the same investment pool as the endowment -- subject to the same percentage loss. One good source says $3.7 billion more, but we cannot confirm that. Here's what we do know:

sofla951

Trask has confirmed the pool holds surplus (dare we say profits) from the health system. Total: $1.4 billion.

And the pool apparently includes Duke's pension fund, confirmed at $1.3 billion.

A 25 percent loss here $680 million.

There's an additional nugget of $651 million (as valued at the start of fiscal year on July 1, 2008) counted as a university asset, even though it technically is under the umbrella of a separate entity, The Duke Endowment, which holds approximately $3 billion for all its beneficiaries. The 25 percent loss applies here too, and that's an additional $163 million gone from the list of university assets.

Lastly, we want to consider the portion of the university endowment that we spend annually. We calculate that Duke used up $418 million in the last fiscal year, and it's believed this year's secret budget calls for $450 million. Normally this spending is covered by earnings -- dividends, interest and capital gains. But with current capital losses, there are no net earnings, meaning this year's endowment spending must come out of principal.

sofla951

In a liquidity bind, Duke borrowed $500 million two weeks ago to meet this cost in the next 12 months. The alternative would have been to sell assets at current depressed prices. In retaining the assets, Duke is gambling prices won't go down more. And it's a further gamble that prices will go up enough to justify interest costs -- but that's an analysis for another post.

An invasion of principal will be repeated every year until the crisis is resolved; last week Trask said projections of where this might lead "become rather terrifying."

In addition to the $450 million invasion by June 30th, which is the same as a loss, interest on the five year bonds that Duke issued will be $80 million or more.

Trask did announce $150 million in spending cuts last week -- formulated with hardly any consultation with faculty, students and alumni. This move will hardly ameliorate Duke's crunch, because other sources of income -- contributions, grants for research, and on-time payments by patients in the health system, to cite just a few examples -- are also drying up. Initial plans for these cuts were laid weeks ago -- with no indication the intensifying deterioration in the economy has changed them.

Returning to Duke's assets -- so far we've discussed a loss just short of $3 billion and the hemorrhaging is not over. The pace of Trask's advancing our loss from 20 to 25 percent suggests we're dropping more than $100 million a week.

(We do not have the precise date of Trask's February update because The Chronicle did not bother to file a story when told of this deepening loss. Ten days ago we gave The Chronicle access to the information you are reading now and the newspaper has not utilized it in any way. We will review the newspaper's performance in a comprehensive, future post. Similarly, Steel has not reappeared since the "good news," and we will profile his actions separately at a later date.)

The news gets worse when we consider the Harvard Factor. In initially reporting a 21 percent loss on its endowment, Harvard officials noted that investments in private equity and hedge funds were still on its books at overly optimistic prices. When these investments are "marked" at true value, to use the Wall Street term, Harvard anticipates its loss will be 30 percent. Barrons, the weekend magazine of the Wall Street Journal, estimated many universities would see a 50 percent decline.

Beware. This is precisely where Duke has concentrated its investments. On July 1, 2008, just before the meltdown began, Duke had 42 percent in hedge funds and 23 percent in private equity situations. (There are minor variations on these percentages in various reports.) Typically such investments are locked in place for the long term by contracts.

Duke faces an ominous downside potential here, and it is going to grow. We believe Duke has contractual obligations to invest $2.3 billion of new money in hedge funds and private equity in the next two years. Such continued investments are routine in these kinds of deals.

Those are big numbers. Lest we become desensitized, we invite some perspective on how significant the losses really are. In a recent year, Duke added $125 million in contributions to its endowment. Our $1.5 billion loss in the endowment alone -- so far -- wipes out 12 years of giving.

Similarly, Brodhead's Financial Aid Initiative eked out $308 million over four years (three of them in public). Duke's endowment loss means that five times
as much has disappeared in the meltdown.

And more. The loss of $1.5 billion in endowment will reduce our annual spending under the Trustees' five percent rule by $75 million. The much ballyhooed increase in need-based undergraduate financial aid this year involved only $11 million.

A substantial loss in pension fund assets will necessitate larger annual contributions to maintain the funding status of the plan, putting more strain on the annual budget.

As the economy continues to droop, so does Brodhead's profile. He did speak at a meeting of the faculty senate at the start of the academic year, appending to his previously scheduled annual message in a open session that was held in a sub-sub basement room in the Divinity School, a room that seats 117.

Last week Brodhead returned for an executive session of the senate, known as Academic Council.

The president has not reached out at all to students, parents nor alumni.

The nadir of the leadership's response was a clandestine retreat that Brodhead and Steel put together ten days ago, with a rebuff to The Chronicle's request for names of principals and advisers. We can only hope the agenda embraced the increasing certainty that we will not somehow jolt out of this quickly.

Our commentaries about Duke's governance have had a consistent mantra: Let there be light. Let us have transparency and accountability. That message was important in boom periods, it is greatly magnified by current conditions.

By refusing to even acknowledge the extent of the calamity -- much less to discuss it openly and honestly with all stakeholders -- Duke's president and chair have eviscerated their credibility.

Note: the preparation of the above report was made more difficult by the Brodhead Administration's failure -- unprecedented in Trinity College and Duke University history -- to produce an annual report for the 2007-2008 school year; material that is on line is for the period ending June 30, 2007. Policy also made our work difficult: Vice President for Public Relations Michael Schoenfeld has consistently told us we are entitled only to public reports, with no help in understanding or interpreting them.