I doubt that Merced is pulling from Berkeley significantly. I wonder, however, how Merced is affecting the top CSUs as well as the (relatively) local CSUs.
Personally, as a southern Californian who is a Cal alum, I think Berkeley has its head in the sand. In the past three years, we have been to two Cal prospective student admissions presentations & tours, attended Coast to Coast as well as a weekend overnight potential student recruiting event at Cal. The people at Berkeley know their weaknesses (housing shortage, difficulty getting classes, difficulty finding friends, cut throat, sketchy neighborhood, low four year grad rate, etc.) but avoid discussing them and don’t have answers when asked (and they are asked at EVERY presentation we’ve attended). UCLA has many of the same problems but they address them up front during the pre-tour admissions presentation with a positive spin. In our experience, after visiting both schools with prospective students, they feel optimistic about their future when leaving UCLA but wonder if they will be just another number after leaving Berkeley.