BUDGET ANALYSIS - PROBLEM STATEMENT

INTRODUCTION

The Library's long term funding difficulty is a 360° problem, with financial pressures from all sides. One way to envision them is with the following schematic.

Following is a brief discussion of each of the major forces affecting The Library's budget planning, not just for FY1998, but for the next five years.

COLLECTIONS: A DECADE OF CONTINUING AND RAPID EROSION

Beginning in 1989, even before the onset of California's deep and debilitating recession of the early 1990s, allocations for The Library's annual collections budget had moved to a nearly flat growth path that fell far short of the rising cost of information. While the rest of the economy has enjoyed the benefits of declining rates that are today running at about 2% per year, inflation averaging nearly 9% has continued its unabated assault on The Library's collections budget. The contrast between anticipated collections costs and current University budget commitments to The Library's is striking. As the chart below illustrates, the purchasing power of the collections budget at the end of the decade will be half of what it was in the late 1980s.

This erosion in purchasing power has already affected The Library's ability to simultaneously maintain its policy of comprehensive and deep collecting in support of all of Berkeley's academic programs. Even with the temporary collections supplements that will be available from 1997 to 1999, the decline in volumes added will continue to accelerate. In an era in which the volume of information is exploding, The Library will be able to purchase only half of what it was able to buy only a decade before. This will require new strategies for setting priorities among collections supporting the many academic programs or letting collection quality decline across the board.

OPERATIONS: COMMITMENTS WITHOUT PRIORITIES

Rather than having a coherent, prioritized program plan, The Library runs a network of facilities whose budget primarily reflects historic patterns. Exclusive of the collections budget, Library operations are held rigid by four interdependent factors:

The consequence of these factors is striking. Even after seven years of steady budget cutting and the loss of 40% of the professional librarian positions (primarily from three VERIP's), University allocations to The Library are barely sufficient to cover remaining operations. The current year's operating budget of about $16.6 million, for example, breaks down into the following distribution:

Such a distribution between personnel and non-personnel costs gives the budget a rigidity that hobbles the reallocation of resources as external conditions and priorities change. It creates a de facto priority to maintain funding for all current positions, regardless of other needs. The problem is exacerbated by the demographics of the work force. Consider, for example, the follow characteristics:

Incumbents in the senior ranks (Librarians III to V) make up over half of all librarians. The average tenure at UC is about 19 years and the average salary within this group is over $60,000.

Similar statistics describe other senior professionals. For example, the average tenure of Librarian Assistants IV and V is about 18 years. Though salaries are somewhat lower in these ranks, they still average nearly $40,000.

Thus despite large numbers of retirements in recent years, The Library's staff demographics still describe a work force at the upper end of seniority, rather than a more even distribution. This is more than a statistical issue, since The Library's demographics also indicate that these staff may begin to retire in relatively large numbers within the next five years or so, creating a crisis in succession and institutional memory. In the meantime, however, turnover remains relatively low.

The characteristics that describe Berkeley's library work force are present in other major university research libraries as well. However, at Berkeley the distributions are more extreme. Consider the following insights culled from recent statistics published by the Association of Research Libraries (ARL).

The result is a budget taken up almost entirely by salaries. *Note But the cost of these work force demographics is more than financial in at least two respects.

First, it has resulted in mismatches between skills of the remaining staff and critical needs of The Library. These skill mismatches may be either in the nature of scholarly subject requirements, or in the area of technical capabilities. The Library is beginning to experience the problem of overburdened selectors carrying assignments that do not reflect their training or experience.

In an era of rapidly changing information technology, however, The Library still needs more staff trained in new disciplines, including:

A second, but related cost of this budgetary rigidity is that it gives The Library no means of internally generating new funds to invest in the development of improved service and business practices. For example, most of the professional librarians received their formal educations in the 1960s and 1970s. As their cadre shrinks, more and different services are expected of them. Yet, assuming most of these individuals will be with us into the next decade, The Library has no money to devote to the aggressive mid-career retraining that will make them and the institution responsive to the needs of a changing student body and rebuilding faculty. Thus The Library faces the unusual paradox of having too much of its budget tied up in salaries, even as it struggles with the problem of too few staff to meet user expectations.

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* Note: University practices allocate only salaries to control unit budgets. If we imputed benefit costs to Library operations, then personnel would take up about 92% of the budget.

UNMET INVESTMENT NEEDS IN A RAPIDLY EVOLVING ENVIRONMENT

Beyond staff training to reflect required changes in library operations lie several other major needs.

  1. There is a growing backlog of facility maintenance problems. High priority deferred maintenance projects (largely oriented to health and safety needs) exceed $1 million in value.

  2. The Library's growing investment in technological applications of all kinds has led to the need for a continuing equipment replacement program of at least $500,000 per year. An inability to maintain and upgrade high technology equipment will prevent rapid movement to cost-effective digital collections, and could lead to failures in critical Library systems.

  3. The evolution to new digital applications promises to yield significant long term savings in the acquisition and management of Library collections, along with improved services to Library customers. There are, however, no continuing funds available for these investments, which will often require significant front-end costs in hardware, software, and digital media.

In sum, The Library's staffing structure results in an inability to generate capital for basic maintenance and replacement, to say nothing of funds for investment in new service models, staff retraining and electronic resources. This suggests a Library struggling just to hold even at a time when new faculty are joining the campus, creating quantitatively and qualitatively different demands on the infrastructure for scholarly information. Combined with the demands of more technologically demanding students, this means that The Library will be unprepared to meet the University community's expectations by the beginning of the new century.

EXTERNAL FUNDING SOURCES: THE PROMISE NOT YET FULFILLED

Within the last two years, The Library has been exploring ways to supplement its basic University allocations. The three most likely ways to develop external financial resources are through private donations, user fees and profit-making enterprises.

Fundraising from private sources holds much promise and The Library has put together a strong development program with augmented staff. However, it is clear that even the most aggressive fundraising program will not pay off in terms of significant annual income until after the turn of the century. Even then, private donations are often conditioned on uses which may not be high priorities for The Library or its customer base.

In the meantime large numbers of users (alumni and others) present a continuing demand on Library resources for which The Library receives no compensation. Not only do all Alumni association members receive free library privileges, but the revenue for library cards issued to other users (over $100,000 per year) goes back to the state. For these reasons and others, The Library will inevitably have to face the question of user fees for selected services.

Profit-making enterprises are a very attractive option, particularly in this pioneering stage of a technological era. The Library has already begun exploring several strategic partnerships which might eventually result in new income sources. But as with any start-up, the early years will require funding, with the payback not being realized for some time. For example, the EBSCOdoc venture only generates about $50,000 in net revenue per year, hardly enough to significantly improve The Library's financial base. Moreover, the campus' recharge oversight policies sharply discourage market pricing practices that might generate additional income.

Absent from the foregoing discussion is an analysis of institutional grant funding possibilities. The assumption is that grants are a declining factor in library finance and cannot be counted on as a significant means of system support.

CONCLUSION

The Library recognizes the need for and is committed to making fundamental changes in how it fulfills its mission as the provider of a critical information infrastructure for the University. However, there are fundamental structural problems in how The Library is supported financially. These problems affect collections, operations, capital investment and external funding strategies. If The Library is to retain its essential role in the next century, it will be necessary for the University to break the logjam in at least one of these areas. Otherwise, a financial straitjacket will exert ever-tightening limits on The Library, resulting in a continuing, long-term and irreversible decline in its usefulness to the University community.

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Copyright © 1997 Regents of the University of California. All rights reserved.
Document authored by: Michael Rancer, July 1997.
Document maintained by: Ann Moen.
Last update 1/26/98. Server manager: contact