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Chapter 32: A New President and an Economic Crisis
The President who presided at that meeting, J. W. Peltason (1992-95), had been among the founding faculty and administrators at UC Irvine. Peltason left Irvine to accept the post of Chancellor of the University of Illinois—Champaign-Urbana in 1967 but accepted the invitation to become Irvine's second Chancellor in 1984, after a career that included seven years as head of the American Council on Education. He was a widely respected and nationally known figure in higher education as well as a seasoned administrator thoroughly familiar with the UC system.
He was noted for his insight, equanimity, and good humor, qualities he often had occasion to summon in his new post. In addition to enduring unrelenting newspaper attacks and embarrassing revelations about University management, he inherited a budget crisis of mammoth proportions. "I knew the Regents wanted me to hit the ground running," he said at his first Regents' meeting as President, "but I didn't know they meant running and ducking."
The good times of the 1980s had masked some serious structural problems, both in the California economy and in the state budget process. The end of the Cold War had spelled the end of California's military-based industries, a bitter blow to the economy. The state, accustomed to brief recessions and quick recoveries, found itself mired in a seemingly endless downturn. It was, in fact, the worst economic slump since the Great Depression.
And Proposition 13 and its aftermath—including Proposition 98, which was passed in 1988 and required that 40 percent of the annual state budget be allocated to the K-12 schools and the Community Colleges—had not only shrunk revenues but also drastically curtailed the Governor's and the legislature's ability to control the state budget. By the early 1990s, 85 percent of the state budget was already allocated before a single decision about spending could be made, as a result of various initiatives, statutes, and mandatory spending requirements. UC, along with the California State University, was locked into that unprotected 15 percent of state programs.
Between 1990-91 and 1993-94, the University's cumulative budget shortfall—the difference between what it would have gotten under normal circumstances and what it actually received—came to nearly a billion dollars. The measures UC took to deal with this staggering gap in its state-funded budget included three early retirement programs, cutbacks in administration, deferred salary increases—in one year, salaries were cut—and higher student fees.
One apparent casualty of the state's plunge into fiscal crisis was the proposed tenth campus. The University's arguments to state officials about the need for three new UC campuses had largely fallen on deaf ears in 1988 and 1989; portents of economic trouble were already in the air. The University, however, had gone ahead with plans to select a site for a tenth campus in the San Joaquin Valley, and in 1995 the Regents voted to accept a gift of more than 7,000 acres near Merced's Lake Yosemite from the Virginia Smith Trust. The next step—an expensive one—was environmental planning for the new campus. Peltason reluctantly concluded that there was no point in going forward with environmental impact reports when there was no money to build the campus.
To his surprise, he was summoned to Sacramento by legislative leaders who demanded to know why the University's plans were being delayed. He explained that the environmental impact reports would cost a million and a half dollars, and that was just the beginning. The legislature would see that the University got its one and a half million, he was told, if he agreed to go ahead with the EIRs; if he refused, the penalty would be the loss of a planned $50 million budget allocation to support UC faculty salaries. Since UC enthusiastically supported the much-needed campus and desperately needed the funds for faculty salaries, Peltason's response was instantaneous: "You've found my price—fifty-one and a half million dollars." Plans for the tenth campus proceeded.
Shortly after becoming President in October 1992, Peltason announced a program of four initiatives to protect the University's quality. The most significant was a long-range planning initiative intended to cushion the University against wide swings in state funding despite California's fiscal problems and its convoluted budget process. Although a solution to budgetary gridlock did not emerge from this effort, something vitally important to the University did.
UC officials told Governor Pete Wilson that the University's survival as one of the world's great academic institutions required an end to the steep budgetary slide of the previous few years. A floor under the University's budget, they argued, would allow UC to plan for the future with some confidence instead of struggling from crisis to crisis. The Governor was convinced. He agreed to a compact with the University under which UC was promised a certain level of funding over the next four years, beginning in 1995. After years of fiscal free-fall, the University had at last gained a stable footing.
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The Regents of the University of California. All rights reserved.
Last updated 09/29/05.