Due to a state budget shortfall, the University will not be able to offer systemwide salary increases to employees and will defer progress on changes to the faculty salary scales for 2008-2009, UC officials say. The final state budget adopted by Governor Arnold Schwarzenegger and the Legislature for the 2008-2009 fiscal year does not provide funding for systemwide salary increases, expanded student enrollments, or inflationary increases in fixed costs such as utilities and health benefits. As a result, the University must make about $100 million in cuts internally to address the shortfall. Additionally, given the immediate and near-term projections regarding the state economy, the state Department of Finance recently informed UC that, as part of the state’s effort to achieve $340 million in additional savings across all state agencies, the University will need to achieve another $33 million in savings to offset reduced state funding. This means that the University of California will need to make a total of $148 million in budget reductions in the 2008-2009 fiscal year. UC has been able to save $28 million from changes made at the Office of the President in Oakland, which is also included in the budget. Although UC avoided deeper cuts than other entities, the final state budget for 2008-2009 essentially means that UC received no increased funding for core costs, including employee compensation and benefits. Wages for union-represented employees are subject to collective bargaining, and obligatory merit increases for faculty will follow UC policy. Competitive pay and benefits for employees are among the University’s top priorities, as they are fundamental to rewarding UC’s hardworking employees for their many contributions to the University, and are critical to UC’s ability to attract and retain quality personnel. Throughout the budget process, UC continually stressed to the Legislature and the governor the importance of competitive salaries and benefits. At UCSF, the issue of compensation is part of the overall vision to create a supportive work environment. The UCSF Strategic Plan specifically states that the University “must work to provide more attractive and competitive compensation packages.” Fortunately, medical and retirement benefits for UC employees remain among the best in the country. As was recently announced, the University has taken extra steps regarding 2009 employee medical insurance rates to help shield employees from escalating health care costs. Not only is UC continuing to pay the vast majority of next year’s premium increases, but UC is applying a special, onetime subsidy to defray the employees’ share of premium increases. UC is also continuing its salary-based approach to rates, so that lower-paid employees pay lower monthly premiums. The net result will be that many employees will see either decreases or only modest increases in their monthly premiums for the exact same benefits as last year – no benefits are being cut. Health insurance rates for union-represented employees are subject to collective bargaining. The University values deeply the many contributions of its faculty and staff and their ongoing dedication to the University, especially during these difficult economic times. UC will continue to impress upon state officials the critical importance of competitive salaries and benefits for all employees.