The 2021-22 Budget: UC Division of Agriculture and Natural Resources

analysis full gutter The 2021-22 Budget: UC Division of Agriculture and Natural Resources FEBRUARY 2021 In this post, we analyze the Governor’s • Direct Allocation From UCOP. Historically, proposals relating to base funding for the Division the state has not earmarked funds specifically of Agriculture and Natural Resources (ANR) at for ANR but instead has given UC flexibility the University of California (UC). We first provide to determine the division’s level of support. background on ANR’s operations and budget. Prior to 2012, UCOP allocated a portion of the Next, we describe the Governor’s ANR proposals university’s General Fund support directly to and the additional ANR funding included in the ANR to support the division’s core operations. February early action package. We then offer our • Campus Assessment. In 2012, UC undertook assessment of the proposals and make associated a series of changes to the way it allocated recommendations. funds to its campuses and divisions, including ANR. Under the new funding model, UC Background allocated all state General Fund to campuses ANR Focuses on Research and Outreach. and charged campuses back an assessment UC’s ANR division oversees various programs to support central services and programs focused on agriculture, natural resources, and (UCOP; ANR; and UCPath, the university’s related topics. Its leadership is located at the systemwide payroll and human resources UC Office of the President (UCOP) in Oakland. program). UC implemented this change to Its core staff of scientists, researchers, and give campuses more flexibility and control outreach coordinators are located across three over their budgets and operations. campuses (Berkeley, Davis, and Riverside) as well • State Line Item. In 2017-18, the state altered as numerous off-campus centers and sites. Its this funding arrangement by directly budgeting core programs include Agricultural Experiment General Fund for UC’s central services Stations, which oversees federally and state-funded (including ANR) in the annual budget act. The research at UC’s three ANR campuses, and state established this line item in response Cooperative Extension, which oversees numerous to a report from the California State Auditor state and local outreach initiatives to farmers and that raised concerns over UCOP’s budget other community stakeholders. We provide a more transparency. Since establishing this line item, detailed overview of ANR’s staffing and operations the annual budget act has prohibited UC in our previous publication, The 2020-21 Budget: from assessing fees on campuses to support Higher Education Analysis. UCOP or ANR. (This prohibition also initially Funding Model for ANR Division Changed extended to UCPath, but since 2018-19, the Several Times Over Past Decade. Though state has allowed campus assessments to ANR relies on state funding to support its core supplement UCPath’s General Fund support.) operations, the state and UC’s approach to State Enacted Base Reduction to ANR budgeting for ANR costs has changed notably over Division in 2020-21. The state’s 2020-21 budget the years. Below, we describe three ways ANR has package reduced UC’s base General Fund support been funded. for central services and campuses. For ANR specifically, the state reduced base General Fund support by $9.2 million (12.7 percent) from the 2021-22 LAO Budget Series 1 analysis full gutter 2019-20 level. As a percent of operations, ANR’s reduction to ANR, the Governor’s budget reduction was comparable to UCOP’s reduction proposed authorizing UC to charge campuses new and larger than the reduction for campuses assessments. The proposal gave UC flexibility to (7.7 percent). (While UCPath also received a determine how to charge campuses to yield the General Fund reduction in 2020-21, the state proposed amount of ANR support. (In addition to authorized an increase in campus assessments, this base support, the Governor’s January budget such that total support for UCPath increased in provides ANR $2 million one-time General Fund as 2020-21.) part of a package of proposals aimed at addressing ANR Reports Budget Shortfall in 2020-21. wildfire issues. We describe this proposal in our Given the magnitude of the General Fund reduction handout, The 2021-22 Budget: Wildfire Resilience to ANR in 2020-21, UC estimates the division has Package.) a budget shortfall. In response to our information February Budget Agreement Provides More request, ANR staff estimated the shortfall to be State Funding for ANR. On February 17, legislative $13.1 million. To address this shortfall, ANR took leadership announced a new budget agreement several measures to limit spending. Most notably, with the administration affecting numerous areas ANR suspended plans to fill some vacant positions of the budget. For UC, the agreement entails (including those resulting from retirements). Staff full restoration of the 2020-21 base reductions, also notes plans to identify further operational including full restoration of $9.2 million General efficiencies and secure additional outside fund Fund for ANR. Legislative staff indicate that the sources (such as philanthropy and federal and state 3 percent base General Fund increase the Governor grants). Any ANR deficit in 2020-21 will be funded proposed in January, as well as the Governor’s out of UCOP’s reserves. campus assessment proposal, are still open issues. ANR Spending Plan Contains Various Cost Proposal Increases. In February, UC sent our office its In January, Governor Proposed Partial preliminary 2021-22 spending plan for ANR. The Restoration Using Mix of Funds. In January, spending plan is not connected to the funding the Governor proposed 3 percent General Fund level proposed in either the Governor’s budget or augmentations to UC’s central services and February budget agreement, instead reflecting an campuses. Much like for UCOP and campuses, independent cost pressure analysis conducted by ANR’s base augmentation—$1.9 million— ANR staff. Figure 1 shows ANR’s spending the would partially restore ANR’s base budget to its past two years, along with its spending plan for 2019-20 level. To restore the remaining $7.3 million 2021-22. The key elements of the 2021-22 plan Figure 1 Higher Proposed Spending for ANR Division (Dollars in Millions) Change From 2020-21 2019-20 2020-21 2021-22 Actual Estimated Proposed Amount Percent Core Spending $73.0 $76.5 $79.2 $2.7 3.5% Employee Salaries Faculty $27.1 $28.6 $30.5 $1.9 6.6% Nonrepresented staff 14.9 14.9 14.9 — — Represented staff 2.9 3.0 3.2 0.2 6.7 Pensions and Health Care Benefits $19.8 $20.7 $21.7 $1.0 4.8% Operating Expenses and Equipment $8.3 $9.3a $8.9 -$0.4 -4.3% a According to UC, much of the increase from the prior year reflects extraordinary one-time costs related to the pandemic. ANR = Agriculture and Natural Resources. 2021-22 LAO Budget Series 2 analysis full gutter include general salary and merit increases for Even were the Legislature to desire more funding faculty, merit increases for represented staff, and for ANR beyond restoration, we think there is little employee benefit increases. policy basis to generate this funding by charging campuses new assessments. Unlike UCPath, which Assessment provides administrative services directly to every Various Factors to Consider When Weighing UC campus, much of ANR’s activities occur off ANR’s Budget Plans. The state has only recently campus at various centers and community sites. started to earmark funds for ANR, such that it has Recommendations no established practice for determining ANR’s funding levels. While focusing on ANR’s underlying Revisit Base Funding for ANR in May. We cost pressures is a reasonable place to start, recommend the Legislature revisit base funding for the Legislature likely will want to assess these ANR in May. At that time, the Legislature will get pressures in the light of the state’s overall fiscal updated state revenue estimates and be in a better outlook. Some of ANR’s spending areas likely are position to assess the state’s ongoing budget high priority. For example, ANR will have to pay its capacity. In light of that updated information, share of benefit costs. Other spending areas, such the Legislature then could revisit the size of the as salary increases for academic employees, are proposed base increase for ANR. more discretionary in nature. The Legislature may Reject Proposed Campus Assessments. want to give particular attention to ANR’s proposed We recommend the Legislature reject the growth in salaries, which are notably higher than administration’s January proposal to authorize new most measures of inflation. campus assessments to support ANR. Instead Proposed Campus Assessments Raise of instituting new campus assessments, we think Concerns. In light of the February budget the state could fund essential ANR cost increases agreement, the Legislature might view the proposed directly using General Fund support. campus assessments as no longer warranted. LAO Publications This report was prepared by Jason Constantouros, and reviewed by Jennifer Pacella and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2021-22 LAO Budget Series 3