The University of California was hit with $558 million in unanticipated costs in March alone due to the coronavirus, a staggering sum as students canceled housing and dining contracts, medical centers paused elective surgeries and campus costs soared for online learning.
UC President Janet Napolitano detailed the grim financial picture in a letter Wednesday to Gov. Gavin Newsom and legislative leaders and asked them for more funding to help cover the unprecedented costs.
She noted that the public research university system was incurring added expenses and revenue losses in multiple areas, as health centers treated high-cost COVID-19 patients, researchers worked on potential cures and campuses sent most students home. UC also has pledged to avoid layoffs of most employees.
“As the world’s largest public research university system, UC is confronting many of the worst impacts of the virus all at once,” she wrote. More funding, she added, would “help UC provide students the education they were promised, treat our employees with fairness and provide our communities with compassionate care.”
The 23-campus California State University system estimates its lost monthly revenue at about $100 million, according to spokesman Michael Uhlenkamp.
H.D. Palmer, a Department of Finance spokesman, said all requests for additional funding would be reviewed but that Newsom is preparing a May revision that is essentially flat and “could go further than that” — meaning budget cuts. The state could face a deficit of as much as $35 billion in the near future, legislative analyst Gabriel Petek said Thursday.
The impact on UC campuses could be particularly dire. Their unanticipated costs reached about $310 million in March — amounting to about 40% of $775 million monthly revenue in a system with an annual $9.3-billion core budget, according to Christopher Newfield, a UC Santa Barbara professor and systemwide budget expert.
Without additional funding, students may face larger class sizes, reduced course offerings, more difficulty getting into needed classes and potentially higher tuition, said Michael Meranze, a UCLA historian who has long studied UC finances. A generation of scholars could be sidelined if UC lacks the funds to recruit them, jeopardizing the system’s renowned innovation and intellectual leadership, he said.
“If they are not reimbursed, the losses caused by the COVID-19 pandemic will be disastrous for the UC system,” Meranze said.
Caroline Siegel-Singh, a UC San Diego student leader, said hiring freezes, furloughs or layoffs in coming months would reduce staff for needed student services, such as financial aid assistance and mental health counseling.
“If campuses have to eat these cuts, the unfortunate reality is that it will lead to a serious degradation of the student experience at the university,” she said.
Varsha Sarveshwar, UC Student Assn. president, said that campuses “did the right thing” in allowing students to leave, reimbursing their housing and meal plan payments and purchasing laptops and Wi-Fi for those who needed them. She said UC should not be expected to pay the costs of that support alone.
Napolitano’s letter provided the first detailed look at the extraordinary financial impact of the pandemic on the 10-campus UC system, which educates 285,000 students and employs 227,000 faculty, researchers and staff. The recently enacted federal Coronavirus Aid, Relief, and Economic Security Act, known as CARES, will provide an estimated $437 million in aid to UC campuses and medical centers, Napolitano said, but that would not fully cover even a month of the extra costs.
The federal bill provides nearly $14 billion overall for higher education. But the American Council on Education, an association of more than 1,700 colleges and universities, has criticized that sum as “woefully inadequate” and called for $50 billion in aid.
Colleges and universities throughout the state and nation already are beginning to take austerity measures as pandemic-related costs mount. UC Berkeley alone announced this month that the pandemic would cost the campus "$100 million and growing” with lost revenue from canceled housing and dining contracts, public performances and sports events, along with higher costs for technology.
UC San Diego Chancellor Pradeep Khosla said the campus losses for about 10,000 canceled housing and dining contracts could total nearly $40 million. The medical center had to cancel all elective surgeries and keep 40% of hospital beds open in case of a surge of COVID-19 cases, which could cost more than $40 million in lost revenue. Technology costs sharply increased as well, he said, as the campus purchased more than 500 laptops for students for the shift to remote learning.
“We are in for some really challenging times,” Khosla said in an interview.
The costs could continue to soar if campuses stay shuttered with remote learning through the fall — as Khosla said was a possibility. If they do, some students have said they will take a gap year or enroll at community colleges instead.
To reduce costs, UC Berkeley and UC San Francisco have instituted a hiring freeze, as have dozens of other campuses including USC, Stanford and Harvard. Those private institutions also have announced salary cuts for senior leaders.
As UC reels, it also will probably suffer the loss of new state revenue. Napolitano said that Newsom’s proposed 5% increase for UC, amounting to $217.7 million, was off the table for now, although additional funding would be considered after July tax returns are in.
In addition, UC regents have postponed a planned vote on a five-year proposal to raise tuition for incoming classes beginning this fall.
According to Napolitano, unanticipated new costs and revenue losses include:
- $310 million for UC campuses for canceled housing and dining contracts, facility cleaning costs and transitioning to remote instruction. An expected $260 million in federal relief won’t cover the costs, Napolitano said.
- $248 million for UC’s health system, which includes $170 million in losses from cancellation of elective procedures. The system’s six academic health centers have treated more than 1,000 patients for COVID-19. But costs to prepare and outfit entire facilities for critical care initially cost between $1 million and $10 million per patient in the early weeks. The health centers expect to receive about $177 million in funding from the Department of Health and Human Services.
- Greater demand for financial aid as massive job losses have upended family economic stability. But $130 million in federal emergency financial aid grants that UC expects to receive should cover the additional needs for the next several academic terms, Napolitano wrote.