Assembly hearing spotlights proposed UC cuts and deferred compact funding; LAO urges rejection of deferrals

Chair David Alvarez convened the Assembly Budget Subcommittee No. 3 hearing on UC finance to review the governor’s 2025 budget proposals that would reduce and defer parts of the multi‑year compact with the University of California. The administration’s Department of Finance described the budget as maintaining the compact but deferring certain payments and continuing efficiency reductions; the Legislative Analyst’s Office recommended the Legislature reject the proposed base deferrals.

“The governor's budget maintains the multi year compact with the university of California in exchange for clear commitments to expand student access, equity and affordability,” Jessica Deichman of the Department of Finance told the committee, while also explaining that a payment planned for 2025–26 was “effectively deferred to the 2027–28 year.”

Ian Klein of the Legislative Analyst’s Office told committee members the LAO recommends rejecting the proposed deferral of the base augmentation and the proposed deferral of nonresident replacement funding for UC, arguing the state had not identified how it would pay for those deferrals and that deferring now would likely shift costs onto other programs later. “Given the projected budget deficits, the state would likely not be able to provide the deferrals to UC or those payments would come at the expense of other programs,” Klein said.

University witnesses said the combined effect of the governor’s proposed 8% operational reduction and the deferred compact funding would create a multi‑hundred million dollar shortfall. Seiya Vertanen of the UC Office of the President told the committee the system faces a roughly $396.6 million reduction from the 7.95% base cut and that, together with other adjustments, campuses face budget gaps that would require further cost reductions. Vertanen warned that “class sizes will go up and time to degree will lengthen” if campuses are forced to reduce faculty or services.

UC San Diego Chancellor Khosla described campus‑level impacts in more detail, saying the campus faces a roughly $73 million gap when the 8% cut and a deferred $31 million nonresident‑replacement payment are combined. He said UC San Diego and other campuses had already implemented hiring freezes and were preparing for the possibility of layoffs and paused capital projects in response to uncertainty.

Committee members pressed the LAO and UC witnesses on alternatives for applying cuts, including focusing reductions on central administration or institutional support to minimize direct student impacts. The LAO presented options that would target UC Office of the President (UCOP) and administrative institutional support rather than academic affairs and student services; UCOP and campus leaders replied that some centralized services (for example, UCPath, HR and IT) provide functions campuses rely upon and that cuts there must be taken carefully.

The committee left the issue open for negotiations and further analysis; several members urged colleagues and the administration to find alternatives that avoid chopping student services and instruction.