Our core funds deficit compounds each year it's not resolved. We must make strategic changes in how we fund our mission.  

Take a few minutes to learn about the UC Davis budget and our core funds challenges.

• What is the current status of UC Davis' core funds deficit?

• What are the drivers of the core funds deficit?

• What are we doing to fix the core funds deficit?

What is the current status of UC Davis' core funds deficit?

Updated as of July 1, 2024 

Student tuition and unrestricted state funding are called “Core Funds,” and are the primary financial resources for our campus educational mission — but only make up about 16% of the UC Davis budget. Over the years, the state has provided a shrinking share of our core funds, while our employment costs have continued to rise. Recent increases in state funding and tuition revenue, while helpful, have not been sufficient to cover our increasing costs. 

• There continues to be an estimated structural deficit in our core funds of $40 million at the end of fiscal year 2024-25 growing to $78 million in 2025-26 if no additional actions are taken.
• Estimates reflect $108 million in savings targets that have been allocated, a process started in 2020-21. This includes an additional $29 million in savings targets allocated to units and central campus in 2024-25.
• Every year that we do not address the structural deficit, it compounds, accumulating a one-time debt that must be addressed with one-time resources. We have also applied $210 million in one-time funds from central campus and carryforward funds from administrative units to manage this debt since 2020 — an option which limits investing in other needs.

Core funds multi-year projections: The graph shows the structural deficit is projected to be $40 million in fiscal year 2024-25, but the deficit would grow by an additional $38 million in 2024-25 based on the expected decrease in state funding in 2025-26.

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What are the drivers of the core funds deficit?

Updated as of July 1, 2024 

1. Salaries and benefits 

UC Davis is people-driven, and so are our costs. At UC Davis, employee compensation — including salaries and benefits for both faculty and staff — are about 75% of our total operating expenditures. If we exclude the medical center’s budget, which has higher costs for supplies and equipment, then our employee-driven costs are closer to 80%.   

Here are the estimated increases in funding sources and compensation costs on core funds: 

Compensation is a key driver: This table shows the annual increases in revenue sources for core funds and the annual increases in costs for employee compensation assigned to core funds. The difference is estimated to be at least $22.9 million in fiscal year 2024-25. The 2024-25 estimate accounts for the level of state funding and tuition revenue expected in 2024-25 and implementation of the salary programs approved by the Office of the President.

2. Utility costs

By 2026-27, purchased utilities costs are projected to increase over $7 million annually compared to 2021-22 levels, due to price increases and renewable energy goals. The university incurred nearly $13 million of additional costs in 2022-23 due primarily to gas and electricity commodity rates. Clean energy investments included below are initial estimates of what UC Davis needs to invest to meet the 2025 UC Clean Energy Goals. 

Comparing utility costs: In 2024-25, utility costs are estimated to be just $6,000 more than 2021-22 costs, though investments to meet UC goals will further impact costs in future years.

It is important to understand that UC Davis uses energy efficiently. In fact, actual energy use has gone down while our total square footage has grown. However, the cost of energy is increasing.

In addition, many campus facilities house animals and scientific activities that require ongoing energy use, which accounts for significant energy use during the pandemic when many students and employees were not physically on campus.

Using less energy, even with more building space: While total campus energy use has steadily declined, our building space served by campus energy systems has increased.

3. Capital and infrastructure 

UC Davis has grown to the size and complexity of a small city, with significant capital, deferred maintenance and seismic challenges. We are using our operating budget to support debt service and leases, about $41 million annually. In the past, this was supported by the state and general obligation bonds.

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What are we doing to fix the core funds deficit?

Updated as of April 3, 2024 

Since January 2020, the campus has made progress toward the goal of reducing ongoing reliance on core funds (state funds + tuition revenue) by $80-100 million by 2025. The campus is on track to achieve the initial five-year savings targets. However, additional cost pressures have emerged that exacerbate the need to make fundamental, long-term changes in business practices and fund management strategies across all facets of UC Davis. These pressures include: 

• Systemic inflationary pressures
• Significant increases in our utility costs
• Growing salary and benefit costs due to salary programs established or negotiated by the University of California
• Uncertainty that the state will be able to continue providing 5% annual increases to the university. 

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