UC Regents committee discusses current state of finances, future budgeting

The UC Board of Regents meet at UC Merced in May. During their July meeting at UC San Francisco, the Regents discussed University finances. (Sam Mulick/Daily Bruin)
By Saya Mueller
July 27, 2024 4:42 p.m.
This post was updated July 28 at 11:53 p.m.
The UC Board of Regents discussed the current state of and future plans for University investments and finances during its July meeting.
The regents held their meeting at UC San Francisco July 16-18. The investment, national laboratories, compliance and audit, and finance and capital strategies committees discussed action items relating to the allocation of University funds.
The investment committee voted to approve a long-term incentive plan for members of the Office of the Chief Investment Officer. The plan incentivizes employees by offering rewards outside of salary for achieving certain goals at the end of every three-year cycle, said UC Associate Vice President of Total Rewards Jay Henderson.
The chief investment officer, senior managing directors, chief operating officer, managing directors, investment and risk directors, investment officers, senior investment analyst, and other participants, such as operation managers and directors, will all be compensated using the new bonus scheme, according to the policy.
Incentive awards are delegated based on the university’s investment portfolio performing better than industry benchmarks set by Regents Investment Policies, according to policy. The first set of bonuses will be presented at the end of the 2026-2027 plan year if performance objectives are met, Henderson said.
“The estimated annual cost of adding LTI as a component is $4.8 million, which is focused through investment return,” Henderson said. “No student tuition or state funds are used for the inventive plan.”
Cheryl Lloyd, vice president of systemwide human resources and chief human resources officer, and Henderson presented the proposal and outlined the investment team’s successes in managing the UC asset portfolio in the past decade. The University’s assets nearly doubled from $95 billion in June 2015 to $176 billion as of March 2024, according to policy.
The board also approved Item N1 from the national laboratories committee, which allocated projected income received by the UC from two Limited Liability Companies for the 2024-2025 fiscal year.
Estimated funds available from UC’s ownership interest in both Triad National Security, LLC and Lawrence Livermore National Security, LLC — which hold contracts to operate laboratories for the U.S. Department of Energy and the National Nuclear Security Administration — are projected to be around $30 million, according to policy. The total fee income will be spent in the University’s 2024-2025 fiscal year to cover various costs, such as the Triad Reserve Fund and the UC Laboratory Fees Research Program.
During the compliance and audit committee meeting, Alexander Bustamante, senior vice president and chief compliance and audit officer at UC’s Office of the President, presented the Office of Ethics, Compliance and Audit Services’ compliance and internal audit plan for the 2024-2025 fiscal year, which the board approved.
Risk assessments were developed through interviews with leading University stakeholders, industry trend evaluations and data analysis from different sources, Bustamante said. The University also has plans for a UCLA-specific internal audit project, which requires an estimated 20,735 hours of work, according to the 2024-2025 plan.
“ECAS prioritizes resources by focusing on the highest system-wide risks,” Bustamante said. “This requires collaboration with audit and compliance partners throughout the university system to identify these areas of focus.”
The highest risks to the University system were identified as cybersecurity and resource security for the second year in a row, Bustamante said, which the office plans to address in future projects.
Bustamante also said each campus will also certify proof of research security program implementation in accordance with university guidelines released last week by the White House Office of Science and Technology.
During the finance and capital strategies meeting, multi-year budget plans were outlined by Nathan Brostrom, executive vice president and chief financial officer, and Caín Díaz, interim associate vice president of budget analysis and planning.
The budget reflects total expenditures of $297.9 billion – a $48.6 billion budget deficit for the 2024-2025 fiscal year, Brostrom said.
New budget support in both ongoing and one-time payments for the 2024-2025 fiscal year will amount to $137.2 million, which will go toward operational costs, enrollment growth and funding of the UC Nutrition Policy Institute. according to the policy. The projected total new ongoing and one-time funding for 2026-2027 is $543.6 million, and the projected 2027-2028 year funds are $543.6 million, according to policy.
The university will continue to receive $258.8 million of ongoing support from the Regent Budget Plan approved in November 2023, Díaz said. The budget includes around $228 million to cover core operational costs and $31 million for third-year nonresident buyouts to financially support the University’s reduction of new nonresident enrollments by 902 students at UCLA, UC Berkeley and UC San Diego, Díaz added.
The plan also included funding and adjustments outside of the Regents Budget Request totaling $124 million for ongoing support, Díaz said.
In additional items related to the university’s budget, $25 million of the university’s ongoing general fund appropriation is contingent on campus climate plans to be started this fall, Brostrom said. The Middle Class Scholarship Program will be funded by $926 million this year, with a $110 million reduction proposed for 2025-2026, Brostrom added.
“This is a very, very important element of our efforts to provide debt-free pathways for all UC students,” he said.