As we celebrate our return to in-person instruction and welcome new and returning students, staff and faculty to campus, we must remain cognizant of UC Merced’s financial situation. The pandemic, as well as protracted enrollment growth, have impacted our ability to hire much-needed staff to support the campus. Although we still face a challenging financial road that will necessitate further fiscal conservation, we have elected to change a number of the financial controls implemented in spring 2020 to better support the campus.
These changes convert what was a largely centralized budget control process to more local budget management, while continuing to make fiscal conservation inform our day-to-day thinking and operational decisions. This will help ensure we are responsible stewards of the financial resources provided to our campus by the Regents to support our academic mission.
We believe it is time to return the responsibility of fiscal stewardship to divisional leadership, supported by central budget oversight and review. Moving forward, all budgetary decisions are pursuant to the approval of the division’s Vice Chancellor. Divisions will work closely with their position delegates on implementation of the revised process.
Effective fiscal year (FY) 2021-22:
We are lifting fiscal controls associated with purchasing, as outlined in a July 8 email.
- Positions vacated prior to July 1, 2021 on state funds (19900) remain subject to budget control decisions. If the position was not previously approved via the budget call memo dated June 1, 2021, or any subsequent budget call reprioritization memo from a division to the EVC/Provost and Interim VC/CFO, divisions must wait until an upcoming budget call period to support these hires.
- Centralized position control ended Aug. 1, 2021. The process is now delegated to divisional leadership as outlined in this message. Ongoing hiring and position management in a division will be managed strategically by divisional leadership in alignment with the division’s budget. Additional financial support for positions will be part of the campus’s budget call process.
- We no longer expect to save 50% of all vacancies in FY 2021-22. Salary savings due to vacancies will be retained by the division in which they arise as a discretionary budget resource. Divisional Vice Chancellors will be responsible for the evaluation of vacancies and determining whether these resources need to be reprioritized to meet the division’s objectives.
- Positions vacated on or after July 1, 2021 on either state (19900) or tuition (14000) funds are subject to a four-month hold. When the hold expires, divisions may fill the vacant positions. Salary savings due to these holds may not be used to support other division expenses. It is expected that these savings will be used to reduce the university’s central budget deficit.
- Both contracts and permanent hires on either state or tuition funds are subject to the four-month hold policy. In the case of a contract vacancy, notification must be provided to Human Resources (HR), which will inform Financial Planning and Analysis (FP&A) of the hold.
- Divisions may begin the process with HR to fill a vacancy as soon as they wish, but the new hire may not begin work prior to the four-month hold from the time the position was vacated. Divisions can hire earlier than the four-month hold if they use existing funding sources to cover the salary savings. The division must document these funds and receive approval from FP&A.
- Contract Positions
- Contracts positions can be for up to two years, with the option to renew for up to two additional years (one-year contracts are allowed). All extensions must be approved by HR. Any contracts to be extended beyond a total of four years must be reviewed and approved by HR.
- Current contracts can be converted to permanent hires if the division provides additional budgetary resources to support the conversion. All conversions will be reviewed for approval by FP&A to ensure sufficient budgetary resources exist to support the action. For limited appointments, please refer to the appropriate collective bargaining agreement (CBA) for time limitations.
- Contract extensions are allowed, providing the division has sufficient funds to support them and the positions are not considered vacancies at the time of contract expiration.
- Budget Planning
- Divisions are free to use existing budget (excluding the four-month salary savings for vacancies on or after July 1, 2021 for positions on state and tuition funds) to conduct reclassifications and individual equity increases and to provide stipends at their discretion. Requests for reclassifications, individual equity increases and stipends must be reviewed and approved by FP&A to ensure sufficient budgetary resources exist to support the action.
- Divisions are responsible for ensuring expenses do not exceed their budget for all personnel and non-personnel expenses. Any deficits at the end of FY 2021-2022 will reduce the division’s FY2022-23 annual budget. This includes deficits that arise in the four-month salary saving accounts. Deficits will result in a dollar-for-dollar reduction in a division’s FY 2022-23 budget.
- Divisions that have sufficient proven existing budget (e.g., salary and benefits for the duration of the hire) to support the creation of an FTE or a new hire will be able to create the FTE to support their operations. Divisions are required to confirm they have existing budgetary resources to support the hire with FP&A before proceeding with HR for the FTE or new hire creation.
- Position delegates must consult and seek approval from FP&A to move forward on any action that goes through Compensation and Classification that is not a contract extension.
- Going forward, the university will focus more on divisional budgets than on FTE to monitor spending.
- Budget Review and Documentation
- Divisions will be expected to document vacancy salary savings at the end of the fiscal year to ensure the savings remained unspent. If the savings are not identified, this will result in a deficit. This deficit will result in a dollar-for-dollar FY2022-23 budget reduction for the division. The division’s budgetary resources for operations in FY 2022-23 will be reduced as a result of excess expenditures in FY 2021-22.
- To support the necessary tracking, a specific account (using the project code in Oracle) will be used to track the salary savings. When a position becomes vacant, divisions must submit a one-time budget request to move four months of annual salary or the remaining months of salary in the fiscal year, whichever is less, to a specific account. The only budget allocated to this account will be related to salary savings. The specific account information (project codes) will be provided to all divisions by Aug. 31, 2021.
- Divisions that elect to hire earlier than the four-month hold period by allocating existing budgetary resources to support the hold vacancy savings will be expected to move these funds to the account identified to track vacancy salary savings. These funds must be documented and approved by FP&A, which will transfer the funds to the salary savings accounts.
We will continuously monitor our financial health and make changes as needed to ensure our long-term financial sustainability. Should additional budget cuts be needed, we will return to the budget call process to support the reductions. However, we will no longer rely on the random process associated with vacated positions to determine where further campus savings will materialize.
We appreciate your partnership in keeping UC Merced on the path to an even more successful future, as we grow our enrollment and our reputation for teaching and research excellence. With these prudent measures, we can be certain our best days are ahead.
Juan Sánchez Muñoz, Ph.D.
Interim Vice Chancellor and Chief Financial Officer