Budget 101

            

Let’s start simple: What’s a budget? A budget is a comparison of the costs a set of activities will incur relative to the expected income those activities will generate. Creating a budget allows an organization to monitor its financial health by determining whether its activities will produce a surplus (if income exceeds costs) or a deficit (if costs exceeds income) at the end of a given time period.

This year, a total of about $2.8 billion will flow through UC Berkeley as it carries out its teaching, research, and public service mission. Berkeley is not a business, so its goal is not to maximize surpluses or “profits” - however, to maintain the institution’s stability and financial health we need to ensure that total income and total costs are broadly in line with each other. In addition to helping us monitor our financial stability, we use budgets at Berkeley to provide focus for our institution and its divisions, to help us maximize resources, and to help coordinate activities to meet strategic goals.

Take a look at the sections below to learn more about Berkeley’s budget.

An intro to UC Berkeley's 2018 budget

Where does our money come from?

UC Berkeley’s $2.8 billion budget is supported by revenue from a variety of sources, including tuition and fees, state support, federal and other contracts and grants, gifts and investment income, auxiliaries (such as athletics, Cal Performances, and the Berkeley Art Museum & Pacific Film Archive), sales and service operations, and other sources. The revenue from many of these sources comes with unique requirements governing its allocation and expenditure - for example, a federal grant may be awarded only to conduct a research study, or a donor's gift might be restricted to supporting a scholarship program.

Each major revenue source is described below:

Tuition and fees: The tuition and fees charged to enrolled students represent the campus’ largest source of revenue, approximately 33 percent of our total budget. The three main subsets of this revenue source are:

  • Tuition revenue, which supports the university’s operating costs for instruction, libraries, operation and maintenance of plant, student services, student financial aid, and institutional support.

  • Student Services Fee revenue, which provides funding for student life, student services, and other activities that provide extracurricular benefits for students, as well as capital improvements for student life facilities; and

  • Professional Degree Supplemental Tuition revenue, which helps fund instructional costs associated with the professional schools, including faculty salaries, instructional support, and student services, as well as student financial support.

State support: The university is a public institution, so it is supported to an extent by California taxpayers through an allocation by the state government. In the past, generous state support allowed UC Berkeley to operate while keeping costs to students low. While still an important revenue source, the state’s financial support of the university has diminished significantly: Thirty years ago, 50 percent of the university’s revenue came from the state, but today, the state provides just 14 percent of the university’s revenue.

Federal contracts and grants: This source of revenue includes funds that are awarded to units or individual faculty for federally sponsored research projects that align with our university’s mission. Federal contracts and grants come from agencies such as the National Institutes of Health or the National Science Foundation. This category also includes federal financial support to students.

Other contracts and grants: Aside from working with the federal government, the campus receives revenue from contracts and grants with state and local government as well as with private organizations. The campus works with foundations such as the Robert Wood Johnson Foundation, agencies like the California Department of Education, and companies like Hewlett-Packard on research and institutional improvement projects.

Educational activities and auxiliaries: In addition to the tuition and fees charged for full-time degree programs, the university also generates revenue from educational activities such as workshops, seminars, conferences, library services, clinic medical services, career services, and more. Auxiliary revenue comes from non-instructional support services including housing, food service, parking, bookstores, student centers, and childcare centers.

Private gifts: This category includes the private gifts given by donors for the benefit of Berkeley, as well as payouts from Berkeley’s endowments. In the last two years, our institution has had record highs in both the number of gifts and pledges we’ve received as well as the dollar amount of those gifts and pledges.

Investment income: This source of income refers to the revenue earned from the interest that the campus records on invested funds.

Other: This category includes an assortment of revenue sources, with the primary one being Federal Pell Grants.

Where does Berkeley's revenue come from?

How have Berkeley's funding sources changed over the last decade?

In the past decade, the state of California has dramatically reduced the amount of public funding that it historically provided to UC. The loss of substantial state support has required Berkeley to adjust by making fundamental shifts in how it brings in revenue. Most notably, UC has increased student tuition to make up part of the shortfall; in the past decade, the percentage of Berkeley’s annual operating budget that comes from the state has shrunk from 27% to 14%, while tuition and fees grew from 18% to 33% over the same period.

Berkeley’s funding sources have changed in other ways as well. Contract and grant revenue has shrunk as federal and other budgets have tightened, and as competition for contracts and grants has become more competitive. The campus has also increased its focus on philanthropy as an important source of revenue, and has begun looking to investment income as another source of operating funds.

While Berkeley leaders continue to advocate for greater state support and for modest but regular tuition increases, these revenue sources can be unpredictable and are not within our direct control. To maintain financial stability, the campus will continue in the years ahead to diversify its revenue sources and to pursue means of generating its own revenue.

A shift in state support for UC Berkeley trimmed

How is our money spent?

Hosting tens of thousands of students, staff, faculty, and visitors every day - and operating services that extend well beyond teaching and research to areas such as housing, dining, policing, and facilities maintenance - running Berkeley is not dissimilar to running a large city. In fact, UC Berkeley's annual budget is the same size as the annual municipal budget of cities such as San Diego, San Jose, or Boston.

UC Berkeley will spend approximately $2.9 billion this year to pay for the operation of the campus. Because this is more than the amount we generate in revenue, Berkeley currently operates at a deficit - which we are working hard to eliminate.

Berkeley’s operating expenses can be grouped into several major categories. Each major category is described below:

Salaries and wages: Higher education is a people-centric sector, so the salaries and wages of faculty and staff constitute the campus’ largest expense category. Berkeley strives to offer compensation comparable to peer institutions so that we can recruit and retain the best professors and staff to support the campus’ mission. You can learn more about Berkeley’s workforce on the Our Berkeley site.

Benefits and retirement: Related to salaries and wages, the benefits that we provide to employees constitute the second-largest category of expenditures.

Scholarships and fellowships: This expense category includes money given by the campus to undergraduate and graduate students to help them fund their education

Utilities: Similar to the utility bills a person pays at home, Berkeley pays for the energy and resource needs of the campus, including electricity, water, natural gas, and more. Given the needs of labs and other energy-intensive facilities, these can be significant costs.

Supplies and materials: Items that are used up in everyday campus operations, from laboratory glassware to office materials, comprise this group of expenses.

Depreciation, amortization, and interest: This category of expenses includes the payments Berkeley makes on the loans it has taken out to fund past capital projects and other activities. Depreciation and amortization refer to means of spreading an asset’s cost over the course of that asset’s useful life. At Berkeley, for example, the cost of a new building is typically spread out over the predicted life of that building, with a portion of the cost expensed each year.

Other operating expenses: Costs recorded in this category include miscellaneous expenses such as insurance, rents, event production, travel, and more.

How is our money spent?

What impact does our money have?

By any measure, UC Berkeley is an incredible engine of positive change in California and throughout the world. We play a crucial role in improving the socioeconomic status of tens of thousands of young people, we foster an astonishing level of economic activity, we are a driver of innovation, and we support the local economy and vitality of the Bay Area.

From Berkeley’s founding, one of the central tenets of its mission has been to provide an excellent education to a broad swath of the public. We admit a large and diverse student body – including nearly as many Pell Grant recipients as the entire Ivy League – and provide these students with an education that rivals any of our private peers, enabling them to live richer and more fulfilling lives once they graduate.

Berkeley also contributes to the economic welfare of the state and world, building industries and commercializing technologies whose impact is felt around the world. Tens of thousands of companies have been founded by Berkeley students and professors, creating well over a million jobs and generating several hundred billion dollars in economic activity. Berkeley is also a crucible for the talented workforce that drives California’s innovation economy: offering a first-rate education to more undergraduates than Stanford, USC, and CalTech combined, Berkeley and its graduates truly power Silicon Valley.

Our institution is also committed to producing research in the name of the public good. Aside from the direct economic impact of our discoveries, we emphasize basic research into the most pressing challenges facing the planet today, from precision medicine and new energy sources to climate change and economic development. These discoveries have ripple effects that change the way we live our lives.

Finally, Berkeley contributes immeasurably to the Bay Area region. Berkeley is a major economic nexus as one of the east bay’s largest employers, but beyond that, our campus is a hub of intellectual, cultural, artistic, recreational, and service activities that improve the quality of life for both residents and visitors and make our region one of the most lively in the world.

Student Support from Budget

UC Berkeley's budget impact on faculty

Berkeley's local & global impact