Budget Basics
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 exceed income) at the end of a given time period.
Budget Overview
In FY25, a total of about $4 billion flowed through UC Berkeley as it carried 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 the focus for our institution and its divisions, to help us maximize resources, and to help coordinate activities to meet strategic goals.
Where does our money come from?
UC Berkeley’s $4 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 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’s largest source of revenue, approximately 28 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.
- Professional Degree Supplemental Tuition, which helps fund instructional costs associated with the professional schools, including faculty salaries, instructional support, and student services, as well as student financial support.
In FY23, the UC Board of Regents approved the Tuition Stability Plan, which sets an undergraduate student’s tuition and other mandatory systemwide fees based on the year they first enroll (their cohort) and locks that rate for the duration of their college career (up to 6 years). Tuition and fees for new incoming undergraduate students may rise each year, but once a student is enrolled, their rate remains fixed. The plan provides predictability for students and families, aligns tuition growth with university costs, and ensures a portion of any tuition increases supports financial aid. The initial five-year plan was recently extended for an additional six years through summer 2033.
State support
The university is a public institution, supported in part by California taxpayers through state allocations. Thirty years ago, 50 percent of the university’s revenue came from the state; today, the state provides closer to 14 percent of the university’s revenue. To help address long-term fiscal stability and shared priorities, the governor and the UC agreed to a multi-year compact in 2022, under which the state committed to predictable annual base budget increases in exchange for the university’s commitment to goals such as expanding access to the UC, improving student success and advancing equity, and increasing affordability. Although the compact has led to increased state support in recent years, it has not kept pace with inflationary cost increases or enrollment growth. As a result, higher education institutions like ours continue to rely more heavily on other funding sources to support their operations.
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. While historically a significant source of funding, future federal support is subject to uncertainty due to potential changes in federal budgets, research priorities, and policy decisions. This lack of predictability could have a substantial impact on the availability of funds for ongoing and new projects alike.
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. During the last campaign, our institution had record highs in both the number of gifts and pledges we 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. In recent years, the strategic management of our investment portfolio has played an increasingly vital role in managing Berkeley’s budget.
Other
This category includes an assortment of revenue sources, with the primary one being Federal Pell Grants.
How have Berkeley's funding sources changed over the last decade?
The figure below illustrates that campus revenue has grown substantially over the past 15 years, nearly doubling from approximately $2 billion in FY10 to around $4 billion in FY25. At the same time, the composition of that revenue has changed. Declining state support has prompted UC Berkeley to adapt by shifting the balance of its funding sources. Today, a smaller share of the budget comes from the state, while tuition and fees, private support, and investment income now play a larger role in sustaining campus operations.
While Berkeley leaders continue to advocate for greater state support and 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 to diversify its revenue sources in the years ahead and pursue new opportunities to generate its own revenue.
Figure 1: Campus revenue change, FY10 to FY25
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, public safety, 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 Boston and nearly double the size of Oakland’s.
The figure below provides an at-a-glance view of key expense categories, comparing total campus expenses and their composition between FY10 and FY25. It shows that campus expenses have more than doubled over the past 15 years, with compensation-related expenses consistently accounting for over 60% of total campus spending.
Figure 2: Campus expenses change, FY10 to FY25
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’s 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’s 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 the 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 distributed 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.