By Mikhail Zinshteyn for CalMatters

The University of California is eyeing a looming budget gap of half a billion dollars next year. To help balance the books it’s relying in part on its out-of-state undergraduates. 

Meanwhile, the system is pouring tens of billions of dollars into construction projects for seismic retrofitting, new classrooms and medical centers — while also acknowledging it lacks the funding to build or renovate most of what it needs. 

Out-of-state undergraduates at the UC are charged more than three times the total tuition in-state students are expected to pay. Now system leaders have increased the supplemental tuition for new non-resident undergraduates by $3,402 next fall, an amount that’s $2,208 more than what the supplemental tuition would increase by under existing UC policy.

A UC regents committee approved the new hike Wednesday; the full board voted to greenlight the measure today.

One regent, Jose M. Hernandez, voted no. Two elected state leaders on the board, Lt. Gov. Eleni Kounalakis and Assembly Speaker Robert Rivas, abstained from voting.

“I just want to be on the record opposing the tuition increase, and also on the record recognizing the commitment of staff to continue to work to evaluate and understand these decisions to increase the cost of attendance for out of state students,” Kounalakis said today.

Under a model passed in 2021, each new cohort of undergraduates sees higher tuition and fees than the previous crop of new students but that tuition stays flat for their time at the UC. In-state students are charged tuition and a systemwide fee. Out-of-state students are charged that plus a much larger supplemental fee. The base tuition and fee would go up as planned under the 2022 model; only the supplemental fee would rise at a higher than expected amount.

All told, it would mean new nonresident undergraduates would pay $52,536 in total mandatory tuition next fall, excluding separate campus fees that are an average of $1,700. Current new nonresident undergraduates pay $48,636 annually, plus campus fees.

The move would affect the roughly 15% of UC undergraduates, including transfer students, who live outside of California and will begin their studies at the university system next fall. The increase wouldn’t affect current students or future graduate students.

“As UC prepares for an anticipated state budget cut that could impact student services across the entire system, we are proposing an increase to support core operations without raising costs for current students and California residents,” wrote UC spokesperson Omar Rodriguez in an email.

The hike would increase revenue by about $41 million for the system annually, Rodriguez wrote.

The impending half-billion shortfall next summer would occur if state lawmakers and Gov. Gavin Newsom make good on a deal to delay previously promised new money for the UC and apply a cut to its state support.

UC’s operating revenue is estimated to be about $53 billion in 2024-25. Most of that is from the system’s medical services work, including hospitals. Its core mission of educating students, largely faculty salary and benefits as well as financial aid, makes up about $11 billion of the system’s budget. That amount is almost evenly paid for with state dollars and a combination of tuition revenue and other university funds.

It’s among the numerous fiscal details that emerged at the regents’ regularly scheduled November meeting, including the revelation that the UC plans to spend $30 billion to repair or replace its increasingly aging stock of academic buildings, medical centers and dorms by decade’s end. And yet, that massive sum falls far short of the 10-campus system’s stated construction needs  — a total of $53 billion in projects without a funding source.

The building spree is occurring as UC trundles toward a goal of adding 23,000 new California students by 2030 — fueled in part by lawmaker demands that the vaunted system make space for more California high schoolers.

The tuition hike in context

In some ways the emphasis on out-of-state students is a return to form for the UC, which both relies on these students for the much higher tuition they pay but also is under pressure by lawmakers to limit how many non-Californian undergraduates the system enrolls.

Eduardo Tapia Jr-Urbieta, an executive officer for the UC Student Association, which represents undergraduate students, said that the student association opposes the increase. “Opportunity to higher education should not face any more barriers. Instead of increasing the salaries of UC administrators, let’s make sure college is more affordable for all,” he told regents yesterday.

Those September raises came in two waves: 4.2% for senior UC officials, such as the system president and most campus chancellors, and extra raises, including for most of the chancellors — ranging from 16% to 33%. The extra chancellor raises are paid with private donations, not tuition or state support. The updated chancellor salaries range from $785,000 to nearly $1.2 million

Nonresident undergraduate students tend to have higher family incomes than resident students. In 2021, 45% of nonresident undergraduates had family incomes of above $185,000. The same was true for 25% of undergraduates from California. Nearly three-quarters of nonresident undergraduates came from households exceeding $93,000; for California-based undergrads, it was 45%.

Still, nonresident students on average pay much more to attend a UC campus, even after all financial aid is factored into their costs. The net price — which includes tuition, housing and other related costs minus grants and scholarships — for resident undergraduates with household incomes above $180,000 was around $37,000 a year last fall. For nonresident undergraduates, the average net price was $67,000.

“I support it (the nonresident tuition increase). I’ll get pushback for that, but here we are,” said Josiah Beharry, a student regent who can cast a vote on the board.

UC officials said that compared to some other major public universities, UC’s nonresident undergraduates pay lower nonresident fees. For example, University of Michigan nonresident students paid $11,500 more than their nonresident UC peers in 2023-24. University of Virginia nonresident undergraduate paid $7,000 more. Even when adjusting for living costs, nonresident Californians are charged less for their education, UC officials said.

UC policy permits 20% of new nonresident tuition revenue to be reserved for financial aid for nonresident undergraduates.

$30 billion in planned construction

The $30 billion construction plan — and $50 billion in projects without a funding source — were spelled out in a new, 207-page report detailing construction plans that UC budget officials presented to the system’s regents yesterday.

“The University’s enrollment growth and continuing needs for renewal, modernization and seismic correction of existing facilities are the key drivers of capital investments,” the report said. 

Cranes have been soaring above the system’s campus skylines for years.

Since 2011, the UC has added beds for 42,000 students, growing from nearly 75,000 beds. The increase means the system can house 40% of its students, up from 32% a decade ago. 

And UC isn’t done as it’s on track to build dorm space for 14,000 new beds at all nine undergraduate-serving campuses through 2030 — at a cost of $6.9 billion. That’s nearly half-a-million-dollars per bed. 

But while student housing projects can largely pay for themselves over time through the rents campuses charge, classroom buildings have fewer sources of cash beyond system bonds and state dollars — which the UC says are hardly enough to meet campus needs.

Take for example all the seismic repairs UC says it must undergo to extend the life of its buildings, with structures built in the 1950s and 1960s representing the largest chunk of UC’s gargantuan building footprint. UC has $16 billion in seismic retrofit needs but only identified funding for 16% of that, or $2.5 billion, last academic year.

It’s not just finding money that’s a concern for UC. As buildings undergo remodeling, the classrooms, research and other activity core to the system’s mission has to continue. “The scope and complexity of planning required to minimize these disruptions can often necessitate the construction of temporary or replacement space,” the report read.

The scale of the need is vast. According to the UC, about 1,464 buildings require seismic upgrades across the system.

UC officials disclosed yesterday that the system is debuting a new plan in which campuses will reduce its backlog of structures that need seismic upgrades by 4% annually, with the structures most in need of an overhaul receiving priority.

And then there’s all the new construction UC needs. The system completed 139 projects at a cost of $1.4 billion last academic year — but has more than $20 billion in active construction plans for about 400 projects. More than half of those are for UC’s extensive medical care operation, in part to satisfy state rules on strengthening hospitals to better withstand earthquakes. 

Through 2030, UC’s construction plans total $30 billion, with about $12 billion for its medical centers. Philanthropy helps pay for all those projects, but only a little. Just about $2 billion of the construction plan budget will come from gifts. About $300 million will come from state funds directly — a relatively tiny portion of the overall revenue picture for the system’s six-year building plan. Much of the projects will be paid for with external financing, such as bonds that the system sells to investors. 

But that’s just projects with a funding source. UC Berkeley, for example, has more than $14 billion in construction needs but has identified the funding for just about $2.8 billion of that.

What is getting built at the system’s oldest campus? For starters, a new undergraduate academic building that’ll include 27 classrooms and a 400-seat auditorium with a rooftop terrace. All of that costs $137 million. It’s scheduled to open in the 2025-26 academic year.