Legislative Analyst's Office Analysis of the 2001-02 Budget Bill

University of California (6440)

The budget proposes $511.7 million from general obligation bonds and the General Fund under the University of California's (UC) 2001-02 capital program. Of this amount, $203.3 million is proposed from the Higher Education Capital Outlay Bond Fund of 1998 for 32 projects, with an estimated future cost of $571.8 million. The budget also proposes $308.4 million from the General Fund including—$160.4 million for four projects at the Merced campus, with an estimated future cost of $24.8 million; $108 million for four Institutes for Science and Innovation, with a future state cost of $150 million; $30 million for a UC San Francisco Fresno Medical Center; and $10 million for a new Heckman International Center for Management at Palm Desert.

We recommend the Legislature approve $193 million for 20 projects. Further, we recommend the Legislature delete $311.9 million for 9 projects (estimated future cost totals $219.2 million) and reduce funding for 3 projects by $2.4 million this year and $29.6 million in future years.

The UC Should Set Campus Goals for Year-Round Operation

We recommend the Legislature adopt supplement report language directing the University of California (UC) to establish five-year goals at each campus for summer enrollment, that such goals be sufficient to accommodate enrollment growth without construction of new instructional facilities to the extent feasible, and that UC not limit summer enrollment.

We have previously recommended the three segments of higher education operate their facilities year-round in order to reduce the need to construct new facilities to accommodate enrollment growth. Chapter 383, Statutes of 2000 (AB 2409, Migden) takes note of year-round operation (YRO) as a strategy for accommodating enrollment growth, provides that fees at UC and California State University (CSU) during the summer shall not exceed those for any other term, and provides that CSU and UC shall retain the flexibility to implement YRO differently on individual campuses.

To utilize its facilities most efficiently, UC should increase its summer enrollment so it is equal to that in other terms. If enrollment in the summer is equal to that in other terms, UC may be able to accommodate up to one-third more students than it can if it does not operate during summer term. If UC limits its summer enrollment, it will not realize the full benefit of YRO. We also recommend UC establish campus-by-campus goals for summer enrollment that will lead to maximum summer term enrollment. This should preclude the need—except in rare situations—to construct additional instructional facilities for the foreseeable future.

Projects Recommended for Deletion

Berkeley: Stanley Hall Seismic Mitigation

We recommend the Legislature delete $2.2 million to develop working drawings for the Stanley Hall Seismic Mitigation project at the University of California, Berkeley because the research activity in this building is to be relocated to existing campus space and there should be no need to construct replacement space after Stanley Hall is demolished. (Delete $2.2 million from Item 6440-302-0574 [1].)

The budget includes $2.2 million for working drawings for demolition of Stanley Hall and construction of a new building. No preliminary plans have been funded for the project. The new building would replace the space lost by demolition of Stanley Hall and would provide additional space for the new Institute for Science and Innovation. Construction is scheduled for completion in January 2005.

The estimated future construction cost for the portion of the new building related to replacement of Stanley Hall is $16.1 million. No information has been received about the additional cost for working drawings and construction for the institute portion of the building. The additional space for the institute would be funded in an unknown amount through separate appropriations for three institutes that have been approved by the Legislature. The first appropriation of $75 million for the three institutes was approved in the 2000-01 Budget Act, a second $75 million appropriation is included in the Governor's budget, and two additional appropriations of $75 million each are planned to be included in the 2002-03 and 2003-04 Governor's budgets. In addition, a fourth institute has also been proposed in the Governor's budget.

Replacement of Research Space Should Not Be Needed. Stanley Hall is a 42,518 assignable square foot (asf) building, including 36,571 asf of research space, 4,294 asf of offices, and 1,653 asf of classrooms. The Berkeley campus currently has over 2 million asf of research space. Based on long-standing legislatively approved space standards, the Berkeley campus has over 300,000 asf more research space (and 100,000 asf more classroom space) than called for under these standards. With this amount of research space, it is not clear why the state should fund a building to replace 36,571 asf of research space.

Also, UC indicates it will move current occupants of Stanley Hall to other permanent space on campus in order to demolish the existing building and construct the new building for the institute and to replace Stanley Hall. Thus, the existing activities will be in their relocated space for several years. It is not clear why the activities could not remain in these locations. If UC believes more research space is needed, it can provide it by using Garamendi bonds (bonds financed through research) or other nonstate funds.

San Diego: Pharmaceutical Sciences Building

We recommend the Legislature delete $1.4 million to develop preliminary plans for a Pharmaceutical Sciences Building at the University of California, San Diego because the information provided is insufficient to justify establishment of a new pharmacy school. (Delete $1.4 million from Item 6440-301-0574 [18].)

The budget includes $1.4 million for development of preliminary plans for a new 44,000 asf pharmaceutical sciences building that would add 39,100 asf of research space, 2,600 asf of classrooms, 1,500 asf of offices, and 800 asf of teaching laboratories to the campus. Estimated future state costs are $1.7 million for working drawings, $24.7 million for construction, and $2 million for equipment. The building would be the first construction undertaken in the establishment of a proposed new school of pharmacy at the San Diego campus. Construction is scheduled for completion in September 2005.

Insufficient Justification for Establishing New Pharmacy School. No proposal for support of a new pharmacy school has been proposed in the Governor's budget. Thus, the Legislature has not been presented with a proposal nor has it approved the establishment of a pharmacy school at the San Diego campus. Instead, the proposal in the Governor's budget asks the Legislature to approve a new building that would lead to development of a pharmacy school without first providing information on the need for and costs of establishing a new school. For example, information has not been provided regarding a shortage of pharmacy school graduates, if there is a need to initiate a new school of pharmacy, or expand an existing school. In addition, UC has not provided any information on the ongoing operating costs related to a new pharmacy school. Also, UC has not indicated what additional capital outlay the state might be called upon to provide if it takes the initial step in establishing a pharmacy school at the San Diego campus by funding this project. The campus has indicated this first building will accommodate 70 full-time equivalent (FTE) students, but the school is planned for an ultimate enrollment of 300 FTE students. This would seem to indicate additional capital outlay would be required if the ultimate enrollment is to be served.

The need for establishing a pharmacy program, its operating costs, and capital costs should be detailed and provided to the Legislature for review before a capital outlay request is submitted. Consequently, we recommend the Legislature delete the $1.4 million requested under Item 6440-301-0574(18) to develop preliminary plans for a Pharmaceutical Sciences Building at the UC San Diego campus.

No Information on Three Projects

We recommend deletion of $148 million from the General Fund for three proposals because there is no information about how the funds proposed would be spent. (Delete $148 million from Item 6440-301-0001.)

The budget proposes the following General Fund expenditures:

• Institutes for Science and Innovation: preliminary plans, working drawings, construction, and equipment, $108 million.
• San Francisco, Fresno Medical Center: preliminary plans, working drawings, and construction, $30 million.
• Riverside, Heckman International Center for Management: preliminary plans, working drawings, and construction, $10 million.

The university has not provided information on what needs these projects are addressing, why they are needed, what the scope of work is or the basis for the requested amounts. With regard to the institutes, UC has provided little information about how it has spent or plans to spend the $75 million that was appropriated by the 2000-01 Budget Act. As noted above, facilities for one of these institutes will be constructed on the site of Stanley Hall at the Berkeley campus. Lacking any information on these projects, we recommend the Legislature delete the requested amounts.

Projects Recommended for Reduction

Irvine: Natural Sciences Unit 2

We recommend the Legislature reduce $2.1 million from this item to develop preliminary plans and working drawings for the Natural Sciences Unit 2 at the University of California, Irvine because the cost of the project is too high. We also recommend the Legislature recognize a future cost of $27.9 million for construction. (Reduce Item 6440-302-0574 [5] by $2.1 million.)

The budget includes $4. ,6 million for preliminary plans and working drawings for a new 69,170 asf building for the biological sciences, chemistry, and physics departments at the Irvine campus. The amount of space includes 54,070 asf for research laboratories and 15,100 asf for faculty and administrative offices. Estimated future state costs are $51.6 million for construction and $3.6 million for equipment, with an additional $3.6 million for equipment to be provided from university sources. Construction of this building is scheduled for completion in December 2004.

High Construction Cost. The estimated construction cost for the project proposed in the Governor's budget is $747 per asf of the building and project cost (construction cost plus the costs for preliminary plans and working drawings) is $814 per asf. We have recommended the Legislature appropriate capital outlay funds for higher education based on construction cost guidelines shown in Figure 1. (Please see the crosscutting issue "Funding Higher Education Capital Outlay" earlier in this chapter.)

Based on our recommended construction cost guidelines, we recommend the Legislature recognize a future construction cost for the project of $27.9 million, a reduction of $23.8 million from that proposed in the Governor's budget. We also recommend a proportional reduction of $2.1 million in the proposed appropriation for preliminary plans and working drawings.

Riverside: Biological Sciences Building

We recommend the Legislature reduce $150,000 from this item to develop preliminary plans for the Biological Sciences Building at the University of California, Riverside and recognize future costs of $669,000 for working drawings and $13.3 million for construction because the cost of the project is too high. (Reduce Item 6440-301-0574 [14] by $150,000.)

The budget includes $0.6 million for preliminary plans for a new 31,666 asf biological sciences building that would add 28,013 asf of research space and 3,653 asf for offices to the campus. Estimated future costs include state costs of $0.9 million for working drawings and $19.6 million for construction. The proposal also includes $1.8 million of gift funds for construction and $0.5 million of university funds for equipment. Construction of this building is scheduled for completion in September 2005.

High Construction Cost. The construction cost of the project proposed in the Governor's budget is $620 per asf of the building. We have recommended the Legislature appropriate capital outlay funds for higher education based on construction cost guidelines shown in Figure 2.

Based on our recommended construction cost guidelines, we recommend the Legislature recognize a future cost of $13.3 million for construction. We also recommend a proportional reduction of $150,000 for preliminary plans and $225,000 in future costs for working drawings.

Riverside: Engineering Building Unit 2

We recommend the Legislature reduce $119,000 from this item to develop preliminary plans and working drawings for the Engineering Building Unit 2 at the University of California, Riverside and recognize a future state construction cost of $34.3 million because the cost of the project is too high. (Reduce Item 6440-301-0574 [13] by $119,000.)

The budget includes $3.1 million for preliminary plans and working drawings for a new 89,686 asf engineering building at Riverside that would add 19,200 asf of teaching laboratories, 5,356 asf of classrooms, 46,210 asf of research and scholarly activities space, and 18,920 asf of offices to the campus. Estimated future costs include $35.7 million of state funds and $5.1 million of gift funds for construction, and $0.5 million of university funds for equipment. Construction of this building is scheduled for completion in June 2005.

High Construction Cost. The construction cost of the project proposed in the Governor's budget is $398 per asf of the building. We have recommended the Legislature appropriate capital outlay funds for higher education based on construction cost guidelines shown in Figure 3.

Based on our recommended construction cost guidelines, we recommend the Legislature recognize a future construction cost for the project of $34.3 million, a reduction of $1.4 million from that proposed in the Governor's budget. We also recommend a proportional reduction of $119,000 in the proposed appropriation of $3.1 million for preliminary plans and working drawings in the Governor's budget.

Development of UC Merced Campus 

Slower Than Legislature's Expectations

We withhold recommendation on $160.4 million from the General Fund for the Merced campus because the University of California (UC) has provided no information about its plans and there is little to indicate UC is moving forward with development in accordance with the expectations of the Legislature.

The Governor's budget includes $160.4 million from the General Fund for the following projects at the undeveloped UC Merced campus:

• $37 million—Site Development and Infrastructure, Phase 1: construction.
• $69 million—Science and Engineering Building: construction.
• $53 million—Library/Information Technology Center: construction.
• $1.9 million—Classroom and Office Building: preliminary plans and working drawings.

The UC has not provided information to substantiate the requested $160.4 million. For example, UC has not identified the specific site for the new campus, has not provided a master plan for the campus, has not identified the site development and infrastructure improvements necessary to begin campus development and has provided only conceptual information on the cost and scope of the proposed buildings. Consequently, it is not clear when UC would begin development of the campus or what outcome the Legislature can expect through the appropriation of the requested funds.

Uncertain Time Frame for Development of Merced Campus. The Legislature has taken extraordinary steps to expedite development of the new UC Merced campus with the expectation that the campus would open for instruction in fall 2004. For example, since 1997 the Legislature has appropriated $71.2 million to begin the process of establishing the Merced campus. This amount includes:

• $4.7 million for capital outlay.
• $30 million for the Wildlife Conservation Board to acquire wildlife habitat.
• $36.5 million in UC's support budget for planning the campus and other activities.

Even with this legislative effort, there still is little to show in the actual progress toward developing the campus. It has been very difficult to obtain information from UC regarding the status of their efforts on the new campus, but all indications are that it is highly unlikely that UC will meet the fall 2004 date. For example, the status of the campus environmental impact report is uncertain and a campus master plan is not available. UC has been unable to provide information on what site development and infrastructure is needed in order to initiate the basic development for the campus, and the proposed initial buildings are only in the conceptual stage. In addition, it is our understanding that UC has recently selected a new site for the campus. If this is the case, UC will likely need to prepare another environmental impact report, which will further delay campus development.

The Legislature has been clear in its desire and direction to UC to create and expedite the development of this new campus. We believe it is incumbent upon UC to provide the Legislature not only the current status of campus planning and development but also the action steps UC will take to expedite development to open the campus for instruction. It is our understanding that UC will submit a report on the Merced campus in mid-February. Hopefully UC will use this report to address these concerns. Pending UC providing the Legislature this information and in view of the lack of information on the budget proposals, we withhold recommendation on the $160.4 million capital outlay request.

Withhold Recommendation on Davis Veterinary Medicine 3A

We withhold recommendation on $3.3 million from bonds for working drawings for the Davis campus Veterinary Medicine 3A project pending receipt and review of information concerning how the project will be funded and implemented.

The budget proposes $3.3 million for working drawings for a
96,090 asf building for veterinary medicine. The building includes 34,275 asf of teaching laboratories, 41,920 asf of research space, and 19,895 asf of clinical teaching facilities. The 2000-01 Budget Act appropriated $4 million from the General Fund to develop preliminary plans and included budget language that required the Department of Finance to approve the project before these funds could be spent. We have three concerns with this project.

First, at the time of this Analysis, it was our understanding that the Department of Finance had not yet approved the project. This being the case, the funds appropriation in the current year for preparation of preliminary plans were still not available to UC for expenditure. Thus, the Legislature will not have preliminary plans and associated cost estimates to review the project scope and cost. In addition, given this situation, it is not clear that UC will need working drawings funds in the budget year.

Second, the project as proposed by UC would be funded for construction over two years—$34.9 million each in 2002-03 and 2003-04—with construction of each "phase" requiring about three years to complete. Thus, construction of the phases would overlap. The project, however, is designed as an integrated facility rather than separate and independent projects. Therefore, it is not clear how the two phases will be bid and the construction coordinated. Furthermore, phasing of the project in this manner will delay completion of the new facilities by at least one year. The UC has been unable to explain how they intend to undertake the project based on this split funding scheme.

Third, it is unclear how the necessary utilities to the site will be funded and constructed. The campus plan is to construct several buildings in the vicinity of Veterinary Medicine 3A, some of which are to be funded from nonstate sources. Utility mains—sewer, water, electric power, steam and chilled water—must be extended from the main campus to this area of the campus to serve the Veterinary Medicine 3A building and the other buildings. According to UC, the cost of this work has been prorated to each building based on estimated utility use, with $5.7 million prorated to the 3A building. UC, however, has not provided the scope of work for the utility project, the estimated cost for the project or the basis for the proposed prorated amount. In addition, it is our understanding that all necessary funds to undertake the utility project may not be available. Therefore, it is not certain when the necessary utilities will be installed. The UC has not been able to address these issues.

Pending clarification of these issues, we withhold recommendation on the $3.3 million requested to prepare working drawings for the Veterinary Medicine 3A project on the Davis campus.