To the UC Davis community:
UC Davis has a long history of innovation and an extraordinary community of students, faculty, staff and alumni who make it the great institution it is. Today, we must tap our ingenuity, resilience and history of collaboration as we brace for unprecedented financial challenges.

Today’s challenges are driven by three key factors: Substantial reductions in federal research funding and uncertainty about what lies ahead; a 3% reduction in state support for the University of California; and escalating operational costs.

We are taking strong measures to curb costs, expand revenues and mitigate the impact of anticipated cuts; however, the challenges will likely require even more significant measures. We will have to work together to determine what UC Davis must be in a time of austerity rather than what we envision in a time of greater resources.

While these projections will shift, here is what we are looking at as of today:

At the federal level, several agencies — including the National Institutes of Health, or NIH; Department of Energy; and National Science Foundation, or NSF — have proposed caps of 15% on reimbursements for facilities and administrative costs, or F&A. This is a substantially lower percentage than is reimbursed today. If the proposed caps were applied across all federally funded research, it would result in an approximately $114 million annual loss to UC Davis.

The university is already seeing early terminations of research contracts and grants, and we are bracing for a broader decline in federal research funding. UC Davis received $441 million in federal contract and grant awards in fiscal year 2023-24. Our models project reductions of 10%-30% to that type of funding, which translates into future annual revenue loss between $44 million and $132 million, plus an additional loss of the corresponding F&A revenue.

Depending on the extent and timing of these and other reductions — along with potentially rising costs for construction and supplies due to new tariffs — we estimate that upcoming potential federal budget impacts to the Davis campus could range from $118 million to $408 million.

Projected federal policy changes affecting the UC Davis Medical Center — which serves as the top health care facility for patients stretching from our region to the Oregon border — are estimated to be between $338 million and $499 million.

Adding the Davis campus and medical center together, upcoming potential federal budget impacts, while speculative, could range from $500 million (a bad case) to $907 million (an ugly case).

We are continuing to monitor for potential federal impacts to student financial aid and will keep the community apprised as we learn more.

Regarding state funding, Gov. Gavin Newsom’s latest budget proposal, released this week, reflects a 3% reduction to the University of California’s state funding for fiscal year 2025-26. This is an improvement on the 7.9% UC reduction announced in January. This week’s state budget proposal continues to defer a 5% annual base state funding increase to UC, a promise made by the state in exchange for UC increasing undergraduate California resident enrollment in addition to achieving other goals.

I appreciate the work of Gov. Newsom and our partners, including UC President Michael V. Drake and others who continue to advocate for the impact the UC has on California and beyond.

Despite the improved state budget outlook, UC Davis still faces a $53 million deficit on tuition and state funds, making continued expense reductions essential.

Our mitigation strategies

These significant and pressing issues require creativity and commitment. I’d like to share some of the intentional steps we’re undertaking, including our advocacy efforts.

A campuswide staff hiring freeze implemented on the Davis campus last month has already helped the university save over $10 million in annual personnel costs. We’re also taking a close look at consultant relationships and contract positions, while also reevaluating planned capital projects. In addition, we’re advancing efficiencies across the enterprise.

I’d also note that for years, UC Davis has managed budget pressures on core funds (state and tuition revenue). We are in our sixth consecutive year of implementing expense reductions to ease our core funds deficit. This year, we have asked each unit on the UC Davis campus to conduct a planning exercise to identify strategic reductions of 10% to core-funds budgets. We are carefully considering submitted plans.

At the same time that we seek to preserve our resources on campus, the University of California is also advocating externally for budget stability. UC, with support from our campus, has advocated in the courts for the federal government to fulfill its legal and contractual obligations to federal funding recipients. Among other things, UC has joined other major universities in suing to block NSF’s unilateral reduction of F&A cost reimbursement, which the universities believe violates federal statutes and rulemaking procedures. UC has also filed written declarations in support of lawsuits brought by the California Attorney General and other higher education advocacy organizations challenging NIH funding reductions and grant terminations, as well as the mass termination of awards and programs funded by the National Endowment for the Humanities. These federal agency actions have had and will continue to have dire consequences for science, arts and humanities research alike.

While these lawsuits are pending, our Office of Research, in consultation with Campus Counsel, is also working closely with principal investigators to review grant terminations and evaluate the options for appealing the terminations so that they and their graduate students and post-doctoral scholars may continue their work and drive new knowledge without disruption or hardship. We know we will not be successful in every case, so we are also seeking alternate options.

Importantly, we and our allies are working closely with our elected representatives to press the case that UC Davis plays a vital role in the prosperity of our region and state, developing the next generation of leaders and making lifesaving breakthroughs.

We are also communicating our value to key audiences in a number of ways. Our From Labs to Lives series highlights the work of researchers across the many disciplines in which we excel. It further addresses why federal funding is crucial for making research discoveries related to cancer treatments, chronic stress and infectious diseases.

Also, this week, the University of California launched a new homepage advocating for our priorities and highlighting our system’s mission of improving lives.

At the same time, we’re accelerating revenue-generating initiatives and investments.

Aggie Square, our new innovation district on the Sacramento campus, was developed with investment from our partner Wexford Science & Technology and promises to offer educational opportunities, jobs and long-term returns as our research delivers university-driven innovations and new therapies.

In recent years, we’ve added — and will soon add more — state-of-the-art facilities at our Sacramento campus as well as services in other locations, including Folsom, Rancho Cordova, Rocklin and Roseville. We also have expanded veterinary medicine facilities on campus and are expanding our veterinary center in San Diego. Our cutting-edge Veterinary Genetics Lab is moving to a larger, cutting-edge space at Aggie Square, where it will have greater capacity.

In times of financial challenges, these revenue-generating efforts become even more critical.

Moving forward together

These challenges are daunting, and I know our students, staff, faculty and alumni are concerned about what these budget challenges mean for people and programs. Campus leaders are working closely with the Academic Senate to achieve our shared objectives. We are monitoring what remains a fluid and uncertain situation, and are making decisions based on the best available information and with compassion for those who contribute so much to our university.

UC Davis has advanced our nation’s global leadership, directly improved American lives and trained generations of leaders in science, business, agriculture, government, education and so much more. We play a major role in the economy and the health of individuals and families across California and beyond. We will continue to serve as a great engine of knowledge, education, opportunity and impact.

In the days ahead, we will take appropriate and necessary steps to move forward while best protecting our community and our mission. We will meet this challenge … together.

Sincerely,

Gary S. May
Chancellor