Furloughs planned for University of California

SAN FRANCISCO (Reuters) - The president of the University of California (UC) said on Friday he would propose to its regents that they approve pay cuts through furloughs to shave $515 million from the public university system's costs amid the state's budget crisis.

UC System President Mark Yudof in a letter also said he would propose additional spending cuts, restructuring the system's debt and student fee increases worth $200 million.

"Admittedly, given the difficult circumstances, no plan is perfect and any solution includes difficult choices," Yudof said in his letter to the system's faculty, staff and students.

His letter was released amid a stalemate in state budget talks between Republican Governor Arnold Schwarzenegger and Democrats who control the state legislature.

Both sides have agreed deep spending cuts will be needed to fill the state's $26.3 billion budget gap but are at odds on a handful of issues, including potential further cuts to education spending and the need for reforms in welfare programs to prevent fraud.

The massive deficit reflects the hit California's economy has taken during the recession and from rising unemployment. Revenues have been tumbling as critical personal income taxes have dropped at their steepest rate since the Great Depression.

To cut state spending, Schwarzenegger has imposed three furlough days for a range of state employees. Under Yudof's plan, the UC System would follow with a tiered furlough schedule with its highest-paid employees subject to 26 furlough days, equivalent to a pay cut of 10 percent.

The university system's lowest paid employees would take 11 furlough days, which equals a 4 percent pay cut.

"Again, while there are no perfect choices for how to achieve the needed cost-savings, I believe this plan reflects an appropriate balance centered on fairness and shared sacrifice," Yudof said.

The UC system's regents will consider Yudof's proposals on Wednesday. They include a plan to restructure $150 million in debt over two years to "provide cash flow relief of $75 million per year for the next two fiscal years," a spokesman said.

Restructuring would also allow the UC system to "reshape its overall debt service profile, as the current debt profile has higher debt service obligations in the near term," the spokesman said. "The University's current debt portfolio has an average life of 16 years, shorter than many peer institutions ... The restructuring would begin the process of smoothing the University's debt obligations into more even annual payments."

The California State University system is tackling and expected $584 million cut in state funds by not accepting student applications for its 2010 spring term.