Hitting the Target

In the recent past, we have gotten used to state revenue forecasts falling below actual results due to unanticipated capital gains in personal income tax receipts from AI. We now have one month's cash report for July - the first month of the current fiscal year. Revenues were a bit ahead of the forecast made when the state budget was enacted last June. But the overage is not from income taxes which fell a bit short of forecast estimates. Corporation taxes were the main source of the overage. And the sales tax ran a bit ahead of forecast values, and by more than pure inflation would suggest compared to the same time last year. So the general economy, as opposed to the world of finance, seems to be doing OK.

It's only one month, of course, but if this becomes a trend, it would mean no unpleasant surprises from the state for UC while the governor finishes out his term, i.e., until January. (There is always room for federal surprises, however.)

The July 2026 controller's cash report is at:

https://www.sco.ca.gov/Files-ARD/CASH/July2026StatementofGeneralFundCashReceiptsandDisbursements.pdf. 

Bond

From the Daily Bruin: The California Assembly Appropriations Committee voted [last] Thursday to advance a UC-sponsored bond measure that would fund scientific research across the state. The California Science and Health Research Bond Act – or Senate Bill 895 – would create the California Foundation for Science and Health Research to award $5 billion in grants and loans to public and private research institutions, including UC campuses. The foundation would prioritize projects affected by federal funding cuts and support research in fields including biomedicine, public health, climate science and wildfire prevention. The committee approved the measure 12-1 after lawmakers amended it to reduce the bond from $12 billion...

Full story at https://dailybruin.com/2026/08/13/5-billion-science-research-bond-clears-california-assembly-committee. 

The Enacted State Budget

As blog readers will know, yours truly is the guy who notes that the glass is half empty. Now that the enacted state budget is posted, he will point to the following sentence regarding UC:

Compact Funding Deferral—Maintains a $240.8 million one-time General Fund deferral of the 2025-26 Compact payment, representing a 5-percent base increase in the fourth year of the Compact, to 2027-28.*

And he will point out that nobody can compel a future legislature to do anything. In particular, the current governor will have been termed out in January 2027. The budget for 2027-28 will be enacted six months later.

What about the overall state budget? The table below summarizes the basics:

The Good News is that last year's budget finished in the black, with a small surplus of about $5 billion thanks to the inflow of tax revenue related to AI capital gains. Some of that money went automatically to K-14, thanks to Prop 98. The Bad News is that this year's budget is in deficit to the tune of around $21 billion. Of course, news reports repeated the idea that the budget was "balanced." But although more funding was placed in the "rainy day" fund, it basically came out of the General Fund (GF) reserve. So it went from one reserve into another, and when we look at the sum of all reserves, the total declines. Now, maybe AI will again provide a surprise dose of revenue. Or maybe not. Or maybe we might discover that the AI thing was a bubble that burst. Or maybe... 

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*Source: https://ebudget.ca.gov/2026-27/pdf/Enacted/BudgetSummary/HigherEducation.pdf. 

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Note: The table is from https://ebudget.ca.gov/2026-27/pdf/Enacted/BudgetSummary/SummaryCharts.pdf. To estimate the changes in the various reserves last year, I used data from the governor's January 2026 proposal: https://ebudget.ca.gov/2026-27/pdf/BudgetSummary/SummaryCharts.pdf.

Watch the Regents Meeting of July 15, 2026

The second day of the Regents meetings of July 14-15 began with public comments. Public comments dealt with the SAT issue, the Hawaiian telescope, funding for professional students, public transportation, a "boarding" crisis in ERs, UC hiring of undocumented students, a project labor agreement for UC, and remote work at UC. There was a brief demonstration thereafter but a warning seemed to bring it to a halt without a full halt of the meeting. (It was unclear who was demonstrating.) 

There were then presentations by representatives of student government, grad and undergrad. There is a certain kabuki element in these presentations. Students denounce the Regents and/or their policies, and then they are thanked for their service. It's a bit like the budget kabuki in which the governor is always thanked for whatever allocation he proposes, and then UC lobbies for more. (Maybe yours truly has grown a bit jaundiced about these traditions!) 

Various student awards were presented including one to a UCLA student who has assisted in advocacy in the face of federal grant cuts.

A report on retention and graduation rates was presented. Among UC's goal is a 90% 6-year graduation rate. The current rate is 86%. One Regent indicated that there was a conflict between the advocacy for returning to the SAT and the fact that graduation rates were generally rising. Another Regents asked, however, whether it is getting easier to graduate.

At Academic and Student Affairs, there was a review of high school A-G courses needed to qualify for admission to UC.  A = History and Social Science, B = English, C = Math, D = Science, E = Language, F = Visual and Performing Arts, G = College Prep Electives. These standards go back the late 19th century and have evolved over time. Most high schools offer A-G. Those that don't can take advantage of online versions. There is a teacher shortage problem with regard to some topics. Also, there are dual enrollment options with community colleges. A concern now is incorporating AI into the curriculum.

As the agenda suggested, there was not a discussion of the SAT, although a student observer opposed going back to the SAT requirement.

The Committee also heard discussion of international education including study abroad programs and exchange students from abroad who come to UC. 

Finally, there was discussion of the return on investment in a UC degree. It was acknowledged that graduating students are facing a low-turnover labor market and that AI is being used to screen job applicants.

At Finance and Capital Strategies, Regent Makarechian - who is often critical of UC construction cost estimates - praised a UC-Irvine project for its low cost and high quality. The state budget allocation for UC was praised despite the "deferral" of certain compact payments. (See the kabuki comments above.) It was noted the although UC has been successful in getting existing grants restored, federal approval of renewals and new grants is sluggish. 

The Regents endorsed the housing bond on the November ballot which contains funding for student housing. National Lab fee income was budgeted. New Regents were excluded from access to classified information. And committee reports were approved.

As always, we preserve recordings of Regents meetings since the Regents have no policy on retention duration. You can see the July 15th meeting at the link below:

https://archive.org/details/regents-7-15-2026.