Cosmetic Compacts

You may have seen this item in the LA Times:

Facing budget shortfalls due to state cuts, uncertainty over federal support and increasingly acute student needs, the University of California said Friday that it would seek a nearly $130-million zero-interest loan from the state. UC’s top finance manager made the emergency request in a letter to the state Department of Finance, asking for fast-tracked approval from lawmakers so the loan could be used during the current fiscal year...

The loan option was offered to UC under the state budget passed this year that cut the system’s year-to-year state funding by 3%, or roughly $130 million...

Full story at https://www.latimes.com/california/story/2025-11-07/uc-seeks-130-million-loan.

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So, let's break it down. Under the so-called compact - good term for something cosmetic - UC should have received the $130 million as an allocation from the state (along with the rest of the UC budget). But the legislature said we'll give it to you - next year. So the deal became, give it to UC now as a zero-interest loan and then UC will pay it back next year with the extra $130 million you'll be giving it. Viewed that way, it is spending in all but form, but it makes the budget look rosier by $130 million than it would if the money were simply recorded as spending. It is cosmetic spending.

However, there is a hitch. The legislature, in cooking up the deal, couldn't really bind any future legislature to allocate the owed $130 million. So we will see how cosmetic it is next June when a new budget will need to be enacted.