The Associated Students could soon see roughly $140,000 in debt accumulated by the Grove Cafe reflected on their annual operating budget. Though the Student Affairs Office has absorbed the debt generated by the eatery for the last several years, university officials recently initiated an effort to clear the deficit from their expenses.
According to Student Life Business Director John Hughes, Vice Chancellor of Student Affairs Penny Rue’s office recently requested that his department identify any long-running deficits within its operating expenses.
Hughes said the debt accrued by the Grove Cafe, as well as a similar amount hanging over Cafe Vita — the Graduate Student Association’s own coffee house in east campus — immediately caught his attention.
“When the university examines its budget and looks at its negative deficits, things like the Grove Cafe jump off the page,” Hughes said.
According to Hughes, Student Life Director of Finances Dawn Buttrell asked that he explore ways to remedy the outstanding deficits. Earlier this month, Hughes met with A.S. President Utsav Gupta to discuss transferring the Grove’s debt from the university’s budget to that of the A.S. Council.
Hughes said both the undergraduate council and the GSA would be able to absorb the deficits accrued by their coffee shops without difficulty, given the scope of their financial resources.
“A.S. and GSA are sitting on large reserves, relatively speaking,” Hughes said. “So the vice chancellor’s office is saying, ‘Why don’t you just move that deficit to your own budget?’”
The A.S. Council manages a total operating budget of over $3.1 million each year, the majority of which is derived from a quarterly student activity fee. Additionally, the council possesses a reserve fund of roughly $1 million.
“It’s a pretty logical choice for [the university] to ask us to bear the burden of our own debt,” Gupta said.
The A.S. Council and the GSA both operate as university departments. Much of their finances are managed by the university, including payroll for A.S. and GSA staff members and long-term financial investments, which are carried out by the UC Office of the President.
Their department status also renders all debts accrued by certain A.S. and GSA enterprises the immediate financial responsibility of the university. Though the Grove Cafe is technically owned and operated by the A.S. Council, the eatery’s sizeable debt is not currently reflected in the council’s budget. Instead, it is reflected in a university account.
According to Hughes, the university is willing to support departmental debts to a certain extent, but these deficits eventually begin to yield negative financial repercussions for the university if they are allowed to grow too large.
This concern arises specifically when considering the university’s Short Term Investment Pool — a program through which UCOP financial managers annually invest departmental revenue from each campus, then transfer two percent of any returns back to the departments. When the university carries deficits — such as those of the Grove Cafe and Cafe Vita — they reflect negatively on departmental STIP returns.
According to Hughes, by maintaining a Grove deficit on its budget, the Student Affairs Office loses roughly $2,800 each year in STIP funds. Though the figure is relatively small in comparison to the university’s total operating budget, Hughes said clearing the budget of deficits is simply good bookkeeping.
Gupta said he believes the university is moving to shore up its expenses due to the systemwide budget crisis.
“The university overall is worried about debt accruing against their accounts, especially when they’re looking at extensive budget cuts going into the future,” Gupta said. “They’re trying to save any amount of money they can, anywhere; $3,000 may not seem like a lot to us, but to them it could be enough to save a particular program.”
Gupta said he expects the university to pursue other similar debt-reduction efforts in the near future.
“There are actual academic departments that are in debt to the university,” Gupta said. “It will be interesting to see how the university starts moving forward on all of these debts. When the budget gets cut, you start looking at where your negatives are. They’re going to be going after places where there is debt, wherever it may lie. It’s more a fiscal calculation than anything else.”
Readers can contact Reza Farazmand at [email protected].
