Earlier quoted context omitted.
Maybe. There is some upper-limit to the number of students the system can admit. Enrolling out-of-state students is a net gain if the they stay in California and are productive enough to outweigh the productivity of the in-state students they push out and the potentially lost productivity from those students' going to non-UC schools.
How do out of state students "push out" in state students?
There may be a limit to how fast new capacity can be brought online, even with an increased budget; in that case, the increase needs to be a) slowed down to match the rate of investment, and b) distributed to the new campuses where new capacity is being added. This last is actually a result of the new policy, though I'm worried that these caps would remain even after capacity has caught up.