Special Budget Report from USU President Albrecht
In a letter to Utah State University’s faculty and staff dated October 15th, I described the action taken in a special session of the Utah State Legislature that imposed a significant budget reduction on most state institutions in order to address a revenue shortfall caused by the serious downturn in state, national, and world economies. That letter was followed by an open forum with faculty and staff held on October 21st. In both the letter and the forum, I announced the appointment of a six-member Budget Reduction Committee that was being charged to develop a university plan for absorbing the reductions.
The committee was co-chaired by Provost Raymond Coward and Vice President Fred Hunsaker, and included Vice President Noelle Cockett, Dean Scott Hinton, Professor John Kras from the Faculty Senate, and Ms. Marsha Howell representing the staff. In the letter and forum, guidelines and procedures were described that would be employed by this committee to create an institutional plan for budget reductions. These guidelines can be revisited by accessing http://www.usu.edu/president/pdf/guidelines_for_budget_cuts.pdf. The committee was charged to complete its work and present recommendations to me by early December.
In the six weeks following their appointment, the committee has done yeoman service in preparing a carefully thought out plan for implementing the budget reductions. The work of the committee has been difficult, but it has also been exemplary both in engaging units across campus in the process, and in being transparent in the development of recommendations. In reviewing their report, I believe that they have accomplished their most important priorities — to minimize direct financial impacts on our students, to be strategic by targeting the cuts so that we protect the long-term future of USU by maintaining our core programs and functions, and to not undermine our effectiveness by negatively impacting important revenue streams.
COMMITTEE RECOMMENDATIONS TO BE IMPLEMENTED
The committee has recommended FY 09 one-time cuts of $6,954,909, a number slightly higher than the required reduction of $6,494,100. My plan is to hold that difference to apply toward an anticipated next round of state-imposed budget reductions (discussed in greater detail below). The committee has also recommended ongoing cuts for FY 10 of $6,600,199, again slightly above the required cut of $6,494,100. Virtually all units of the university have been impacted, though the committee has recommended more modest reductions in some strategic areas, including those units already confronted with deficits, those accounts responsible for employee benefits, and those units which provide the infrastructure for a wide-range of academic programs. In addition, there were a group of units that the Legislature mandated could receive no more than a 4% cut.
Largely because we have still been recovering from budget reductions taken earlier in this decade, and because of a downturn in revenues that resulted from lower enrollment following the passage of HB 331 (legislation that negatively impacted our out-of-state enrollments), the impact of these budget cuts affect most profoundly our human resources. The reductions recommended by the committee will affect 85 FTE and 123 headcount jobs. Fortunately, the large majority of these are being addressed by not filling open positions, restructuring some positions, or making revenue shifts. However, approximately 23 positions that are currently filled will be eliminated over the next few months. These, of course, are the most difficult of the decisions that must be made.
Again, their task has been difficult, but on behalf of the university community, I express my appreciation to the committee for their excellent work.
LOOKING AHEAD
While these budget cuts respond to the mandates of the Utah State Legislature, we knew going into this process that the speed with which the economy will recover would be difficult to predict. In fact, in the few weeks since the legislative session in September, the economy has continued a downward spiral and retrenchments from the housing and financial sectors have now extended into virtually every dimension of our economy. Even the most optimistic are now acknowledging that a recovery is many months into the future. State revenue projections continue to become more and more pessimistic. What this means for us, unfortunately, is additional reductions in state support for our university.
To give you some sense of what is ahead, let me describe two scenarios that we are dealing with right now. The first is a request from the legislative fiscal analyst that we prepare budgets that would include an additional 5% reduction from our FY 09 budget, and a 10% reduction from our FY 10 ongoing budget. If we were to project these cuts on our reduced base following the current reduction, this would mean taking an additional $7,806,325 from the current FY budget, and $15,612,650 as an ongoing reduction from our FY 10 budget.
The second is the new budget plan released from the Governor’s office late last week. The Governor’s budget includes the following recommendations:
- All State departments (including Higher Education) received an additional 1.5% reduction in the current FY 09 budget allocation.
- All State departments (including Higher Education) received a 7% ongoing base reduction for FY 10.
- However, some departments, including the Utah System of Higher Education institutions, received a 3.5% one-time reduction offset in FY 10. Thus, in the Governor’s budget, the full effect of the 7% reduction takes effect beginning in FY 11. The hope here, of course, is that the economy will show some improvement by then and this reduction may not need to be imposed.
For Utah State University:
- The additional 1.5% one-time reduction for this fiscal year equals $2,341,900.
- The ongoing 7% base reduction for FY 10 equals $10,928,900.
- The 3.5% onetime offset for FY 10 equals $5,464,450.
Both scenarios are alarming to say the least, though the Governor’s recommendations do provide some cushion that would be enormously helpful to us. (Since many of you have asked about the state’s rainy day fund, I note that the money to fund the offset would come, in part, from that fund).
Even with the most optimistic scenario, however, it is evident that we have difficult work ahead. I believe that the process we put in place for the first round of cuts has worked well, so my intention is to continue to use that committee structure as we look ahead.
Finally, let me assure you that we will continue to work very hard with our legislators, with the Governor’s office, and with our various other constituents around the state to make the case for higher education. Among our arguments as we move forward are the following:
- The path to economic recovery goes directly through the public research universities. Thus, the state must do everything it can to protect this vital resource.
- There is no example of sustained economic growth and vitality in this country that isn’t built, in some way, around a major university. To cripple that system will have consequences for our economy and our country that will extend for many decades.
- Failure to recognize the importance of higher education in our 21st century economy will only result in our falling behind in the increasingly competitive global marketplace.
- While we understand the importance of preserving public education, we have no public education system without quality colleges and universities to train our teachers. The same assessment applies for those business and agricultural entrepreneurs who are being trained; for the engineers who are being educated; for the pre-medicine, pre-dentistry and nursing health providers who are being developed; for the natural resource professionals who will protect our land and water resources; and for the musicians, artists, and humanists who will enrich our lives. Anything that weakens our universities weakens the basic structure of our economy.
- In addition, further cuts to our higher education budgets will have the following potential consequences:
Fewer class offerings
Larger classes
Program eliminations
Increased time to graduation and lower student retention
Higher tuition and reduced access
Fewer advisors
Caps on enrollment
Further reductions in faculty and staff
Additional negative consequences for local and state economies
Clearly we face a most challenging time. I believe that the various economic stimulus plans being proposed at the federal and state levels will, once implemented, stop the downturn and begin to move us toward an economic recovery. However, that recovery will take time. In the meantime, we must all do everything we can not to lose the momentum we have experienced over the last few years. Utah State University is an outstanding university, and will continue to be so.
We will continue to move forward with our comprehensive campaign — though in a much more difficult fund raising environment — and with new capital projects like the Emma Eccles Jones Education Building, the USTAR Building on our Innovation Campus, and the Bingham Entrepreneurship and Energy Research Center in the Uintah Basin. A state economic stimulus package could, potentially, provide funding for other capital projects on our campus and elsewhere. And, most importantly, we will continue to provide outstanding educational opportunities for our students as we continue to attract and retain a truly exceptional faculty and staff.
I ask for your continued support during this difficult time. Please be patient and understand that all of us must devote our creative energies to addressing the challenges that are ahead. Together, I am confident we will succeed.
President Stan L. Albrecht
Utah State University
December 9, 2008
