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Senate Committee on Finance and Planning

Tuesday, February 2, 2010

2. Statement on Budget Issues

As a follow up to the budget discussion the Committee held on February 1, Professor Luepker drafted a memorandum to the President and circulated it to the Committee by email.

1. It is apparent that we are in a severe and worsening fiscal crisis. Something has to be done. We are not sure everyone believes this yet or understands the likely impact.

2. The proposals are based on additional "across the board" cuts and is for only one year, FY 11. This is the usual response to a fiscal crisis. A bold, transparent strategic plan, which provides a vision and informs decisions, is not apparent. Such a plan will be essential if we are to face the FY 12 crisis and future cutbacks. The long-range problem was well described in the Financing the Future report. A strategic plan needs articulation and must be initiated soon.

3. Major elements in the draft budget proposal move many budget decisions from the schools and colleges back to central administration. This reverses the goals of the budget model over the last several years and takes responsibility away from the schools and colleges, once again encouraging dependency on central administration.

4. The draft plan that was discussed needs a summary table of the costs and revenues to assess the whole picture. It is not possible to ascertain this from the handout.

With regard to specific items:

1. Pay raises: A 2% raise in pay is more symbolic than economically substantive. Employees will appreciate the symbolism. However, the public and political perception of this may be that the University has enough money to absorb State cuts and still give pay raises.

2. Twenty-seven pay periods: This calendar artifact should be handled directly with 27 payments where applicable: all should be treated equitably, but calculating paychecks may differ between hourly-wage and salaried employees. This issue needs to be factored into future budgets. Few people understand the calendar problem other than knowing a solution wasn't planned. It shouldn't happen again.

3. Tuition increase: It is clear that the burden will increasingly fall on individual students and their families. It also appears the added money will be controlled by central administration rather than the schools and colleges. The increases will have to be used to offset state budget cuts and therefore will not be available for instructional purposes.

4. Initiatives pool: It is not apparent how we can create any new initiatives in the coming period. Some of this money appears targeted to fill holes that undoubtedly will occur but the criteria for these subsidies are not apparent. It sounds like discretionary money for central administration. A wise use of this money might be to invest in one-time projects that will produce financial benefits or to distribute part of the pool to colleges to invest in local priorities.

5. Furloughs: This is the most controversial topic for employees. In essence, two unpaid weeks is a 3.8% pay cut. Making it work will be problematic, especially given the diversity of funding sources and appointment terms for faculty, staff, and student employees. The Committee needs more details and further consultation, but the details must be worked out quickly because employees are already raising concerns due to the vagueness of the idea and lack of communication.

6. Overall givebacks of 2.75%: How will those decisions on the distribution of cuts among the various units be made and will the criteria be transparent? The term "supporting the institutional framework" is obscure. The bottom line of this is that staff will lose jobs.

7. Financial aid: In recent years, as state financial support has waned and tuition increases have been necessary to cover the resulting revenue loss, the University has significantly expanded its commitment to need-based financial aid to lower- and middle-income students. The cost of this aid is a substantial part of the undergraduate cost pool and reduces the efficacy of these tuition increases as corresponding increases in aid are needed. It also reduces discretionary revenue from tuition increases. Given the likelihood of sustained and significant reductions in state support, the Committee feels that it is important for the University community to discuss the nature and level of the University's financial aid commitment and how that commitment relates to the mission of the University.

8. Cost pools: A variety of comments were made about cost pools. It is apparent that some will increase, as will the overall total. It is apparent that the cost pools exceed the State subsidy for a growing number of schools and colleges. Cost-pool increases are an additional budget cut to the units, on top of the 2.75%. The Committee needs greater clarity about the relationship of the cost pools to the academic mission.

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