UT Budget News

Over the past month, I’ve watched two television commercials for Kaplan University that have caused me to pause and reflect. These commercials have reminded me that the world of higher education is indeed changing: students learn and communicate regularly using new and developing technologies, and higher education options available to students are expanding.

Before I get too far into this brief commentary, let me go ahead and answer the question, “Do you want UT to become Kaplan University?” No, absolutely not. I want UT to be synonymous with academic quality and rigorous learning. The Kaplan commercials remind me, however, that traditional universities can use new and developing technologies to expand their educational boundaries both inside and outside the classroom. The definition of academic quality now includes these new and developing technologies, and traditional universities can use these technologies to deliver high quality education to historically underserved students—perhaps at a cost they can more readily afford.

UT is already a leader in the number of distance learning courses it offers. We are on the right path. We just need to make sure we keep pace with the speed of change that is occurring in higher education and the world at large.

Kaplan Commercial #1

Kaplan Commercial #2

­­­As we make our way through the budget development process, one question that we have been receiving from some college deans is, “If the Governor is recommending a biennial budget with an increase in State Share of Instruction, why does UT need to construct 7% and 15% cost reduction scenarios?” The short answer to this question is as follows:

1. Based on the Governor’s recommendation, UT would receive approximately $6.7 million in additional funds over two years. Projected salary and benefit increases alone over the two years will exceed $16 million (based on existing collective bargaining agreements). Given that the Governor is also recommending an undergraduate tuition freeze, we have very little choice but to consider other revenue enhancements and cost reduction scenarios. The 7% and 15% scenarios are intended to address both revenue enhancement (up to 50% of the scenarios) and cost reduction possibilities. We need to explore these possibilities.
2. There will be other cost pressures: student financial aid, debt service, utilities, structural deficits and carry-forward spending, the threat of a lower academic subsidy from the hospital, etc.
3. The legislature might choose to change the Governor’s recommended budget, so anything is still possible at this point in the legislative process.
4. The Governor’s recommended budget is based on the receipt of substantial federal stimulus funds, and most of the federal funds are front-loaded into the first year of the biennium. In a best-case scenario, federal funds will stimulate the economy and restore lost tax receipts. In a worst-case scenario, federal funds will simply buy the state some time to adjust its finances downward. In other words, we may be living on borrowed time.
5. UT’s academic (non-hospital) operating margin was already inadequate prior to the national recession. Some improvements were budgeted for 2008-09, and more improvements were already planned for 2009-10. The academic operating margin is too low to generate enough funds to pay debt service and reinvest in the physical plant and IT infrastructure in adequate amounts. As a short-term strategy, UT borrowed funds to address deferred maintenance. As debt capacity is maximized, however, the operating budget must be adjusted to fund adequate levels of capital reinvestment. If we allow the plant and IT infrastructure to deteriorate, nobody will want to join or attend the university.
6. We still need to make further investments in the university’s implementation of its strategic plan. To do so will make us a stronger university. Academic quality will improve. The university’s academic reputation will improve. The student experience will improve. Patient care will improve. The region’s economy will improve. Our finances will improve, which will enable us to adequately fund and sustain full-time employment at the university.
7. Cost reduction scenarios are ways to spur creative thinking. It is good for us to ask the question, “Can we become more cost effective and move existing funds to strategic priorities?”

These are the top seven reasons why we need to continue to develop the 7% and 15% cost reduction scenarios. I hope this is  helpful.

Scott Scarborough

The budget pre-hearings are underway.

Drs. Haggett and Gold are meeting with all the colleges and academic support units, and I am meeting with all of the non-academic support units to review their budget scenarios—both the 7% and 15% scenarios.  Up to one-half of each budget scenario may include proposed revenue enhancements, so the pre-hearing conversations typically begin by assessing the reasonableness of revenue enhancement proposals.

To date, I have held pre-hearings with Information Technology, Budget Office, Advancement, Human Resources, Athletics, and Students Affairs.  I am happy to report that all areas were fully prepared and made excellent presentations.  My goal for the pre-hearings is to make sure the budget scenarios are thoughtfully and accurately prepared and clearly presented.  Decision-making does not really begin, however, until after the pre-hearings and formal budget hearings have concluded, which is around the end of March.  After that, input is solicited from the university’s Finance and Strategy Committee.

In summary, it is still very early in the process, but I am optimistic that the university non-academic support areas are making a very serious attempt to be as cost-effective as possible.  To the extent they are successful, this maximizes the financial resources that go to our core academic areas.  More to come…