Budget Decisions in Uncertain Times
On Friday, May 15, Dr. Jacobs will recommend a 2009-10 operating budget to the Finance Committee of the Board of Trustees. It is a balanced budget—at least for now.
The university’s recommended budget is based on many assumptions, one of which is the amount of funding the university will receive from the State of Ohio, which is still very much an open question. As you may know, the State of Ohio is now projecting that its current year budget is $900 million short. Not only is this a problem for the current year budget, it also means that next year’s budget is once again a major question mark. State legislators are now saying that they will need to “start from scratch and reevaluate everything.”
We as a university community began working on the university’s 2009-10 operating budget in January. The university’s Finance and Strategy Committee, which includes representatives from Faculty Senate and Student Government, helped write the budget instructions that were delivered to deans and vice presidents. In addition, the committee helped to identify a listing of cost savings and revenue enhancements. Finally, the committee reviewed the final recommended budget and unanimously endorsed both the process and the outcome. Every sector of the university was represented in a budget process that was highly participatory and transparent.
We’ve been working to communicate the budget outcomes to the university community for the past two weeks. Although we have held numerous public meetings to explain both the process and the outcomes, many in the campus community still struggle to understand why this year’s budget was so difficult and why it resulted in the layoff of approximately 90 filled positions and the elimination of approximately 200 vacant positions. The short answer is relatively simple: projected increases in budgeted expenses greatly exceeded projected increases in budgeted revenues, and expenses had to be cut to balance the budget. The longer answer goes something like this: When one considers the financial impact of (1) a state-mandated tuition freeze, (2) new collective bargaining agreements, (3) the affects of a national recession on need-based student financial aid and interest expense, (4) the need to address structural budget deficits, carry-forward spending, and a historically negative academic operating margin, (5) normal inflationary costs such as healthcare and utilities, and (6) the need to make strategic plan investments that gives this university and this region a chance to rejuvenate and improve itself, then one should begin to understand why it was difficult to get the numbers to balance. The one positive variable in the budget equation was the news coming from Columbus—until recently.
Despite these difficulties and the ongoing uncertainty in Columbus, the 2009-10 budget that Dr. Jacobs will recommend to the Finance Committee of the Board of Trustees on May 18 has some very positive outcomes.
First, the university has honored its collective bargaining agreements even though they were negotiated in far better economic times. Second, there is more need-based financial aid for students who are struggling in this economy. Third, the budget is a solid budget in that it fills many historical holes (i.e., structural budget deficits and carry-forward spending). Fourth, the budget is balanced and cash flow positive—it has a 3% operating margin for the clinical enterprise and a 0% operating margin for the academic enterprise, and it fully funds depreciation for both. Fifth, $10 million is being moved from administrative budgets to academic budgets. Sixth, the university will continue to make strategic plan investments that will advance the university and the region’s economy (e.g., investments in the School for Solar and Advanced Renewable Energy and increased graduate student tuition waivers that support research programs).
At the same time, the 2009-10 recommended budget will challenge the university to become more efficient and more productive. Administrative areas will have to function on far less financial resources, and there will be less money for part-time and visiting faculty members. This means that full-time faculty will have to teach more students than they have historically done. Like other industries in the world, higher education including the University of Toledo will have to do more with less and become more productive. Also, there are fee and housing rate increases in the budget, which means many students will pay/borrow more to finance their education.
In closing, I do want to emphasize the sadness of laying off 90 employees—we pray the very best for each person. Every manager knows, however, that if one fails to make these difficult decision, it puts ALL jobs and the institution at risk. In all we do, we try to make decisions and operate in a way that is consistent with the university’s values: discovery and learning, outreach and engagement, diversity and teamwork, innovation and excellence, wellness and safety, and professionalism and respect. I believe the 2009-10 operating budget serves our value system…and that’s what really counts.
Scott Scarborough
Senior Vice President for Finance & Administration
May 8th, 2009at 2:30 pm
I was wondering if it is appropriate to ask how many of the 90 people who were layed off were able to retire.
May 11th, 2009at 7:01 am
It is appropriate, in my opinion, and a good question to ask. Also, I would like to know how many of the 90 laid off were over the age of 45 and were within 1 year of retirement. And, how many are able to bump (for those that have that option) and how many are being told there are some really weird reasons they can’t bump?