Dear University of Idaho Faculty and Staff,
The continuing volatility in the economy, together with questions from our faculty and staff regarding budget holdbacks and the program prioritization process, compel me to provide greater clarity and take additional action regarding the University of Idaho's budget situation.
As I wrote recently, the Idaho Division of Financial Management has indicated that state agencies should prepare for the Governor's 1 percent holdback of state-appropriated funds for this fiscal year (FY09) to increase to 2.5 percent. We are awaiting word, which may come from the governor this Tuesday, as to whether that expected percentage will increase. We believe it may possibly be as much as 5 percent. We also believe that, given the turbulent economic conditions, holdbacks will continue and possibly increase in near-future years.
For the University of Idaho, a 5 percent holdback of state-appropriated general education funds would consist of approximately $5 million from our $96 million General Education account and $1.5 million from our $30 million in state-appropriated special program accounts (i.e., Agricultural Research and Extension, Forest Utilization Research and Idaho Geological Survey). This combined base for these reduction calculations is approximately $126 million, while the University budget totals more than $432 million. This larger figure includes funds from a wide variety of other sources, including grants, contracts, student fees, auxiliary services and fundraising.
The economy in the coming year is uncertain, so we also need to plan for the probability that this year's state holdback will recur in the coming 2010 fiscal year, potentially requiring an additional 2.5 to 5 percent reduction in spending on state-appropriated funds.
The other factors influencing our budget, which I understand have caused some confusion as they relate to the holdback, are strategic investments and reallocations. We entered the current 2009 fiscal year following through on the internal reallocation we had committed to - a strategic prioritization of $6.2 million toward areas identified as critical for investment, including those expected to increase revenue over time: graduate and undergraduate recruitment and retention, research, and advancement. Some of these investments have already borne fiscal results (e.g., enrollment and fundraising increases). I will talk about those returns in a future Progress Report.
A portion of that $6.2 million reallocation was also used to cover increased operating costs such as energy, liability insurance and city services, and a lower state allocation because of cumulative lower enrollments over the last three years. Costs will continue to increase in the coming fiscal year for things like utilities, and we must continue to sustain strategic investments to increase revenue over time. As such, we project the need to internally cover an additional $2 to 5 million in fiscal year 2010.
In short, we are looking at a scenario in which we must anticipate 5 to 10 percent in state-mandated holdbacks over two fiscal years, resulting in a permanent budget reduction. In addition, we will need to cover increased costs. Of course, gains in revenue from sources such as increased enrollments (which lead to increased state appropriations over time), fees, private giving and/or state or federal assistance to higher education will help mitigate budget reductions. While we anticipate revenue increases over time, it is prudent to plan assuming no short-term revenue enhancements. As such we are developing fiscal models to deal with these budget reductions that minimize the impact on our teaching/learning, scholarly/creative activity, outreach/engagement, and organization/culture/climate.
To further address the state's request, I will place into effect, on December 1, two requirements to reduce spending:
- A freeze on non-essential state-funded travel: travel to conferences; to face-to-face meetings that could instead be convened by phone or videoconference; travel not essential to maintaining donor/alumni/legislative relations or that does not have high potential to cultivate new revenue sources; and the like. All travel scheduled after December 1 must be approved by unit deans or vice presidents.
- The current hiring pause on state-funded positions will convert to a freeze. Employment offers for state-funded positions being prepared on or after December 1 must be submitted to unit deans or vice presidents. If they concur that those hires are critical, final approval must be sought from the provost and me.
Parallel to these actions, the deans are continuing the critically important process of analyzing program investments, disinvestments and reconfigurations that could occur this year to benefit both the short-term budget situation and the long-term University transformation process. We are also examining all University accounts, including state-appropriated and local service accounts, for potential "bridge" sources of funds to meet immediate needs.
To continue our University transformation process, the deans and vice presidents, along with faculty, staff and student partners, are pressing forward swiftly on the major strategic planning activities of this fall:
- academic program prioritization for our long-term viability and impact;
- process reengineering pilot projects to increase our efficiencies, collaborations and internal customer satisfaction;
- and a Request for Innovations (RFI) process to envision how the University of Idaho should be shaped and focused for the 21st century.
These activities are an extension, enhancement and acceleration of the Strategic Action Plan we began implementing more than two years ago. And while they are influenced by new realities in our fiscal situation, they are not driven by it. They are part and parcel of the proactive, innovative, and practical strategic planning that we and all institutions must do to provide the greatest impact in a changing world. As I said to you earlier this year, thanks to these good efforts, we are well-prepared and continue to make good progress toward making the critical choices we will face in the months ahead.
I encourage your interest, energy and engagement as we take the next steps together in transforming our University of Idaho. We will keep you informed as we receive additional information regarding fiscal requirements from the state. As always, I welcome your questions and feedback.
Sincerely,
Steven B. Daley-Laursen, President