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Provost’s Update on the Budget

The results of the March Revenue Estimating Conference foretell significant budget cuts for the next fiscal year. During a recent conference call, Chancellor Rosenberg warned university presidents to prepare for FY08-09 budget cuts of up to 10%.

Earlier this spring, the University Budget Planning Committee reduced FY08-09 budget allocations by 2% in anticipation of additional budget cuts. Unfortunately, the size of the cuts now expected requires that FY08-09 E&G budget allocations be reduced by another 4%, resulting in a total (at least to date) FY08-09 budget reduction of 6%.

In anticipation of budget reductions during FY07-08, $17,500,000 was removed from college and division budgets during the fall. Most of these funds were used to address the two state-imposed budget reductions that have occurred during this fiscal year. The first reduction occurred in the fall and resulted in the loss of $9,594,293; the second occurred this spring and resulted in the loss of an additional $3,459,442. Of the $17,500,000 removed from budgets last fall, $4,446,265 remains available to address state-imposed budget cuts in FY08-09. By reducing FY08-09 budget allocations by 6%, we make available an additional $15,600,000 that, when combined with the $4,446,265 just described, provides enough money to cover a FY08-09 budget reduction of approximately 7.5%. Since a FY08-09 budget reduction of 8% is quite possible, university reserves will be used to cover the difference between a 7.5% reduction and an 8% reduction.

Unfortunately, FY08-09 budgets may be reduced even more. Therefore, I have asked the deans and vice presidents to give serious thought to how they would handle state-imposed budget reductions of 10%. To the extent possible, recurring and non-recurring university reserves will be used to dampen, and slow, the impact of further budget reductions. However, university reserves are limited, and at least some college and division reserves will be needed to address further budget reductions. While all state-imposed budget reductions are reductions of recurring funds, the non-recurring funds that make up college and division reserves can be used to provide the time required to free up recurring funds.

So far, budget reductions have been applied uniformly across all colleges and divisions. Unfortunately, we have now reached the point at which non-uniform reductions must be considered. To that end, the University Budget Planning Committee is being tasked with evaluating and recommending how future budget reductions should be made. In the interim, I have asked the deans to begin discussions within their colleges regarding the need for focused cuts, guided by program quality, centrality to mission, demand, comparative advantage, and cost.