Letter to colleagues on budgetLetter to faculty and staff on 2009-2010 budget
This is the third time I’ve written to you in the last six months about how the economy and the state’s fiscal condition will affect the University—and most important, what we can do about it.
Last December, I wrote that the state and University were in positions of relative strength, and that has remained the case. I asked that we take steps to save money during the current fiscal year so we would be able to ease the immediate impact of budget cuts in the fiscal year beginning July 1. I am pleased to report that each campus will benefit from decisions made over the last six months to prepare for next year.
In February, I reported on the state of the budget discussions and the likely impact of federal stimulus funding on our budget. Although there was much legislative activity after that, the final state appropriation to the University ended up about where the discussion began—at least in terms of the base (recurring) budget. The Board of Regents, the Chancellors and I have continued to work on how the budget can be managed during the next year to maintain the University’s significant momentum. I think we have a good plan to do that, and that’s what I want to tell you about today.
I do want to call your attention to some very positive actions by the Legislature and Governor. First, they approved our plan to use savings held by the state from the LB 1100 building initiative to invest in the new student information system. This addition of over $10 million completes the $30 million investment required for implementation of the system and means that campus funds will not be reallocated for this purpose. This has an enormous impact for the next year, since $10 million amounts to about two percent of our total general fund appropriation. The state also provided operating funds for a new, much-needed division of nursing in Norfolk, as well as continued funding for our LB 605 system-wide construction initiative and for biomedical research. Forgiveness of a $4.2 million annual depreciation reserve payment will provide one-time funds for academic programs and student financial aid. In addition, a number of policy changes we sought, including increased R&D tax credits for private investment in the University, extending the ban on concealed weapons to include university campuses, and a state-wide biotechnology plan, were adopted.
On June 12, I will present a proposed 2009-2010 budget to the Board of Regents. The agenda item will be available at www.nebraska.edu/board. The budget is guided by the goals of the University’s Strategic Framework and maintains the recent progress of the University. It is a budget made possible by a relatively strong Nebraska economy, the investment of federal stimulus funding in other state obligations, a modest tuition increase, and shared sacrifice on the part of many university employees.
We understand the difficulty of the current economy for many people, including many in Nebraska. And we are grateful for the support we receive and the confidence Nebraskans have in their University. At a time when many of our peers, including those in neighboring states, will experience severe reductions in funding, we will continue to make strategic investments, thanks to good planning on the campuses, modest revenue increases and reductions in our expenditures. We will not be able to avoid making some budget cuts across the University, but we are in a better position than we thought possible a few months ago.
Nearly 80 percent of the University’s state-aided budget is for salaries and benefits. To reduce the need for program cuts and job losses, we have budgeted a relatively small amount (1.5 percent) for a salary increase pool, to be used strategically on each campus. Although this may not advance the Board’s goal of reaching the mid-point of each campus’ peers, I believe it is responsible—as well as responsive to many of our faculty and staff who offered to forego salary increases to preserve programs and jobs. Even this modest investment may compare favorably with many peers; we have indications that on a number of our peer campuses there will be no funds dedicated to salary increases. Even so, it is important to recognize that this year’s approach is not sustainable; we cannot continue to make progress that benefits Nebraska if we are not aggressively competing for talent.
We are providing some additional benefits to employees next year. The University will assume the increased employee share of health insurance cost increases, thus saving participating employees between $60 and $192 next year. Also, we will provide an expanded employer-financed life insurance benefit equal to the last year of most employees’ salary, which would cost employees an average of $200 a year if they had to pay premiums.
Of course the faculty bargaining units at UNK and UNO will be paid pursuant to agreement (in the case of UNK) or resolution of litigation (in the case of UNO). The additional funding required for these contracts will be borne by the respective campuses, which will result in deeper budget cuts on those two campuses. Again this year UNL and UNMC will have the largest requirements for new building operating and maintenance, and those costs will be borne by the campuses incurring them. I believe these steps fairly distribute budget obligations and contribute to cost consciousness. We have also made other reductions in planned expenditures, while at the same time making important investments. I am especially pleased that we will be able to make strategic investments of one-time funds in Programs of Excellence.
We have budgeted a 4 percent tuition increase. And while we realize that any tuition increase has an impact, we believe this increase—the lowest in over a decade—is justified. Not all peer decisions on tuition have been made, but we expect our increase will again be less than average increases by peers and will keep campuses’ total tuition and fees well below peer averages.
We plan a number of strategies to address affordability. First, we have increased the budget for Collegebound Nebraska, which promises zero tuition to most Nebraska families with an income of $50,000 or less. This holds harmless financial aid recipients from tuition increases. In addition, we announced earlier this week a special financial aid fund of $1.2 million to assist students whose families have experienced a major change in circumstance, such as job loss. Combined with the largest Pell grant increase in history and noteworthy growth in the Buffett Scholarship program, significantly more funding will be dedicated to financial aid than at any time in our history.
Despite good planning and preparation, reduced expenditures, and modest increases in state aid and tuition, we will have permanent base budget cuts next year totaling over $8 million. We will be aided by this year’s savings, which will provide some additional time for base cuts to take effect, but there will be reductions across the University nonetheless. Several months ago, I asked the Chancellors to begin preparing for a 2 percent annual reduction; in most cases, because of the way we are managing new expenditures, the reductions now planned are less than that. After the budget is adopted by the Board, plans for implementing campus reductions will be addressed by each Chancellor.
There remains a good deal of uncertainty about the economy and Nebraska’s tax revenues, and it would be a mistake to be complacent about the future. We will monitor carefully the state’s fiscal situation, and continue planning for the second year of the biennium, which will also likely require reductions. Despite our challenges we are grateful for the relative strength of Nebraska’s economy today and for the relative stability that has provided the University. We will do our best to manage the budget in ways that continue to advance the University’s priorities and serve Nebraska.
I am very grateful to you for the work you do on behalf of this great University and the people of Nebraska. Thank you.
James B. Milliken