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Strategic Budget Advisory Committee (SBAC)
Strategic Budget Advisory Committee

University Leaders Discuss Budget Reductions

February 18, 2009

By Philipp Kotlaba
Collegiate Times staff writer

The university administration has asked departments to plan scenarios to deal with 3 percent or 5 percent reductions in their budgets as Virginia Tech readies itself for a $42 million cut in state appropriations from its general fund.

President Charles Steger, accompanied by Provost Mark McNamee and Chief Financial Officer Dwight Shelton, held two "town hall" meetings Tuesday and Wednesday in Burruss Auditorium to inform the university community about measures the university will take to cope with state cuts for higher education.

"The state is working on its projected shortfall with a budget deficit of nearly $2.9 billion.  The economy is much worse than we thought," Steger said.

As a result, Tech suffers.  In the 2000-01 academic year, the University Division -- which covers all instruction costs -- received $190.1 million in state support.  Based on Gov. Tim Kaine's introduced budget, that number is expected to fall to $159.1 million for the next academic year.

 

"I was telling somebody the other day, I felt like I was running around Squires checking the sofas for spare change that might be under the cushions," Steger said.

"Often when I'm talking to people, they say, 'Well, you've got this huge university ... any business organization can take a 10 percent cut.'  You know, if we were fully funded, I'd agree with you," Steger said. "But we haven't been fully funded for a long time."

For example, in 2002, Tech lost 26 percent of its entire state support, or $72 million.  "We have really not recovered from that.  So you have to look at this from the context of cuts after cut after cut, to the point where there's not much left to cut," Steger said.

The University Division alone faces a cumulative general fund reduction of 20.9 percent. Around 37 percent of the instructional budget comes from the state.  In 1990, that number was 70 percent.

"When a business finds that they have a revenue decline, what's the reason?  It's because their business is down.  Well, our business is up," Steger said.  "We have tremendous demand for what we're offering, and we are being expected to do it with fewer and fewer dollars."

Tech has steadily taken on more graduating high school students to accommodate increased demand.  In the last four years, 2,000 additional in-state, undergraduate students were admitted without ever receiving any state support for the effort.

"So when people are talking about 'we want to reward growth in the future,' our point is going to be, what about growth in the past?" Steger said.  "The capacity to take additional students beyond that is simply not there, and we're not going to do it.  We can't do it; it's not fair to the existing students that we have who are here to get a first-rate education."

At the same time, fund appropriations per student are set to fall 40 percent, to $5,929 in 2009-10, from $9,915 in the 2000-01 academic year.  Steger explained how tuition costs must rise to offset the loss.

 

Despite all this, the university has done much to streamline programs and manage costs.  In fact, over the last nine years, Tech has actually lowered the average cost of instruction per student from $10,424 to $9,849, adjusted for inflation.  "There are not many companies that could show that level of efficiency," Steger said.

At this stage, there are plenty of unknowns.  Despite the passage of the federal stimulus bill, the rules for the distribution of stimulus money are still in formulation.  "A lot of it we do not know.  It changes every hour or two," Steger said.

 

Besides that, since Kaine's last budget projection, Virginia has revealed $800 million more in shortfalls than previously expected.  The state revenue forecast will have to be revised, and any change will likely be for the worse.  "Even if everything works, the economy is going to go downhill before it goes uphill," Steger said.

University Senior Vice President and Provost Mark McNamee outlined several actions the university has taken to address the state's budget cuts.  For the 2009-10 academic year, Tech is planning for permanent general fund reductions of 5 percent of internal allocated budgets.

 

In terms of the university's strategy for positioning itself in the long-term, McNamee emphasized the need to evaluate permanent changes in the size and scope of all programs; any administrative activity not essential to fulfilling core missions "could be evaluated for reductions in scale or even elimination," McNamee said.  "You have to think long-term."

Other key points included the decision to continue to offer undergraduate degrees only on the Blacksburg campus, and evaluating how to make off-campus graduate programs cost-neutral or even revenue-generating, with the overriding theme that all colleges should immediately begin to explore ways to maximize efficiency without losing long-term flexibility.

"If they're not essential ... or they're not going to be competitive, we have to look at those carefully and decide if we can afford to keep doing them," McNamee said.

However, McNamee laid out several principles by which the university will conduct itself despite the current budgetary problems.

 

"We will continue to honor the practice of not terminating any untenured, tenure-track faculty members for budgetary reasons.  We think this would be a horrible practice, and almost irrecoverable in terms of reputation of the university," McNamee said.  "Even though they don' t have a legal contract to stay here indefinitely, we certainly will not take that step."

"Unlike some universities, we have not handed down across-the-board mandates on what they can and can't do; we're just asking people to use common sense and try to conserve resources wherever possible," McNamee said.

In addition, promotion adjustments for faculty will be awarded next fiscal year.

McNamee also recognized the College of Liberal Arts and Human Sciences for being the only college that had been considering major structural and programmatic changes.  "So for that area where they need some flexibility, we are going to give them the option to consider some retirement incentive items."  

CLAHS contains the only senior management area that will be allowed to use a retirement incentive program.  No across-the-board hiring freeze will be implemented.

"A hiring freeze simply is not strategic, so we're not doing that," McNamee said.

However, vacant positions in most senior areas will not be able to be filled until the situation improves, and some focus programs may face elimination or reduction.

 

"We're looking carefully to see what the impact of those reductions will look like," McNamee said.

"We're seeing evidence that a number of sections and classroom seats are at risk in the budget reduction plans ... These budget reductions of this scale, combined with previous reductions, have serious implications for what the university needs to do and wants to do," McNamee said. However, the university is also looking into reinvestments to help future growth.  New majors and programs, such as new sustainability programs, are in consideration.

One example is the potential for a new sustainability minor in response to vocal support from students on the issue, and possibly other new undergraduate degrees.  McNamee also mentioned increased pre-college outreach, support for the Arts Initiative and the Task Force on Race and the Institution, as well as the creation of a Master's of Public Health degree.

The state has allowed the university to mark certain items as mandatory expenditures, exempting them from reductions.  Looking at the part of the education and general budget that can be reduced brings a $26.2 million reduction from an 8.3 percent to a 5 percent loss. The disparity also reflects the "impact of central actions we've taken to try to reduce the impact on campus," Shelton said.

Despite a certain degree of reluctance, research institutes will also take reductions, just as all other parts of instruction and academic programs.

 

The governor's budget was submitted on Dec. 17.  The General Assembly is in session, working on the budget.  They are scheduled to conclude the session by the end of February.  

"They are currently still in session, working on the budget, and things are changing as we hear even today," Shelton said.  "We're not certain if they're really going to make that, but that is the plan right now."

"We're just received the e-mails this morning (that) the state is looking to the federal stimulus money as a way to enhance our education or maybe offset some of the reductions," Shelton said.

 

"As a result, we normally set tuition and fees shortly after the general assembly session is over; we're not sure if we're going to be able to do that in quite that time frame this year because of the uncertainty of what's going on in Richmond and what they'll finally say with the budget," Shelton said.

"Our number one priority ...  is to protect the core academic programs and the integrity and quality of those programs, so all of the reductions that we're going to take and how we're going to have to reallocate money are all going to be designed to try to protect those elements."

Decisions on tuition are now to be delayed into the spring, along with any budget decisions.

"I would say the prospects are very good that the institution is still going to be a very good value for its students and one that's going to increase in value in the following years," Shelton said.

In keeping with the "town hall" format, Steger followed up the presentation by accepting questions and comments from the audience.  He received varied responses.

"I absolutely thank you for all the hard work ... it's a huge amount of work, I could imagine, the nights you stayed up, so I thank you for doing that," said chemistry professor David Kingston.

 

"Thank you for noting that the library is possibly going to be exempt from any cuts.  I do want to put forward strong support for the library," Kingston said.  "Of all the institutions ... the library is one of the least funded.  Further cuts for the library would really hurt the research and departments, as well as their teaching."

Patricia Hyer, associate provost for academic administration shared the "stress that's going on in some of the departments," particularly with deans' budget reduction plans that are, for the moment, unable to go forward.

 

Hyer also noted the lack of efficiency in terms of energy.  "I have no idea what we're doing on that score to control our energy costs," Hyer said.

 

"All the new buildings are going to be leading-edge, energy designed," Steger said.  However, he noted that over last year, just the cost of coal has gone up $3.8 million.  The university consumes 240,000 tons of coal each year.  "We need to do a lot of things," Steger admitted.

 

He noted energy-efficient, automated lighting as a good starting point, and the university is looking into this.

Nabil Hamdan, a mechanical contractor performing renovations on the campus, agreed.

 

"It does annoy me a lot to see the energy that we do waste here," Hamdan said.  "It's crazy that we're such a wonderful engineering school with such brilliant minds, and the lights are on in the bathroom, or you're running the air conditioning in the middle of wintertime," Hamdan said.

     

"In the current environment with the 5 percent cut, we're finding most units are going to be right at the edge, but most units are going to be handling this either through not filling vacant positions, taking rate of the natural attrition that occurs ... or in some cases, very selective personnel actions where they're changing the program," McNamee said.

"If things were to get dramatically worse, we'd have to go back and look at a whole range of things, but as of now, we're looking opportunistically at the openings that occur to save the amount of money we need to save."

After the meeting, most attendees seemed pleased with the presentation.  "They did a really good job.  It's a tremendous amount of information, and I thought they hit the important points," said Sue Rowlands, dean of the College of Liberal Arts and Human Sciences.

"The university will come out fine," said Irene Leech, associate professor in the department of apparel, housing & resource management.

   

"The areas that they find to be key are going to be fine.  It's those of us who are in a position that they've decided we aren't as key anymore; we're the ones who are going to not survive it quite so well."