February 18, 2010

Budget Update

Earlier this week, I had the chance to speak to the Faculty Council, where I gave an update on our budget situation.  As I mentioned previously in Tower Talk, all state agencies have been asked to prepare a prioritized plan to reduce state general revenue expenditures by 5%.  For UT Austin, that means a reduction of $29 million in state funding.  Fortunately, last summer we reorganized our Information Technology Services division, resulting in improved services and a savings of more than $5 million.  I’ve also arranged for a transfer of $5 million from cash reserves in the trademark licensing and sponsorships account by Intercollegiate Athletics.  We will make up the difference with reductions in new hiring, deferring some capital expenditures, and significant budget cuts in the administrative portfolios.  To a much lesser extent, we are asking for reductions in the colleges and academic departments.

Combined with declines in income from the Available University Fund and other endowments, this reduction in state funding will have a considerable impact on our budget.

I’ll keep you posted on these developments.

Bill's Signature






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6 Responses to “Budget Update”

  1. I’m heartened by the robust discussion in this forum about the university’s budget situation.

    But I must correct an inaccuracy that was posted here (and that has been repeated elsewhere) about the proposed Liberal Arts Building we’re planning for the east mall.

    Most of the budget cuts that are being discussed for the College of Liberal Arts would be necessary even if there were no plans for a new building. Like all schools on campus, we’ve been asked to find ways to spend less and the vast majority of our proposals have nothing to do with the building.

    In fact, if we start construction on the building in the next year, we’ll be able to save millions of dollars on this vital project.

    By taking advantage of today’s depressed construction costs and low interest rates, and tying the project to the ongoing construction of the Student Activity Center next to Gregory Gym, we’ve been able to bring down the cost of the new building from well over $100 million to $90 million. If we delay, the savings will disappear.

    And that would be a blow to Liberal Arts and the entire university.

    The new building will contain over 30 modern classrooms and a center with study lounges and meeting rooms for our students —a space of their own for the first time. More than that, it will give us the office and laboratory space we desperately need to attract and retain world class faculty and graduate students and to let them collaborate with one another.

    Without a new building and the opportunities it brings, we simply can’t elevate UT’s status in the academic world or promote cutting edge scholarship and innovation. Liberal Arts — essential to any great university’s success — would be relegated to a lesser role on campus. We can’t let that happen and must keep our eye on excellence even in lean budget times.

  2. Jane says:

    I appreciate UT leadership and their thoughtful response to the state’s request. This is quite a lot of pressure for UT administration, especially those departments already working to slim budgets and increase revenue. I have seen talented vice presidents and managers pave the way for bad news and negotiate budget cuts with the hope of finding efficiencies.

    Significant budget cuts in the administrative portfolios include trimming down of already tight-budgeted services in the division of student affairs. This is a great strain on upper-level management and will result in frustration for those below who have taken on more work during the hiring and wage freeze.

    I agree with Thomas Palaima and hope that the University and work together cohesively with a common understanding of priorities.

  3. In the spirit of open exchange on Tower Talk which President Powers wisely saw as necessary on this large and diverse campus, I politely offer three points for consideration that I think merit a public airing. To my knowledge, as a member of the executive committee of the Faculty Council and its budget advisory committee, they have so far been discussed publicly.

    I want to express thanks to President Powers for seeing that an institution in the public service and assuming the public trust needs to have a forum for airing and discussing alternative viewpoints. As he well knows from his experience with the law and from his strong commitment the the principles that underlay thee liberal arts, discussion of critical issues and examination of data (aka evidence) from varying perspectives is crucial in making good decisions and in forming true consensus.

    UT Austin is about the size of a classical polis. It is good we have a president who understands that the hallmark feature of efficient government in the first democracy was public debate.

    Please consider or reconsider three items that are increasing the budgetary stress.

    (1) Put to a general faculty discussion and then vote the plan to create a 2% merit pool primarily by means of making cuts in the academic budget. To my knowledge, the general faculty has never been asked, even through discussion and vote in the Faculty Council, whether it wants to have a merit raise pool that comes at the expense of cutting staff, cutting program features, cutting graduate assistantships, and increasing class size (for example, in foreign language instruction).

    (2) Under capital expenditures, please reconsider the decision to have Liberal Arts continue with its plans to build a major new building during this fiscal crisis. This buidling will be funded by cuts (see #1) made to its academic budget. Again, according to my inquiries, this is the first time a college has ever been allowed to do this at UT Austin. The decision was made when the general budget picture was stable. The situation has changed significantly.

    (3) Please reconsider the practice of having athletics use 90% of the proceeds from the trademark, royalties and advertising revenues (annually now over $10 million). Since this policy has been inaugurated, athletics has stockpiled, as Pres. Powers reported to the faculty Council on February 15, a reserve fund of $26 million dollars, from which $5 million dollars is now being withdrawn. This happened during a period when colleges and programs were explicitly directed to spend down their endowment reserves, putting them in their current danger..

    The conflicting policies have put academics in the position of having to cut from their actual services while athletics is still ‘in control of’ a $21 million reserve fund.

    Thank you, as always, for being so open-minded as to receive and promulgate such suggestions as these and invite open discussion on policies and programs. This is just what an institution in the public service and trust needs in times of crisis.

  4. Argus says:

    Hi, Bill—

    I need your help to understand something.

    Please correct any inaccuracies herein.

    The current annual state contribution to UT is 16% of the budget, and you have to cut five per cent of that contribution.

    Running the numbers: 5% of 16% (or .05 x .16, which equals .008) is eight-tenths of a per cent.

    So your target figure of $29 million to cut (because of a 5% loss in state funding) is eight-tenths of a per cent of the overall budget? In effect, you maintain that $29 million is .8% of the budget?

    That would make the overall budget $3.625 billion.

    According to the Austin Chronicle, UT’s operating budget for 2009-2010 was $2.14 billion.

    So between 2009-2010 and 2010-2011, the budget will increase by over 69%?

    Can you explain that?

    On a campus with many minds much sharper than mine, I sincerely doubt I am the only one to notice this. Therefore I urge you to answer this question publicly and fast.

    • Kevin Hegarty says:

      The University 2099-10 Total budget is $2.14B. The budget has three distinct components as follows: An academic core budget of $1.146B (teaching budget), an academic enhancement budget of $645M (endowments and research), and the budgets of self supporting auxiliary units of $349M. While the total budget may increase year over year it will likely not increase by more than several million dollars as follows:

      The academic core budget is likely to remain fairly flat as a result of an increase in tuition which may be offset by a reduction in State funding.

      The academic enhancement budget we hope will increase as a result of increased endowment performance and increased research expenditures.

      The self supporting unit budgets will likely remain about where they are today.

      Just to put things in proper perspective, the 5% reduction, or $29M, we believe at this time is a biennial figure. The State funds on a 2-year cycle so it would make sense that it is a biennial figure. However, we will not know this for certain until we begin the next Legislative session. If it is a biennial figure it means we must reduce our annual state expenditures by $14.5M per year for each of the two years of the biennium for a total 2-year cumulative savings of $29M. A $14.5M loss in State revenue per year, or about 1.3% of the academic core budget, may not sound like much when expressed as a fraction of the total academic budget, but it would take a 3.3% tuition increase (after required financial aid set-aside) just to make up a $14.5M loss of state funds if the institution were to ask parents and students to pay for this loss of State monies. That I think is significant.

      Kevin Hegarty
      Vice President and Chief Financial Officer

  5. Barbara says:

    Thanks for the hard work and for sharing the information. I hope in the future the state will be able to kick up their contributions again.