FY09 Budget Update, February 27, 2009
Interim Provost Rick Miranda today is sending a notice to the colleges and VP areas to advise them of our budget reduction plans for FY09. We’re sending out these plans with the realization that Colorado and higher education potentially could see some benefit from federal stimulus funds in the next few months, which may reduce the overall state budget reduction for this year. While we certainly hope for some good news in this area, we believe it is important to proceed in a conservative and responsible manner, addressing the entire budget challenge facing CSU for this fiscal year and next in ways that will allow us to sustain academic quality and minimize, wherever possible, the impact on our students.
We began planning for these reductions before the holidays and have taken a consistent, pragmatic approach throughout this process. Because of this, we’re well-positioned to deal with the reality of the fiscal challenges facing Colorado and CSU. It’s also become clear that — even if the state is able to reduce its portion of the rescission for this year through one-time bridge funds and stimulus assistance — we, as a campus, still must deal with the ongoing and significant impact of the economic downturn and increasing mandatory costs. For that reason, we are moving forward to implement the budget-reduction scenarios that have been offered from each unit.
At this time, we’re anticipating an approximate $13.1 million overall shortfall for FY09, including the $6.7 million we have been asked to give back to the state General Fund and about $6.35 million in shortfalls from declines in interest earnings on cash deposited with the state treasury, increased benefit costs, and slight declines in non-resident enrollment. We must also address some commitments made to Athletics coming into this year to assist them in rebuilding and better positioning the program — although this commitment has been reduced significantly by the operational efficiencies and budgeting progress made under AD Kowalczyk’s leadership this year.
We have reduced the total amount of cuts to individual units with the $1.5 million administrative reduction that was announced in the fall, which included an approximate 25 percent cut to the President’s Office. We will also be calling on $2.6 million in institutional reserves (still maintaining adequate reserves for contingencies and financial liquidity), and $500,000 from stock holdings realized through recent progress in technology transfer. The remaining shortfall will be addressed with a 3 percent average cut to academic units and a 6 percent average cut to administrative units, continuing our commitment to minimize, wherever possible, the impact of these cuts on the classroom.
It is likely that individual units may eliminate some positions this year to meet their share of the budget reduction. Although it is too early to know how many positions could be impacted, we anticipate that it will come to less than 1 percent of our permanent, non- faculty workforce, and that no permanent faculty lines will be affected.
We continue to look at furloughs as an important and possible strategy for cost reductions in the next fiscal year, but I’ve decided against utilizing any mandatory furloughs for FY09 because it would leave our employees with very little time to prepare for the associated reduction in pay. If we decide to move forward with furloughs in the next fiscal year, we’ll make that announcement no later than this June and work to consolidate furlough days around existing holidays and breaks.
On another note: I’ve received a number of questions as to why the University is proceeding with the 10 major construction projects now underway in light of our current budget picture. These projects are financed with bonds and have no state funds associated with them. Stopping these projects is not a viable option because we are legally obligated to use the bond proceeds for those construction projects that we identified to the bond investors at the time of sale.
We have some reason to be optimistic with the passage of the federal stimulus bill and suggestions from the Governor’s Office that we might be facing less dramatic cuts than anticipated for next year. We are also seeing a surge in undergraduate and graduate applications for next year, at a time when other institutions are seeing declines. At the same time, we don’t know how wide or deep our current recession could turn out to be. We also know that mandatory costs are going to continue to rise, and that we have some ongoing commitments that will have to be addressed in the next fiscal year. For that reason, we will continue, as an institution, to plan for the worst and hope for the best with a cautious, responsible approach to our planning and budgeting process. If we do realize some benefits from stimulus funds in the next several months, they will allow us to help mitigate the impact of budget cuts and tuition increases for FY10.
If you would like more detail on the budget process and priorities, I encourage you to participate in the Budget 101 sessions scheduled for Monday and Tuesday of next week. We’ve got two presentations scheduled for Monday March 2 — the first from 3-4:30 p.m. and the second from 5:30-7 p.m. On Tuesday, March 3, we’ll offer the program again from 9-10:30 a.m. Interim Provost Rick Miranda and Vice President for Finance Allison Dineen will lead the sessions, which will all take place in the North Ballroom of the Lory Student Center. The same information will be offered at each session.
While the reductions we face for FY09 are serious, I am also pleased with the thoughtful, constructive approach that each unit has taken to preserving highest priorities and service to students and constituents. I want to thank all of you for your suggestions and recommendations in recent weeks, all of which are being considered and discussed. I am proud to serve this campus community, and I look forward to working with you as we manage the FY09 cost reductions and plan for a healthy, sustainable budget in FY10.
Dr. Tony Frank