By Katie Quaranta
University officials presented to the Budget Planning Council this morning a flexible budget management plan that would allow the university to invest in its strategic initiatives and continue with its commitment to a conservative fiscal philosophy while being prepared for the unexpected. It was drafted in response to the Board of Trustees' request in April that university officials revisit a contingency plan and present a new version in June.
Executive Vice President and Provost Kathy Krendl and Vice President for Finance and Administration Bill Decatur also presented projections for a balanced fiscal 2009 budget, which reflects better performance this year on enrollment and retention that allowed budget planners to revise revenue projections upward.
As trustees directed, Vision OHIO initiatives -- including a $1.2 million investment in faculty salaries -- and annual employee raises are included in the budget and are in the process of being implemented.
The budget management plan incorporates strategies for increased savings, greater revenue generation and contingencies designed to help the university address economic factors beyond its control.
Krendl noted that the first version of the contingency plan, which the board asked to be revised, focused on budgeted but unspent resources such as the university's 3 percent raise pool, while the new plan places an emphasis on savings and revenue that have yet to be achieved.
"In order for this plan to be successful," she said, "we will need cooperation in areas identified for expenditure reductions, in the realm of shared services and in the development of new academic programs earmarked for revenue generation."
Cost savings will occur primarily through the development of strategic procurement initiatives and shared services. The university recently hired its first director of shared services, Mark Hopton, who is in the process of developing and implementing a comprehensive shared services model to eliminate duplication of efforts and consolidate routine processing in university service centers, some of which have the potential to reduce costs.
Several BPC members asked how shared services would affect staffing and whether layoffs would drive the expected savings. Krendl said most efficiencies would come through natural attrition and by shifting employees from affected positions to essential positions that have been vacated. Though she expects the university to realize some benefits as early as this year, she noted that a shared-services model is aimed at long-term savings.
In addition, Finance and Administration will work with the provost's office to tighten university policies and collaborate with departments to look for efficiencies that could lead to reduced spending. Krendl stressed that these cost-saving measures would be different for each department and would not affect resources that are necessary to achieve the university's academic mission or Vision OHIO goals.
The university also has begun several initiatives that are capable of generating revenue next year and beyond. In addition to an expected increase in international student enrollment, which is not accounted for in the base budget, Decatur expects partnerships with various community colleges and new academic programs to bring in additional revenue.
Under the new contingency plan, the university will look to revenue-generation and cost-savings strategies to provide a cushion of up to $4.5 million, which could play an important role in guarding against uncertainties, including cost increases, stock market volatility or reduced state funding. The state, which has mandated a zero percent tuition and fee increase, is slated to provide an additional $9 million in support to Ohio University in fiscal 2009.
In the event of more drastic budget fluctuations, the university is prepared to employ strategic budget reductions, Director for Budget Planning and Analysis Rebecca Vazquez Skillings said.
"Word from the chancellor and the Board of Regents is that higher education remains a high priority, but we also understand that the state's ability to protect higher education is influenced by the economy," Skillings said. "It is a responsible action to prepare in case they are forced to (make cuts)."
Revised enrollment and retention projections for fiscal 2009, based on the current year's trends, gave budget planners a strategy for closing a potential $1.35 million budget deficit, discussed at the last board meeting, that could result from reduced investment income.
"Early in the budget development process, the BPC determined (it was wise) to be extremely conservative," Skillings said. "We believe, based on our positive experiences this academic year, that we can remain sufficiently conservative if we rely on enrollment projections for next year that are the same as this year."
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