On Friday, the university's executive staff and academic leadership unanimously endorsed a contingency budget strategy recommended by the Budget Planning Council (BPC). This plan calls for delaying new spending on strategic investments--specifically annual salary increases for faculty and staff who are not bargaining-unit members and some Five Year Vision Ohio Implementation Plan initiatives slated for multi-year investment--until the picture on several key revenue sources is better known.
We recognize the significance of this news, and that's why we want to provide you with detailed information that accounts for BPC's recommendations and the administration's decision to implement this approach. As you read through the details that follow, we want to emphasize the following:
- These recommendations are driven by BPC's desire to avoid planning unit budget cuts.
- These recommendations call for a delay--not an abandonment of those investments we have identified as a university community as being our highest shared priorities.
- We have been and will continue to constantly monitor the budget as well as the factors that have informed this fiscally conservative approach.
The BPC is a 15-member advisory body made up of representatives from the administrative (1), classified (1), faculty (3), graduate (1) and student (1) senates; at-large faculty members (2); deans (3); and a vice president (1). The council is co-chaired by Bill Decatur, vice president for finance and administration, and Kathy Krendl, executive vice president and provost.
Budget contingency plans have been discussed at a number of BPC meetings. The need to move from dialogue to recommendation was prompted by a growing number of economic uncertainties and indicators that suggested it was time to err on the side of caution. As you are certainly well aware, the reach and implications of the current financial climate extends well beyond higher education.
At its meeting on April 4, following a thorough and thoughtful discussion, BPC passed a motion (one abstention, the others unanimous in their support) recommending budget spending delays. This action was informed largely by the following realities:
First, Governor Strickland announced in January that the state budget would have to be cut by $733 million, and net revenues have continued to fall below projections since then. These cuts were based on the state's best-case financial scenario and a requirement to balance the budget before the end of June. Although the Strickland Administration did not include higher education funding in these cuts, BPC is concerned that we may not be able to escape cuts should more be necessary in the future. We are monitoring that situation and must be prepared should cuts to higher education become a reality.
Second, our university and others across the state are noticing a "hesitancy to commit" regarding the number of confirmed admissions. While these numbers are dynamic and fluctuate daily, we are currently down in our number of final admits. For example, as of Friday, April 11, we were down 297 final admits compared to this same week last year. Offers of financial aid went out on April 1. Those offers always matter to the families of prospective students, but they matter more in the current economic climate. We are working hard to solidify our enrollment numbers for the fall.
Third, due to a number of factors, the university is revising its projected investment income downward for fiscal year 2009. Like individual investors, institutions of higher education must also deal with the consequences of a volatile market.
We are hopeful that revenues will still come in as projected and that we can pursue our proposed investments, even retroactively. There are certainly positive signs amid the uncertainties. For instance, when it comes to our enrollment targets, we have seen a record number of applications. Academic profiles are strong. And the one percent improvement in retention tracked through the year is holding steady. But, if our net revenues aren't what we planned, the recommended approach gives us prudent flexibility to adjust expenditures accordingly before spending money, thus avoiding the need for cuts.
One of the strongest points of consensus in this contingency budget planning was that it should not be funded from unit budgets. Planning units have endured seven years of cuts. BPC created a contingency budget plan at the university level rather than the unit level, thereby protecting jobs and academic programs. The executive staff and academic leadership strongly supported this point during Friday morning's discussions.
We also want to emphasize again that, even though these recommendations will delay some base-budget investments in the five-year plan, they also call for the university to consider moving forward with investments that can be funded with one-time monies. It is also worth noting that there are many important strategies in the plan that do not require additional investments. We remain committed to all of the initiatives set forth in the strategic plan.
Our institution is in a good position to respond to various economic scenarios because of the planning and collaboration that have occurred during the last year. We believe this strategy ultimately will give us the time to both prioritize our investments and ensure that we have a strong budgetary foundation upon which to build our future. We will work to keep you informed throughout the process as details are available and our situation is clearer.
Roderick J. McDavis, President
Kathy A. Krendl, Executive Vice President and Provost, BPC Co-Chair
William R. Decatur, Vice President for Finance and Administration, BPC Co-Chair