UI Budget Updates

April 8, 2009

First, thank you for joining me today for what I hope will be an important conversation.

This has been a difficult year for our university as we have faced unprecedented challenges. I will speak today about our current challenges—but also about the opportunities inherent in those challenges. However, it is critical that I also hear your concerns and ideas about the future of the University, and I will leave time for questions and comments.

As you know, our current great challenge is the University budget. With our state budget and the national economy in significant decline, we may be faced with making cuts of a depth, breadth, and swiftness that we have never seen before. While the financial situation we face did not originate within the last year, it has certainly been exacerbated by the state of Iowa’s budget woes and with the impact on individual Iowans over the last several months.

Unfortunately, the state budget numbers keep getting worse rather than better. As you probably have heard, when the Revenue Estimating Conference met recently, they lowered their estimate of state tax collections even further than the previous downgraded estimates.

Let me put some perspective on what we face with some numbers.

•  In 1981, nearly 70% of the cost of education at Iowa’s public universities was born by the state; today, that figure is less than 50% and falling.
• Our General Education Fund is comprised of two primary sources: tuition and state appropriations and it is the appropriations piece that has been in decline relative to tuition for almost three decades.
• For FY 2010, in the wake of the continuing distress to state finances, the legislature has proposed a 12.5% decrease to our state appropriations, which equates to a 6.25% cut to our overall General Education Fund. Just as a reminder, FY 2010 runs from July 1, 2009 to June 30, 2010.
• Last Friday, Governor Culver released his revised budget proposal, which takes into account the declines in state revenue estimate from the March meeting of the Revenue Estimating Conference, but also the federal stimulus dollars that can be provided to help education.
• His proposal would use stimulus dollars to close the gap between our adjusted 2009 budget (we have already sustained a 2.5% decrease to the current budget), bringing the proposed 2010 budget to roughly the ’09 adjusted levels.
• While promising, there are two important points to keep in mind: First, the legislature still needs to weigh in on the budget and may or may not agree with the governor; and second, using stimulus money to sustain our current budget is a temporary solution. We would still have to plan for substantial reductions in subsequent years, but we could do so in a more thoughtful and less immediate way than we had been anticipating.

And, we will face these challenges at least through fiscal year 2011, as state revenue growth is anticipated to still be below the level of funding provided with stimulus dollars.

So, the University cannot finalize its General Education Fund FY2010 budget until the state finalizes its budget. And because of that, I want to emphasize that no decisions have been made about what will be cut in the General Education Fund, how, and where.

As we await final numbers, so that we can know better what immediate steps might be needed as well as how we will proceed for 2011 and beyond, it is more important than ever that we remain engaged together in thought and discussion on budget. Please continue to visit our budget web page, both for updates as information becomes available, but also because we continue to receive valuable input and suggestions.

At the April Board of Regents meeting, I have been asked to present a preliminary “road map” of the strategies, processes and opportunities for generating efficiency and ultimately reducing our budget to reflect the reduced appropriations.

Some examples of the kinds of things that we will likely include in our discussion with the board will be: carefully crafted early retirement and phased retirement programs, reallocations of planned capital expenditures, reductions in financial support for non-academic enterprises that receive funding from the university’s general fund, savings from energy efficiencies that we can create, savings on facilities and grounds maintenance, and a range of changes in academic and administrative operations.

Because more than 75% of our budget is invested in personnel, no one strategy alone will generate enough savings to reach the goal as we currently understand it. Moreover, please remember that the strategies we discuss and employ for reducing our state-appropriated general fund budget will, by necessity, be different than those that are needed to address the budget difficulties faced by UI Health Care. Our hospitals and clinics do not directly benefit from the general education fund - their operations and issues are tied directly to their business model.

Toward that end, collaboration of UIHC and the physicians, nurses and other health care professionals is critical. I know these professionals have a deep human commitment to the betterment of patient care and the financial well being of our great health care enterprise.

Even as we confront painful budget reductions, we must keep our highest priorities clearly in view. I believe, if we follow a simple set of guiding principles, we will come through this challenge stronger and better positioned for the future.

So let me suggest what I believe our guiding principles should be:

• First and foremost, protect quality. Preserve the quality of our core missions: education, research, service/patient care.
• Second, protect people: our most important investment. There is a reason why so much of our budget is invested in personnel, and disinvesting in people at this point in time only worsens an already critical situation.
• Third, protect affordability: we owe it to Iowans and to all of our students.
•  Fourth, while we increase cost-savings and create efficiencies, we also look for opportunities to increase revenues and we do this on a carefully planned, multi-year timetable.
•  Fifth, we identify selected opportunities for innovation and excellence by reallocations and investments from new revenues.
•  Sixth, we articulate a strong strategic vision and priorities that inform the budget choices that we ultimately make;
• And finally, we continue to use consultation through the long-held and well-respected traditions of shared governance here at the UI to inform all of our actions and choices. Your input is both necessary and welcome!

While in the best of all possible worlds we would not be forced to make budget cuts in any area at all, that is not reality. No one would ask for the opportunity to make the decisions we have to make. But, given our situation, we must find opportunity where we can in these challenges.

Times of austerity ask any forward-looking organization also to look reflectively. Times like these compel us to ask ourselves what our traditional strengths are, which helps us set strategic priorities.

The University of Iowa wants to be—and needs to be—a leader in areas that are of critical importance today. Now is not the time to give up on our plans and dreams to excel in these areas; now is the time to carefully craft a path that will position us to be strong, focused, and more creative than ever for the future.

Preserving and enhancing our excellence—our quality—should always be our ultimate goal. Eroding excellence is not an option, even in the face of hard economic times.

This brings me back to a point I made earlier—our people. Our excellence comes about through our greatest strength: our people. By protecting our people to the greatest extent we can, we protect our excellence. We have learned much about people and protection here at The University of Iowa in the past year in another significant way.

Our other recent—and ongoing—great challenge is last year’s historic flooding. Keeping our eye on the positive, we must remember the remarkable opportunities that have arisen out of the flood. Obviously we never would have wished for the damage and disruption the flood has caused.

But now we have an opportunity to rebuild much of our campus—especially our arts campus—for the 21st century. Whether we ultimately decide to relocate or rebuild the Hancher/Voxman/Clapp complex and Art Building East, the new facilities will, in the end, be much more up-to-date than what we could have accomplished otherwise.

This does not at all mitigate the huge disruption to our arts programs, especially in art and music, in the past year and in the several years to come. I am grateful for the patience and fortitude of our faculty, staff, and students in these programs that have long-defined the UI’s innovation and renown in creativity.

We also understand the impact that this multi-year disruption could have on student recruitment. That is why we are so pleased that, thanks to donations to our flood fund and thanks to our office of Financial Aid, we are able to provide significant additional funding for scholarships to attract the most promising undergraduates to our School of Music.

We are also working on similar scholarship programs for undergraduates in other arts programs. And, we have developed a plan to provide $325,000 of flood relief money to support graduate students in the arts who have a variety of needs that have been enhanced or exacerbated by the disruption created by the flood.
This visionary thinking not only will help stabilize programs while we await new facilities, but we hope they will continue to increase the quality of our students in the arts. Once all is said and done, I know we will be more proud of what The University of Iowa has to offer than ever before.

The other positive that came out of the flood was the remarkable demonstration of community. As the floodwaters rose, we pulled together to protect this University that is so dear to so many. We literally formed a line of unity against the flood. We showed the world what Iowa—our University and our state—is all about.

That same spirit of community and mutual support will be the keystone to weathering the current economic storm. Just as we bonded together to protect our campus last June, we are bonding together to address budget issues.

In dealing with both flood recovery and our financial situation, we are calling upon our traditions of shared governance and campus consultation. Crucial to our flood recovery is the internal campus task force I appointed to advise the administration, including experts on flooding and hydraulics in our own backyard from the UI’s globally recognized Hydroscience and Engineering program.

Likewise, we have six budget task forces that are focusing on the very topics I mentioned earlier that we will discuss with our regents later this month. Also, as I’m sure you know, our collegiate units and our faculty leadership have been working hard at developing scenarios for different levels of budget cuts. Some of you may have been involved in these processes.

We are also bonding together in a more general way to protect our people during these difficult budget times. We want and need to minimize job losses to preserve our excellence and support our fellow members of this University community. As we have considered our budget options, I have been heartened to see our people unite in solidarity for the good of all.

Faculty and staff consistently tell us that they would rather accept personal reductions in their own compensation or work time than have others lose their jobs. Over a year and half ago, I was proud to accept the Presidency at The University of Iowa because I knew well its reputation for innovation in the arts, writing, the health sciences, and many other areas that improve and enhance lives through high-quality teaching, research, and service.

Ironically, I often said at the outset that one reason I came to Iowa was that nothing significant needed “fixing.” Well, as of last June, we ended up with a lot of things that need fixing, in the literal sense!

But what has been inspirational to me, and what has made my job so rewarding in the face of such challenges, is what our people continue to do.

Despite what we face, Brian Hand and Bill Therrien received a $4.8 million grant from the Department of Education Institute of Education Sciences for a study of science literacy through writing.

Despite what we face, the Iowa-Cedar River Basin project, coordinated by IIHR-Hydroscience and Engineering in the College of Engineering, will become one of five in the United States and 64 worldwide—and the first in the Midwest—to be included in UNESCO’s Hydrology for the Environment, Life and Policy (HELP) program.

Our faculty and research staff have taken the tragedy of the flood and turned it into an opportunity to help develop advanced information system technology.

Despite what we face, we can celebrate David Gompper receiving the Academy of Arts and Letters’ Academy Award in Music for outstanding artistic achievement in composition.

Despite what we face, Honors junior Rachel Nathanson, an economics and geography major, has been named a 2009 Truman Scholar to pursue graduate study in global change science and policy. And two other students have recently received a Goldwater and a Udall scholarship as well — all national honors of very high caliber.

Despite what we face, our students managed to raise yet another record-breaking million-dollars-plus for the UI Children’s Hospital in this year’s Dance Marathon, and many of them spent their spring break working on flooded houses in Cedar Rapids.

The spirit of education, discovery, innovation, and service continues to burn brightly here at The University of Iowa.

We must be realistic about the immediate prospects before us. But in so doing, we must also expand our vision to see not only the achievements we continue to make, but also the ways in which we can manage our current tribulations for future success.

As I said, we still don’t know exactly what our final decisions will be on managing an austere budget, and we still don’t know exactly what our flood recovery will entail.

But we know that our University community has said, loud and clear, that they are willing to work together, and they are willing to sacrifice for each other.

I am enormously proud of—and grateful for—that spirit of community at the UI.

Thank you for coming here today and now, I want to know what your concerns are, as well as your ideas for moving forward in challenging times.