Reduced state revenue projections create potential for UI budget cuts

President Mary Sue Coleman answers some questions about the University’s response to these impending budget cuts.

What does this announcement by the governor mean?

State revenue projections have been sharply reduced. In response, Governor Vilsack is revising his proposed budget for state government for fiscal year 2002. One of his major recommendations is a six percent across-the-board cut to most state agencies, which would include The University of Iowa and the other Regents institutions. Governor Vilsack also says state spending will have to be reduced further beyond 2002. Governor Vilsack will announce the specifics of his budget cut recommendations by March 28.

What does this mean for The University of Iowa?

We don’t precisely know yet. We won’t really know until the governor announces his specific recommendations and the legislature approves the state budget for fiscal year 2002. However, we must prepare for a six percent cut in our state-appropriated operating budget in the coming year—a cut of about $19 million. Approximately 21 percent of the University’s $1.6 billion budget is from state appropriations, yet 61 percent of our General Education Fund is state appropriations. The General Education Fund supports core teaching and research activities of the colleges, the library, and many of the other most basic functions of the UI. The University has never faced a single state budget cut of this magnitude.

How does this compare with last year’s budget cuts?

The last state appropriation budget cut amounted to $1.5 million. So you can see we’re talking about a new budget cut over 12 times as large.

What at the University would be affected by this new budget cut?

Items in our budget that are funded by our state appropriations would have to be cut. Almost 80 percent of the University’s General Education Fund is devoted to salaries and fringe benefit costs. The remaining 20 percent of these funds pays for such items as library acquisitions, telecommunication services, energy purchases, and equipment purchases.

How is the University coping right now with this threat to salaries and services?

All current vacancies will have to be critically evaluated. I have asked the provost and the vice presidents to work with their units on evaluating all open positions. As a start to this process, I have put the search for a vice president for external relations on indefinite suspension, a suspension of at least two years.

Will there be employee layoffs?

At this point, it’s too early to say what will happen. We are modeling numerous possibilities. But since 80 percent of our state-appropriated funds pays for salaries, managing a budget reduction of this magnitude will affect our personnel in some way. I am seeking a broad spectrum of options and recommendations, but we can say that the cuts will be strategic. That is, we do not anticipate a 6 percent cut in salaries or positions across the board. We will look at the services the University offers and make decisions based on our strategic plan and our top priorities.

Who will be making these recommendations?

I am consulting broadly in this matter. I am already consulting with Provost Jon Whitmore and the other vice presidents. Provost Whitmore is talking with the deans, and I will be consulting with the leadership of the Faculty Senate, the Staff Council, and the Student Government. In addition, six months ago I appointed a Budget Planning Advisory Committee to make recommendations for situations just like this. The committee is chaired by Jonathan Carlson, professor of law, and is comprised of members of the Faculty Senate and Staff Council budget advisory committees, as well as other University community members. Their recommendations also will be given the most serious consideration. I also welcome suggestions from any member of the University community.

Why can’t the University just save money in other areas, like some building projects or athletics?

The University’s $1.6 billion annual budget is comprised of many "pots" of funds, if you will. Funds in these "pots" are dedicated to specific uses. As I suggested earlier, our state appropriations for the General Education Fund is only one pot, but that is the pot from which much of our salaries and our general educational support are derived. Athletics generates almost all of its own revenue from ticket sales and contributions, which cannot be transferred to the General Education Fund. Similarly, the residence halls and UIHC are other self-supporting areas on campus. We simply cannot take money from their "pots" to pay for cutbacks in our operating budget from the state, just as the state cannot cut budgets that do not use state appropriations. This is why it’s possible to go ahead with building a new residence hall and with making other residence hall improvements. Indeed, it is essential that we do so to meet student needs. Likewise, investments in health care, sponsored research, and athletics facilities may well continue as long as the source of funds supporting those activities remains available. This situation illustrates how absolutely crucial our state funding is to our most essential educational mission.

Is there anything other than the General Education Fund that will be affected?

Yes, several other University units receive state appropriations and will be affected by reductions. For instance, the state supports UIHC’s Indigent Patient Care Program and partially supports the University Hygienic Lab and several other health care units.

Do these budget cuts mean that tuition will increase?

Tuition rates for the 2001-2002 academic year have already been set by the Board of Regents. They cannot be increased for next year. We do not know what will happen to tuition rates for the 2002-2003 year in response to the current situation. It is worth noting that tuition accounts for approximately nine percent of our total University budget, and pays primarily for student financial aid, faculty salaries, library costs, and other basic educational support costs. Although we as a university will certainly make recommendations regarding tuition rates for the 2002-2003 academic year, the Board of Regents has the responsibility of setting them.

How can I keep apprised of developments in these budget issues?

I am making every effort to share as much information as possible with the University community, as I get it. We will continue disseminating information, as it develops, in campus publications as well as communications directly from me. We also are looking into the possibility of keeping updated information on our budget situation on my web site, www.uiowa.edu/president/words.html. And as I said before, I welcome suggestions from everyone in our campus community. You can write me, or you can e-mail me suggestions at
campus-comm@uiowa.edu.

Would you like to leave us with any last thoughts?

Although we don’t have all the details about the specific budget cuts, this is a very serious situation. The University of Iowa has not faced such a significant state budget cut in contemporary memory. We must respond realistically, but also strategically, and through broad consultation with campus constituencies. Our highest priorities, under any circumstances, should always remain the highest quality education possible for our students and the highest quality services possible for our state’s citizens.

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