Fiscal Response to Continued Economic Weakness: Budget Protection Measures
Friday, February 27, 2009
The University administration has finalized budget preparations for the coming fiscal year, July 1, 2009 through June 30, 2010 (FY 2010). I am pleased to report that the proposed budget is balanced and incorporates several significant new commitments to:
- Scholarship funding to meet rising student needs,
- Our growing study abroad programs, and
- Enhancements to the Alexander Health Center that will reposition it as a university-wide health-care source for students, faculty and staff.
In addition, the proposed budget includes major new increases to cover sharply higher utility and health care costs, additional debt service, and federally mandated changes to the hourly minimum wage.
As you know, the credit and equity markets continue to falter. Just this week the national news media noted that the Dow Jones Industrial Average has declined to 1997 levels. Like everyone else invested in the market, The University of Tulsa faces ongoing declines in the value of its investments. Today, TU’s endowment stands near $620 million, down from $917 million in 2007. The current decline in the value of our endowment will substantially reduce endowment earnings. In FY 2012, this shortfall could be as much as $15 million below current levels.
Because of this projected shortfall, we are taking prudent steps now to begin conserving funds. We expect the cumulative savings over the next 2-3 years to offset some of our income loss and to help protect 1) the quality of the educational experience our students receive, and 2) the jobs of our employees. It is with these priorities in mind that the University is implementing the following policies and practices, effective immediately.
1. We are significantly reducing the use of overtime. The measure will not diminish our ability to maintain campus safety and security.
2. Summer half-days off will be unpaid. The University will continue to follow our traditional half-day Friday schedule during June and July, but starting this year the time off will be unpaid. This change affects the President, the Vice Presidents, Deans, and all staff.
3. Merit salary increases are on hold. Our many deserving employees will be frustrated by this news, but we have decided to conserve these dollars in the hope that we can avoid future layoffs. This step reflects our thinking that it is better to take smaller cuts now than face drastic cuts down the road. We will review the situation next January.
4. Funding for vacant positions will be reclaimed into the general budget. This step represents the continuation of a previously announced policy. This measure does not amount in all cases to a hiring freeze; academic deans and division vice presidents have the discretion to reallocate other budget dollars to meet strategic staffing needs. Personnel savings enabled us to balance the FY10 budget; these savings will roll forward to future years and are expected to grow through routine employee attrition.
Clearly, these steps represent sobering reminders of our difficult times. Much will depend on the stability of our enrollments going forward. Under current conservative assumptions, we believe that by acting now, we can remain stable despite continued weakness in the overall economy. Of course, the economic climate remains volatile, and new adverse developments may require further budget action.
As additional resources on this subject, we have posted online a fact sheet and a brief overview of our budget protection measures.
In recent years we have worked as a team to achieve record-breaking growth, prosperity and progress. Now, as we face a season of challenge, I know we will work together just as effectively to preserve what we have built.
I appreciate your help now more than ever as we tighten our belts to meet the times ahead. Our position remains strong and our mission remains unchanged. Thank you for your dedication to TU.