January 03, 2013

President Martin's budget update for May 31

by President Susan Martin, Published May 31, 2011

Dear Students, Faculty and Staff,

As we move further in the budget development process, we are identifying more specific information about the scope of the reduction that will take place. Following the approach and guidelines announced as we initiated this process, I am sharing this information with the campus community directly in the spirit of regular communications, openness and transparency. 

Our state appropriation for FY 2012 is headed to the Governor's desk for signature and contains a 15 percent reduction from $76,026,200 to $64,619,100; a reduction of $11,407,100. This is a severe and drastic cut. The Autism Collaborative Center is likely to receive a separate appropriation of $500,000. Our current estimate of enrollment increase for FY 2012 is 1.7 percent.

President Martin

President Susan Martin

These are difficult times. This is a difficult process. I have heard the concerns expressed by many of you. I understand the anxiety this has created. While it would be easy to recommend across-the-board reductions to balance the budget or a 7 percent tuition increase (the state appropriation bill includes tuition restraint language that mandates increases be below 7.1 percent at the risk of implementation of additional cuts), we have undertaken a much more difficult task. The economic situation in Michigan continues to place a hardship on many of our students and their families to afford college.

Based on the recommendations from Deans and Executive Council leadership, it appears that at least 70 non-bargained for and bargained for positions are likely to be recommended for elimination and about 20 of those are currently vacant. If all employees were to forgo a pay increase this year the savings would be $3.2 million dollars. To that end, I have asked each bargaining unit to consider forgoing a pay increase this year. I have already announced that the non-bargained for employees will not receive a pay increase in FY 2012 along with elimination of cell phone allowances (except for safety, security, contractual requirements). International travel, discretionary travel, and honoraria are also being reviewed. We have not finalized a recommendation for the Board's consideration for the FY 2012 budget but strategic investment in academic initiatives along with non-bargained for and bargained for personnel reductions (filled and vacant) are likely to be a part of that final recommendation for the Board's consideration. 

The budget forums, University Budget Council meetings, Faculty Senate and All-Union Council meetings have provided input and resolutions that are being shared with the ad hoc committee of the Board of Regents. Meetings with the ad hoc committee were scheduled on April 22, May 6, May 13, May 20 and June 13.

A key element of the process has been the development of a "roadmap" of potential savings. This is designed to provide a comprehensive assessment of savings opportunities in order for the Board of Regents to evaluate the budget impact of various levels of tuition and fees for next year.

The state funding reduction of $11.4 million and the projected increase in year-to-year operating expenses of approximately $12 million for next year leaves a total operating budget shortfall estimated at $23 - $24 million. The primary means of addressing the shortfall are increased tuition and fees and budget cuts.

The estimated $12 million increase in year-to-year expenditures is due primarily to:

  • $3.3 million increase in personnel costs (largely driven by contract agreements);
  • $3.3 million increase in financial aid (approved previously);
  • $1.9 million in higher health care costs;
  • $900,000 for additional operating costs for the Science Complex and Athletics' Title IX compliance;
  • $800,000 for additional instruction costs assuming an enrollment increase
    of 2 percent; and,
  • Contingency and other expenses estimated at $1.6 million.

The guiding principles we instituted and communicated previously provide a framework for the budget impact analysis that is taking place. Potential savings are being reviewed relative to their impact on institutional priorities -- building on our positive momentum and growth; preserving and enhancing academic quality; and, maintaining a positive campus experience for students.

In determining funding reductions, we are looking at administrative areas first. The number of faculty and lecturers appears likely to increase slightly based on current trends of hiring and departures, reaffirming our commitment to a high quality education for our students.

Other actions are under consideration and will continue to be reviewed in the new fiscal year. This includes evaluating and consolidating shared services -- areas in which people are performing similar job functions in different divisions and departments. A significant reduction in the budget for travel also will be implemented. We will have more news on these items in the days and weeks ahead, and plan further informational updates as we proceed.

The actions that we put in place by July 1 will put us on the road to addressing our budget challenges. It is important to note, however, that additional measures will likely be necessary in the 2012 fiscal year and in developing our 2013 fiscal year budget, given the uncertainties ahead.

I understand this is a challenging time, but I am determined, with your help, to move forward and continue the outstanding work we do to provide opportunity for an excellent and affordable education to Michigan citizens. Ideas and suggestions are always welcomed and appreciated. Please feel free to contact me with any cost saving suggestions at office_of_the_president@emich.edu.

Susan Martin