Final FY15 Budget
President Kalikow shared the following announcement with the USM community, external communities and the University of Maine System on Friday, June 13, 2014.
June 13, 2014
Let me begin by thanking all the stakeholders who have contributed their time and effort in creating the final budget for fiscal year 2015, which begins on July 1. As you know, my decision to rescind faculty layoffs allowed time for more input and creative thinking. That said, the final budget is a compromise and sets the stage for additional discussions surrounding the 2016 fiscal year and beyond.
I am pleased to report that we have closed the $14 million gap between expenses and revenues for fiscal year 2015, and will submit the budget to the Chancellor’s Office on Monday, June 16. Trustees are scheduled to take final action on the University System budget at their meeting scheduled for July 21.
Today’s communication is divided into three sections, with additional information available at the links included below. First, I will outline how we closed the $14 million gap. I then want to recognize the contributions and efforts of the faculty in this process. The third and final section takes a look ahead to the challenges facing us in FY 2016 and beyond.
CLOSING FY 2015
Let’s recap where we are in closing the $14 million gap. We have the $4.5 million in savings announced earlier this year (positions left vacant, 26 staff layoffs during the last year, flat funding of deferred maintenance), plus the generous, one-time infusion of $7 million from the System’s Budget Stabilization Fund, for a total reduction of $11.5 million.
Thanks to the work over the last 6 weeks, we have identified the remaining $2.5 million needed to close the gap. How did we close the gap?
1. $1,575,000 by reducing the amount budgeted for positions. While funds came from reductions in many areas, four largest “pots” were:
- $605,000 from the voluntary separations of 5 faculty who were previously identified for retrenchment.
- $247,000 by eliminating funding held to cover the cost of faculty in administrative positions who decide to return to the faculty positions.
- $200,000 by not replacing administrative positions.
- $222,000 created by the opportunity to replace retiring faculty and staff with new employees who will be paid less.
2. 483,000 by reducing amount of funds we pool through not immediately filling positions, etc. These pooled funds are invested in new positions.
3. $446,000 from expenditures for non-compensation expenses. These reductions came from a wide range of areas. The three largest reductions were:
- $151,000 finance and facilities from energy savings and delaying equipment replacements (e.g., delaying replacement of vehicles, decreasing number of vehicles).
- $107,000 in funds budgeted to support faculty research awards, awards for service and other requests.
- $38,000 by reducing the use of external consultants.
Closing the FY15 budget involved five voluntary faculty separations, 11 faculty retirements, and one staff layoff.
FACULTY CONTRIBUTIONS AND EFFORTS
When I rescinded the faculty retrenchments on April 11, I asked the Faculty Senate to find $1.2 million in comparable savings from academic programs. The Faculty Senate’s Alternative Budget Plan Committee report identifies $1.2 million in savings from 11 retirements and four voluntary separations of faculty previously identified for retrenchment.
I especially want to thank the Faculty Senate for their participation in this difficult process within a short period of time. However, these reductions, for the most part, will not take full effect in FY 2015. Consequently, the immediate, identifiable reductions for FY 2015 are calculated to be close to $575,000.
Why aren’t there $1.2 million in savings for FY 2015?
- In four cases, the committee does not calculate the costs for replacing two faculty in Education and one faculty member and one academic support person in Exercise, Health and Sport Sciences program.
- In other cases, we will not realize savings from retirements until FY 2016 or beyond because of payments due faculty.
- We have not yet received one of the retirement requests.
Nevertheless, the nearly $575,000 in savings for FY 2015 is substantial. And we will see additional savings beyond FY 2015 once we have met our contractual obligations to those faculty who have left USM.
More details on savings are available in “Table 1: Savings from Retirements & Voluntary Separations to Offset $1.26 million Rescinded.”
The Faculty Senate report also includes close to $3 million in savings through such proposals as reductions in spending for memberships, University System cost sharing and reducing the salaries of, or numbers of, non-represented personnel over certain salary levels.
While the timing of the FY 2015 budget process precludes us from including these recommendations as part of the FY 2015 budget, we are committed to evaluating additional changes that create more savings as soon as possible and including them as part of the FY 2016 budget process.
Take, for example, the proposal to cut the salaries or reduce the number of non-represented personnel. I’m not in favor of targeting entire groups of employees for salary reductions. I am, however, supportive of taking a strategic approach toward evaluating how we currently measure up with our peers and determining what staffing level is needed at this university to serve students and support critically needed functions. That approach would be right in line with the System goal of reducing administrative costs per student to that of our peers by FY 2017.
More details on my response to the nearly $3 million in additional savings are available as part of the “Faculty Senate Alternative Budget Steering Committee Spending Reduction Recommendations.”
FY 2016 AND BEYOND
Despite the progress made in this budget cycle, we are anticipating and need to plan for a $12.5 million structural gap in FY 2016.
The $7 million from the System that will help us bridge the gap in FY 2015 is one-time money and, as such, will be gone at the start of FY 2016. So, we’ll need to find $7 million right off the bat in 2016. That $7 million combined with a projected $5.5 million in additional costs (financial aid, enrollment efforts, academic programs, etc.) creates the $12.5 million gap in FY 2016.
We will, as a community, continue to make hard choices that position this university for the future and provide a first-class, affordable education for our students. The commitment our Board of Trustees has made to affordability in the form of freezing tuition is absolutely the right thing to do for our students and the communities we serve. It does mean, however, that we have a responsibility to do everything possible to bring our costs in line with revenues.
We must align our expenditures to strategically match our resources. That alignment will necessarily include faculty and staff layoffs, more restructuring for administrative savings, and strategic choices about programs.
We have to focus our academic offerings so we can better serve students, build healthy enrollments for the university as a whole, and function more efficiently, thereby regaining fiscal stability.
“Focus” means that we can’t do everything we are used to doing. We are at a point where strategic and sometimes hard decisions must be made.
Given all this, I intend to continue the program elimination process begun for American and New England Studies, Arts and Humanities at LAC, and Geosciences.
The next step in that process, however, is meaningful consultation with the faculty union, AFUM. The last step is to seek approval from the Board of Trustees. In between those two steps, I look forward to further input from faculty, staff, students, and community members. For example, I want to work with the Academic Affairs Subcommittee of the LAC Community Advisory Board to ensure that other USM humanities resources meet LAC needs.
If the Trustees approve these program eliminations, we will be working directly with the impacted students to make sure they have the opportunity to earn their degrees at USM.
The financial challenges facing us are the result of financial and demographic trends, disruptive technologies and increasing competition for fewer students. The good news is that we do not have to meet these challenges alone. We must collaborate on campus but also partner with our community stakeholders and the resources available across the University of Maine System to achieve efficiencies and develop a stronger and sustainable model of public higher education for the future.
I want to again thank the entire university community, including our external partners, for their patience and contributions throughout this process. While our priorities and plans may have differed, I have never questioned our shared commitment to the value and future of the University of Southern Maine.