Office of the Chancellor > Budget Updates > May 4, 2009

Chancellor's Budget Update for May 4, 2009

Dear CU faculty, staff, student and community member:

I know that many of you have read President Benson's communique to the campus last week. I want to take this opportunity to follow up on his update about the budget, and provide you with some information on how we are proceeding with managing the state funding reductions that specifically impact CU-Boulder.

Members of the cabinet and I have received a variety of questions centered on budget and campus resource issues. We have compiled those questions into the Q&A below. I urge all of you to read it, and to further discuss budget issues with your supervisors, department chairs, deans and the vice chancellors. Please know that as we engage in this process, our priorities are to protect the campus's academic mission, and the resources allocated to our students and graduate students. Together, I know we will navigate through this difficult time, preserving our core values, the ambitions of our Flagship 2030 strategic plan and the quality of our research, teaching and service. You may also provide feedback to me at chanchat@colorado.edu

Sincerely,

Phil DiStefano, interim chancellor
University of Colorado at Boulder

CU-Boulder Budget Questions and Answers

Q: How much has the state had to reduce funding to higher education and the University of Colorado?

A: Beginning in the current fiscal year the state-wide public higher education base budget was reduced by $150 million due to shortfalls in state tax revenues. This is a permanent reduction and must be accompanied by a reduction in expenses or an increase in on-going revenues of a like amount. The CU share of this reduction is approximately $50 million. Governor Ritter has stated his strong support for higher education and for the importance of higher education in the recovery and strengthening of the state economy. Accordingly, he has allocated funds provided to Colorado through the federal "stimulus" act to assist us in dealing with the funding reductions to higher education for the current fiscal year and the next two fiscal years.

Q: Can the funds provided by the Governor be used to mitigate the budget cuts?

A: There are some limitations to the use of stimulus funds. First and foremost the stimulus funds are temporary or one-time dollars. Temporary (or one-time) funds can postpone the need for reductions, but they can not be used to restore the base funding shortfall which will reappear the year after temporary funds have been spent. The President and Chancellors have agreed to use $50 million of stimulus funds to cover the reduction for FY09 (ending June 30, 2009), given the little time left in this year to make permanent reductions. In each of FY10 and FY11, $20 million of stimulus will also be used to postpone a portion of the system-wide reduction, bringing the cut down from $50 million to $30 million. CU-Boulder's share of the remaining $30 million is $13 million. Therefore, we will need to reduce our continuing base budget by $13 million by July 1, 2009.

Additionally, there is significant uncertainty and pressures on other major revenue sources that cause us to reduce spending and prepare for lean times - these include losses in investment income, the potential for the loss of non-resident tuition income (our largest revenue source), and the need to cover cost increases such as building operations and health insurance premiums.

Q: Where will the $13 million in cuts be taken?

A: Approximately $3.4 million of the $13 million base reduction is being managed at the central campus level by eliminating planned investments approved by the Board of Regents in June 2008, but not yet allocated to the department or unit level for expenditure. An additional $2.8 million will be saved by reductions in the President's Office, which in turn will reduce the Boulder campus overhead paid annually to the CU System Office in a like amount. The remaining approximately $6.8 million has been distributed to the Vice Chancellors and Deans as reduction targets to be implemented by July 1, 2009.

Q: Will layoffs be necessary to meet this budget reduction?

A: Since the majority of our campus costs are related to personnel, there is no way to cut the budget at this level without personnel reductions. These are difficult decisions, but in making them, we will focus on retirements, on cutting vacant positions, and finally, if necessary, on filled positions linked to reductions in programs and services that we are no longer able to sustain at current levels. This is a time for us to closely examine, at basic levels, what we do and how we do it, and make tough decisions about permanently ending certain activities. Our commitment, again, is to preserve as much as possible the support services for faculty and students and the educational quality we offer our undergraduate and graduate students.

Q: Procedurally, how should personnel cuts be undertaken?

A: Department chairs, department heads and other supervisors should consult with the appropriate Vice Chancellor's Office, who will in turn coordinate with our Office of Legal Counsel and our Office of Human Resources, regarding personnel reductions. In the process of making personnel reductions, we will provide as much assistance to employees as we can in making this difficult transition.

Q: What about the $20 million in system-wide cuts that are being bought down with stimulus funds in FY10 and FY 11; don't we need to deal with them at some point?

A: Absolutely. Using these stimulus funds buys us time, but we will still need to identify cost reductions or new on-going revenue sources in this amount before July 1, 2011. We hope to work with the state on restoring these funds, but that will depend on several variables, such as how the economy recovers and how state public policy on government spending allows for reinvestment in higher education. If there is not a state-generated solution, then the University will need to manage the shortfall internally within the next two years.

Q: I work for an auxiliary unit or research project; are these units affected by the cuts?

A: The $13 million budget cut target is linked to the loss of state tax funds, however, given the general malaise in the economy, all areas of the campus are being asked to be careful about spending limited resources. Some auxiliaries may already be seeing some reduced activity in purchasing, and this may lead to the need to reduce overhead expenses. Auxiliaries that charge fees to campus units are being asked to look carefully at their pricing structure and to look for ways to hold costs down. Research units may actually see a surge in spending related to federal stimulus dollars allocated through a competitive grant process. This may cause stresses on general fund units that provide services to these research units. We will try to support our research mission at the levels necessary to have these projects be successful.

Q: Tuition is our largest revenue source, how will tuition rates be affected by all this?

A: Tuition increases are a Board of Regents decision, and the Board has asked us for a variety of tuition scenarios to be considered at their May 18th and 19th meetings. Tuition is always a difficult and complicated public policy decision and is even more so this year, given the economic downturn. Any increases in resident tuition beyond inflation will need to add financial aid support to ensure access to all Coloradans. Non-resident students will continue to be offered a guaranteed four-year tuition rate, with incoming students getting a price increase that has not yet been established. The Board may consider a tuition increase to partially backfill for the budget cuts; however, the other variable is the number and residency mix of students that enroll. We will not know this with any certainty until September. Given it is unlikely that tuition revenue increases will fully offset the cuts, we will continue with our plans to reduce costs until we have a fuller understanding of our tuition revenues.

Q: Can funding from construction projects be used to reduce the cuts?

A: We do have construction going on, including the Visual Arts Center in the center of campus, and the new Center for Community on Regent Drive. These projects have been in the works for many years (it can often take as much as 10 years to gain approvals and identify funding for a capital project). These facilities are critical to our future ability to provide a quality education and academic environment for our faculty and students. The construction funding is an "earmarked source" for these particular projects and are one-time funds - and therefore cannot be used for continuing expenses, such as campus operations or personnel. Postponing construction will not help with meeting our budget cuts, and given the long-term nature of developing facilities it would be short-sighted to postpone these projects just for the appearance of frugality. We must continue to make these investments in infrastructure that support the education and research mission of the university.

Q: Do we expect these cuts to adversely affect our ability to teach students and support faculty?

A: Yes. There is no doubt these cuts will impact our ability to provide services at current levels. The University of Colorado at Boulder is already among the most efficiently operated institutions in the country, so it is difficult to identify places where cost cutting will not directly impact an important service or program. Students may notice some changes in the availability of classes and services; however, we will endeavor to minimize these impacts. These are extraordinary times, and we will need to make the difficult choices to bring spending in line with our available resources. We will want to make reductions that are intended to be permanent, so that when new resources again become available we can invest in our strategic goals and continue moving the University forward.

Q: What is the expected impact of the $6.2 million in CU System budget cuts?

A: As the President outlined in his announcement Friday, the budget and political landscapes continue to change, but President Benson has taken bold steps in meeting these changes by cutting $6.2 million out of the CU System's $39 million operating budget. These cuts are designed not simply to shrink the budget, but to set forward new priorities, and new streamlined and more effective relationships among the CU campuses and the system office.

In my more than 35 years of service to CU-Boulder, I have not witnessed the CU System leadership so willing to share in the fiscal and organizational sacrifices demanded by state budget realities. I know these are difficult decisions, but making them with this shared sense of sacrifice, and with an eye toward directing budgets to our most vital operations, will result in the long run in better alignment of our work and more effective budgets.

Q: Are there opportunities to move forward, even in these austere times?

A: There are opportunities in this difficult situation to look for new revenue opportunities, new cost savings, and new ways to do more with less, and as I said, to clarify our priorities and direct our budgets toward them. We are not putting our goals and ambitions "on-hold"; but, for example, we will need to slow-down and focus our spending for Flagship 2030. I know this is a difficult time for many in our community; my pledge is that we will cut the budget in the right way, helping those impacted by the cuts as much as we can, and working toward the day when our revenues stabilize, or when higher education in Colorado finds a more stable, permanent revenue stream.