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Nancy Suttenfield told University trustees last month that Carolina stands
ready to do its part to help the state make up for a projected deficit in the
current fiscal year of more than $500 million.
Suttenfield, Carolina's vice chancellor for finance and administration, and
then-interim Carolina provost Dick Edwards later told vice chancellors and
deans that they will have the freedom and responsibility to pinpoint how and
where cuts will be made.
"We believe the decision of how to implement the reductions should rest with
each vice chancellor or dean so they can minimize the effect the reductions
might have on their goals," Suttenfield and Edwards wrote in a Jan. 31 memo.
"Therefore, the decision to freeze positions, limit travel, or any other means
you may chose to affect your reduction is up to you."
The 16-campus UNC system has been asked by N.C. Gov. Mike Easley to revert $25
million of its state-appropriated funds by June 30, the final day of the
2000-01 fiscal year.
The University's total operating budget for the current fiscal year of $1.4
billion is funded by a combination of public and private sources. State
appropriations account for $409 million, or 29 percent of that total.
The amount the University will revert back to the state is $5.42 million, or
less than one-half of 1 percent of the University's total operating budget of
$1.4 billion.
In addition, Area L AHEC will be required to make a one-time reduction of
$349,174, or an amount equal to three-quarters of 1 percent of its state
appropriation for the year. Area L AHEC is part of a statewide health education
system headquartered in the University's medical school.
The bulk of the cuts will be split between Academic Affairs and Health Affairs,
the University's two largest divisions.
Each will be required to reduce spending in an amount equal to 1.5 percent of
its state-appropriated money for the current fiscal year. In Academic Affairs,
that 1.5 percent reduction amounts to $1.42 million; in Health Affairs, $1.46
million.
One third of the campus cuts, or a little more than $1.8 million, will come
from central funds the Budget Committee oversees. The committee decided to
commit the money to lessen the impact throughout the campus, Suttenfield and
Edwards wrote in the memo.
The Budget Committee is a four-member administrative team comprised of the
provost, the two associate provosts and the vice chancellor for finance and
administration. It was created by former Chancellor Michael Hooker and charged
with making day-to-day decisions about allocations from central funds. Central
funds are cash reserves that the University maintains to handle emergencies and
respond to opportunities.
At various meetings over the past month, Chancellor James Moeser has moved to
assure trustees, faculty and staff that the University is in solid financial
shape and that the factors driving the need for reductions now bear no
resemblance to the factors that led to more severe, permanent cutbacks two
years ago.
"It is important for us to not view this as some kind of crisis," Moeser told
University trustees at a Jan. 25 meeting. "We will be able to manage ourselves
through this situation. It is serious. It is very serious, but it is not a
crisis and we should retain equilibrium."
Suttenfield, at the same trustees meeting, reinforced Moeser's assertions with
good news from Wall Street.
Recently, Fitch IBCA upgraded the University's bond rating to AA+, while
Standard & Poor's raised the University to the equivalent level of AA1.
The AA+ rating reflects the University's strong operating performance,
excellent student demand statistics, substantial liquidity and consistent
financial support from the state in recent years, Fitch said in a Feb. 1
release.
The upgrades move the University's rating to just below the coveted AAA rating
that only a few public universities in the country now have because of the size
of their private endowments.
This past year, the University's public endowment topped $1 billion for the
first time.
Two years ago, the University faced a $9.8 million deficit that developed from
a combination of factors -- from a projected shortfall in the statewide budget
to a peculiarity of the 1999-2000 fiscal calendar that led to a "27th payroll"
of $4.9 million that had to be met.
The budget shortfall dealt with in the spring of 1999 led to permanent, or
"recurring" cuts that helped bring expenses in line with anticipated revenues
for the upcoming budget, said Roger Patterson, associate vice chancellor for
finance.
Patterson said it is important to understand that the measures taken in the
spring of 1999 were made to balance University revenues and expenses for the
upcoming budget year.
The reductions that will be made this spring, in contrast, are part of a
systematic attempt throughout all state agencies to make up for a budget
shortfall created by a variety of statewide factors, including flood relief
efforts from last year.
Administrators have discretion to decide how cuts will be made and no one has
raised the possibility of layoffs. The reductions being called for this spring
are small and will be "non-recurring," which means they will remain in effect
only through the end of the fiscal year.
Laurie Charest, vice chancellor for Human Resources, said she knows no more
than anybody else how reductions will ultimately be achieved. But, she said, "I
think it is fair to say that we have had no contacts from departments
contemplating layoffs and do not expect layoffs as a result of this
non-recurring budget cut."
Two years ago, when the University had to make permanent budget cuts,
administrators estimated that no more than 15 University employees would lose
their jobs as a part of cost-cutting measures, Patterson said. The actual
number ended up being fewer than ten.
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