Thorp says UNC can handle state’s 5 percent holdback

The final budget for 2009–11, which earlier this month the General Assembly approved and Gov. Beverly Perdue signed, means about a 7 percent cut in state funding for Carolina.

“Considering the state’s still uncertain revenue picture and this budget’s impact on other state agencies, legislators treated the UNC system very fairly overall,” Chancellor Holden Thorp said in an Aug. 17 e-mail message to faculty and staff.

Until that revenue picture becomes clear, however, Perdue is taking steps to stretch state resources. And that includes a mixture of good and bad news for state agencies.

Perdue rescinded the emergency budget restrictions for state funds that had been in place since July 24. But she also instructed the Office of State Budget and Management to withhold 5 percent of each state agency’s monthly allotment starting in September.

“While this is another reduction for us to manage, we understand that the governor needs to proceed with caution in this environment,” Thorp said.

Because the University had already enacted a total 10 percent permanent cut for state appropriations effective in July, Thorp said administrators could handle the 5 percent holdback without asking campus units to make additional cuts.

If state revenues continue to decline, though, Perdue could take additional steps that would require more cuts from campus units, Thorp said. “Nevertheless, we are hopeful that our current measures may, in fact, hold us for the fiscal year,” he said.

The University’s priority has been to protect core academic and teaching programs. In fact, administrators limited campus reductions to instructional units to slightly more than 5 percent.

But research centers and institutes, which have been key in attracting federal research grants, have not fared as well. Although they are being cut between 17 percent and 23 percent, campus administrators were braced for even deeper cuts earlier in the legislative session, Thorp said.

The University is able to maintain some management flexibility, he added, and has worked to minimize the impact on Carolina’s overall research enterprise.

“While I know this is a hardship for our faculty and staff engaged in the hard work of conducting research to help people, please understand how difficult a job our legislators had in balancing competing interests,” Thorp said.

“Moving forward, our focus should be on continuing to inspire the confidence of legislators in this important work so that it results in more, rather than less, flexibility in making our own decisions about spending reductions.”

State appropriations equal roughly one-quarter of the University’s total operating budget. Other funding sources include research grants and contracts, sales and services, tuition and fees, patient services endowment income and private gifts.

Even in the current economic climate, external research funding continues to grow. Carolina faculty set a new record for external research funding – attracting more than $716 million in fiscal 2009  (see related story on page 6). And the University is well positioned to continue to attract federal research dollars available through the American Recovery and Reinvestment Act, Thorp said.

Although difficult financial decisions likely still lie ahead, he said, the University is prepared to deal with them. “But we can’t let the state’s financial condition paralyze us from advancing the work of the University.”

To read Thorp’s message and other budget-related information, refer to the Carolina Budget Information Web site, universityrelations.unc.edu/budget.