Budget updates:

Thorp grapples with emerging economic realities
Faculty Council urges flexibility in budget decisions
Cutting budgets: Carolina is not alone

Thorp grapples with emerging economic realities

As the University prepares for state budget cuts next fiscal year, administrators are fine-tuning a set of legislative priorities for which Carolina will seek additional funding.

Chancellor Holden Thorp, in a report to the University Board of Trustees on Jan. 22, laid out the careful approach administrators were pursuing to meet challenges for a 2009–10 state budget that will not be “normal.”

So far, Thorp said, the planning for next year has been in response to UNC President Erskine Bowles’ request for hypothetical planning scenarios for cuts of 3 percent, 5 percent or 7 percent.

For this fiscal year, the University has been asked to identify a 6 percent reduction, and administrators are preparing for the possibility of cutting another 1 percent from state funds later this year.

State funding makes up about 22 percent of Carolina’s overall budget, and each 1 percent in state cuts currently equals about $5 million.

Compounding the situation is the possibility that the one-time cuts put into effect this fiscal year could become permanent next year if the economy continues to worsen, Thorp said.

He presented 10 legislative priorities with a heavy dose of realism about their prospects for funding over the next two years.

The priorities spring from UNC Tomorrow – the far-reaching initiative championed by Bowles and the Board of Governors to position the UNC system to serve the state’s growing needs. 

They also dovetail with many long-held priorities for the University, including faculty retention, campus safety and ongoing efforts to increase access to higher education for underserved populations and regions of the state.

Given possible cuts for the upcoming budget year, however, Thorp cautioned that the University’s legislative efforts should stay focused on more immediate concerns.

“If we held budget cuts to 5 percent and focused on health care and enrollment growth, I think we’d be in a good position,” he said.

Even if state cuts were limited to 5 percent, however, the University could lose as many as 120 faculty and teaching positions and 85 staff positions, he said in a campus e-mail update – cuts that would first be handled by eliminating vacant positions.

Cuts at that level would mean eliminating courses for undergraduates and increasing class sizes, Thorp said.

A 7 percent cut next year could result in a total loss of 230 faculty and teaching positions and 150 staff positions.

Capital projects
Regarding capital priorities, Thorp identified three projects at the top of his list: planning funds for a new law school building at Carolina North, the expansion of Morehead Planetarium and Science Center, and the replacement of Davie Hall.

“We don't know when that money will be available again,” Thorp said. “But I've promised everybody that they won't lose their place in line.”

The legislature had approved planning funding for the law school relocation and infrastructure for Carolina North and partial funding for Morehead last year, but the funding was later frozen in response to the state’s looming deficit for the current fiscal year.

When asked if the federal stimulus package proposed by President Barack Obama might help keep these projects on track, Thorp said a project must be “shovel-ready,” or ready for construction to begin within 90 days. In that case, only the planetarium project could be considered eligible.

the campus community
Thorp commended the University community for the spirit in which people have responded to this difficult period.

“All of us who work in the administration have been inspired by the way the community has rallied behind the fact that we are all in this together and that we love the University, and we are going to do what it takes to get ourselves through this,” Thorp said.

He also commended Employee Forum Chair Tommy Griffin as an example of that spirit. During remarks to the trustees’ Audit and Finance Committee, Griffin emphasized the need for the campus to pull together.

“That just shows the spirit that is infused in our campus and that will carry us quite a long way,” Thorp said.

He also praised Provost and Executive Vice Chancellor Bernadette Gray-Little, Vice Chancellor Dick Mann and the deans for the courageous manner in which they crafted various budget scenarios in preparation for the hard choices that lie ahead.

“As I said, we have the spirit to get through whatever we have to get through, but we also have the acumen to get ourselves through this and conserve cash in a way that leaves us in good shape,” Thorp said.

Cost-cutting measures
Gray-Little and Mann have laid out specific budget guidelines for administrators in response to Gov. Beverly Perdue’s recent announcements affecting state agencies.

In a Jan. 23 memo, they said department heads must approve using any state funds to purchase goods or services costing $5,000 or more. Justification should be addressed to Material and Disbursement Services. The restriction does not apply to supplies, equipment and materials required for classroom instruction.

In addition, state-funded travel and training is restricted to public safety, public health, job requirements, economic development opportunities and emergency situations related to the care of people for whom the state is responsible unless approved by a department head as a necessary exception. Justification should be addressed to Travel Services.

The statewide hiring freeze does not apply to the UNC system, said Brenda Malone, associate vice chancellor for Human Resources, earlier this week in a memo to deans, directors and department heads.

“However, as Chancellor Thorp has made clear in his recent budget updates since the beginning of the year, all units must carefully scrutinize their plans for any vacant positions,” she said.

Only positions considered absolutely necessary to the functioning of the organization should be posted – and only with vice chancellor approval, Malone said.

Similarly, General Administration determined that the statewide freeze on salary increases did not apply to the UNC system, she said. But she cautioned administrators to try to ensure that any salary increases were essential.

“Any salary actions you take now could have major consequences later in the fiscal year,” Malone said. 

Faculty, staff and students also have pitched in to help identify ways the University can meet this budgetary challenge.

Within two weeks of Thorp announcing the creation of a new e-mail address to collect creative cost-cutting ideas, budgetideas@unc.edu, more than 140 people had responded.

Their ideas ranged from ways to save energy and promote sustainability across campus to suggestions for reducing non-academic expenses and using technology and collective purchasing resources more efficiently. Other suggestions focused on exploring furloughs, alternative or reduced work schedules, early retirement and reduced salaries in lieu of layoffs.

On Friday, Bowles signaled his interest in pursuing legislation to allow furloughs for UNC system employees as a possibility for responding to state funding cuts. A furlough plan ultimately would require approval by the BOG.

Faculty Council urges flexibility in budget decisions

At the Jan. 16 Faculty Council meeting, the current economic situation took center stage.

An hour-long panel discussion focused on budget-cutting suggestions and principles. Leading the conversation were professors Steve Matson (Department of Biology and Graduate School), Ross Simpson (School of Medicine), Maureen Berner (School of Government) and Lolly Gasaway (School of Law).

“Let’s start by talking about the idea of a hiring freeze, which has been part of every downturn I’ve seen through the years,” said Faculty Chair Joe Templeton.

Berner said a hiring freeze, while easy to implement, would not address a department’s functional priorities and could erode effective operations.

“Departments need the flexibility to change how personnel resources are used and to fill any necessary positions,” she said. “It’s better to have the discretion to make these decisions than to be in a constant holding pattern.”

Other panelists agreed.

“A freeze might be a necessary rescue operation, but it is not a good way to protect our mission,” Simpson said. “It doesn’t help in the long term.”

Gasaway agreed with strategic planning in principle but reinforced the University’s commitment to its students in the process. “Our main focus is teaching and learning, so we always have to ask how this affects our students,” she said. 

Matson, dean of the Graduate School, pointed out that the University would not see any savings from layoffs involving substantial severance packages for several months.

“And we would have a lot of unhappy people,” he said.

Similarly, the suspension of faculty searches across the board could cause more problems than it solves, panelists said. Not only would the University lose its potential to attract star faculty members, the impact on faculty growth and productivity as well as students’ ability to complete their degrees could be significant.

Better options might be furloughs, cutting back work hours or curtailing travel and faculty leaves, panelists said.

“Anything that’s discretionary should be on the table, but it should be applied based on guiding principles,” Berner said.

Overall, panelists and audience members advocated a strategic, principle-based approach to cost cutting that would help strengthen the University in the coming decades.

Bernadette Gray-Little, executive vice chancellor and provost, asked each panelist to identify the fundamental principles that should underpin the decision process.

Matson and Berner advocated flexibility.

“Flexibility in decision making is incredibly important to every unit, even when considering furloughs,” Matson said.

Berner said flexibility empowered people at all levels to participate in budget cuts. “It provides an opportunity to think about guidelines for new programs and an expansion of existing programs that would be both systematic and supportable in the long term.”

Gasaway said having the least negative impact on students was key.

Simpson emphasized the importance of research to teaching and service. He said the University also should help the people of North Carolina understand why certain choices were made.

Cutting budgets: Carolina is not alone