UNC slices spending in anticipation of deep budget cuts

There is no way to know when the joint Senate-House conference committee will propose a final state budget, but when the Gazette went to press on Monday it appeared almost certain an agreement would not be reached before today (July 15), the date the temporary spending bill to begin fiscal 2009–10 was set to expire.

Chancellor Holden Thorp, in his July 1 budget message to the University community, did not emphasize when the budget would be approved or how it would be funded. He focused on how the University should respond to a budget picture that remained bleak.

Even as administrators await a final budget from legislators, they are slicing spending levels to accommodate permanent budget cuts totaling 10 percent for the 2009–10 fiscal year. This total includes the 5 percent cut Thorp announced in March as a proactive step, with the warning that things could get even worse.

A 5 percent cut would have amounted to a loss of nearly $29 million in state funding. The 10 percent cut takes that number to nearly $60 million when cuts to the Area Health Education Centers program are included.

“We’ve been saying all along that additional cuts were possible and that permanent cuts would be unavoidable,” Thorp said in his e-mail.

Last week, the Budget Committee gave vice chancellors and deans specific targets for spending reductions so they could implement the additional 5 percent cuts. (This information is posted on the Carolina Budget Information Web site, universityrelations.unc.edu/budget, under Recent Budget Communications.)

Thorp has emphasized repeatedly that the University’s top priority throughout this crisis has been to protect students in the classroom and academics.

Toward that end, the University has so far been able to avoid eliminating any faculty positions.

In light of recent legislative scrutiny, however, it appears likely that there will be cuts for research centers and institutes, but the University will have flexibility in how to apply those reductions, Thorp said.

Dwayne Pinkney, assistant vice chancellor for finance and administration, said it was not unusual for the budget process to take longer during times of economic crisis because the combination of choices – spending cuts and higher taxes – can be harder to make.

Pinkney said there was agreement, for instance, that taxes should be raised to generate enough revenue to lessen the scope of cuts, particularly in the area of education.

The big questions still to be resolved are which taxes to raise and by how much, he said.

Last Friday, the House and Senate agreed to a spending plan of $18.9 billion for the 2009–10 fiscal year, Pinkney said. This plan includes roughly $1 billion in new taxes, but the details of a revenue package have yet to be resolved.

The major differences revolve around the question of how broad the tax increases should be, Pinkney added. 

The earlier version of the budget proposed by the House would have raised sales and income tax rates, while the Senate version would have lowered some rates but significantly increased the number and kinds of services subjected to taxes.