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University Budget Update

Sent to University faculty and staff

March 2, 2009

As we continue to refine the University of Minnesota's plans and budget during these challenging economic times, it is increasingly important to share new information with you. To that end, I would like to update you on a few critical developments as we await the revised state budget forecast on March 3.

Budget context
We continue to make a strong case for the University of Minnesota in a concerted effort to protect our people, our quality, and our core academic strength. Our goals are straightforward and simple: to minimize the impact of proposed state budget cuts on students and their families, both in terms of tuition and educational experience, and to reduce potential job losses and support the extraordinary work of our faculty and staff. We will use every tool at our disposal, including cost reductions, deferred investments, and productivity and revenue enhancements, to achieve these ends. The University has consistent principles, clear processes, and an established timeline for developing and approving its budget. We are moving through those processes now, in coordination with the state's biennial budget process. It is critical that we make the case for the essential value of the University to the future of Minnesota and that we urge state leaders to moderate the proposed reductions.

The revised state budget forecast will be released Tuesday, March 3, and we expect it to be significantly worse than the January forecast. The governor has warned that the state budget deficit could approach $7 billion, or nearly 20 percent of the state's total general fund spending. In addition to proposed cuts to our state appropriation for the next biennium, both the State of Minnesota and the University's administration are working hard to assess the potential impact of the recently passed federal stimulus package. It contains a number of positive opportunities for the University, including:

• Renewed investment in the Pell Grant Program, which supports undergraduate students from low-income families, and
• Expanded higher education tax credits for low- and middle-income families.

Although federal stimulus funds provide a much-needed temporary bridge during these difficult times, they are nonrecurring funds. They cannot be used to solve long-term budget challenges for the University or the state. Without strong fiscal discipline, creative thinking, and a spirit of shared sacrifice, the financial challenges facing our state beyond this biennium will be even more serious.

Recognizing that much of the authority regarding how stimulus money is distributed will reside with the governor and legislative leaders, we are carefully analyzing the stimulus package to determine how best to respond. For further information, see the Brief article "U prepares for cuts in state funding" or the University's Stimulus Funding Web site.

Recent actions
In the past few weeks, we've discussed a number of actions to help address the University's budget challenges, both now and in the future. It's important to see these actions in the context not only of the next biennium but also of our strategic plan and aspirations. As much as possible, our efforts to address serious budget cuts must not diminish our quality or capacity. We must do all we can to preserve the strength of the University for the future.

For this reason, we continue to look seriously at opportunities to reduce administrative costs and increase effectiveness. Earlier this month we announced the restructuring of graduate education at the University. I believe that this decision was a sound one—that decentralizing master's and graduate studies will streamline targeted operations and reduce costs by leveraging capabilities and systems that already exist within departments and colleges. We are committed to maintaining the strength of our graduate and professional programs—including strong support for students and interdisciplinary academic programs—and we have appointed a cross-functional task force to ensure broad engagement and participation as this decision is implemented. There are many issues to consider in this effort to strengthen graduate and professional programs while conserving resources for critically important academic investments. We need the help of the entire University community to shape our strategies and manage this important transition.

We have also discussed a number of cost-reduction initiatives related to human resources and have reached some important conclusions:

• We will be recommending to the University's Board of Regents that the Regents Scholarship Program be revised to require a 25 percent contribution from employees. The Regents Scholarship currently covers the full cost of tuition for University courses taken by employees with an appointment of 75 percent or greater. According to this recommendation, the University would continue to pay 75 percent of tuition for courses taken by these employees. This change is projected to save the University $2.5 million.
• Given the proposed budget cuts and economic outlook, we are likely to implement a salary and wage freeze in the 2009-10 academic year. It is unfortunate that we face this reality again, but we simply will not have the resources for permanent compensation adjustments next year. It should be noted that the collective bargaining process determines compensation plans for unionized faculty and staff, and all such plans are subject to Board of Regents approval.
• While we continue to model the potential savings of closing the University during holiday periods, we are no longer pursuing a furlough plan or an extension of the Retirement Incentive Option (RIO) at this time.

Looking ahead
Over the next few months, the budget situation will continue to evolve, both in scope and complexity. Although we must meet the challenges we face with an appropriate sense of urgency, we must also act with unity of purpose. The engagement and support of faculty and staff will be essential to our ability to respond in a timely way to changing circumstances, and I am committed to communicating with you as frequently as I am able on issues of importance to the University's future.

Plans to address proposed budget reductions are being developed, implemented, and communicated at the unit level as well. Across the University system, leaders are working to prioritize their activities and preserve their core strengths. They will also be communicating with you as important decisions are considered and announced.

In addition, I will answer some of your questions directly following my 2009 State of the University Address, Thursday, March 5, at 3 p.m., in Coffman Memorial Union Theater. You can submit your questions between now and Wednesday, March 4, by e-mailing them to upres@umn.edu. I also encourage you to share your thoughts and ideas through the Economy and the U Web site. (You can register for budget-related e-mail updates.)

The University of Minnesota takes its strength from outstanding faculty and staff like you, and I will continue to do my best to represent you and your best interests as we work to secure our collective future. Thank you for your continued hard work and support.

Sincerely,

Robert H. Bruininks