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Budget Update

June 18, 2009

To:  Campus Community
RE:  Update on Campus Budget

Since I became Chancellor last August, I have sought to provide the campus with regular communications, something I believe is especially important in times of economic crisis. Today I am writing to provide an update on our budget situation. Although we still await crucial decisions from the Legislature and the Governor, the general direction is becoming clearer and will require us to continue to prepare now for difficult circumstances ahead.

Massachusetts, like many other states, has chosen to frontload funding from the federal grants for state stabilization. If the current trends hold, the campus should receive a significant amount of one-time federal support in FY10, but will likely receive very little or nothing in FY11. We must therefore revise our original strategy of a gradual reduction in budget over two years and deal with a “funding cliff” in FY11. Our campus administration will continue to work very hard to advocate for support from the state and federal governments, just as we did in helping to secure the stimulus funding we are slated to receive, but the economic realities require that we plan for significant funding reductions even as we advocate for stable funding and investment in higher education.

Three additional complications potentially affect the amount of money we receive from the Commonwealth of Massachusetts.

1. The line in the state budget for Commonwealth College was eliminated in both the Governor’s budget and the Senate budget. The loss of this special appropriation effectively reduces the campus allocation by $3.2 million. Our efforts to restore this budget line have thus far been unsuccessful, but we remain committed to this important program.

2. The federal stabilization funding will not come with the fringe benefits that accompany state allocations, effectively reducing the funding to us. For each dollar we receive from federal sources, the campus will therefore have to supply close to 30 cents, which means a loss of approximately $7 million in state funding. In effect, then, even if we are “made whole” and “funded at the FY09 level,” we will face a $10 million deficit.

3. The Governor has filed the labor union contracts, but it is unclear how the agreements will be funded, especially in years 2 and 3. If the campus has to fund these agreements in FY11 (and FY12), it will mean additional reductions in our budget of approximately $12 million per year. We will work closely with all our constituent groups to attempt to secure stable funding in the face of this additional funding challenge, and will work hard to make the strongest case possible for the support necessary to build an even stronger public research university for the Commonwealth.

We enter FY10 with a base budget deficit of $29 million. We will likely receive enough in federal stimulus funding to cover this deficit for one year. Most observers are convinced we will have mid-year cuts in FY10. We must also remember that covering a base budget deficit with one-time funding causes the deficit to be carried to the next fiscal year; it does not eliminate budget reductions, it simply postpones them. While we are committed to using appropriate bridging strategies, it is fiscally irresponsible to ignore funding level reductions and not make the cuts that these reductions require.

Even if the Trustees decide to maintain the full fee increase of $1,500 from FY10 and a cost-of-living increase of 3% in FY11, we face a deficit of approximately $30 million in FY11, assuming we are called upon to fund obligations contained in the collective bargaining agreements and there are no mid-year cuts in FY10. Reducing the campus budget by such a large sum in a single year would result in significant program reductions and layoffs – something we have worked very hard to avoid in order to maintain the high quality of education and support we provide here at UMass Amherst.

We are clearly facing daunting challenges. To meet these challenges we have formed a series of task forces with faculty and staff representatives to investigate revenue generation. We will be looking at enrollment management, summer session, Continuing and Professional Education, and other options to create additional revenue, and lessen the impact of cuts. I have also met recently with leadership in the Faculty Senate and asked them to take a leadership role, along with the Provost and me, in dealing with curricular reforms that can help the campus achieve savings. Now is the time for us to look hard at how we can best maintain our commitment to quality in an adverse economic climate. We cannot simply maintain the status quo going forward – we must be innovative and forward thinking. I am confident that, working together, we will develop innovative and creative ideas, and the plans to implement them.

In addition, I will request soon that every non-instructional unit participate in a zero-budgeting exercise, so that we can approach cuts with insight into what will be lost and where we might achieve efficiencies. I will ask the Provost to develop an appropriate approach to examining the budgets of academic units once he begins in August.

We are fortunate that the federal stimulus funding gives us a year to develop revenue-generating initiatives and curricular reform – that we have the time to find creative ways to mitigate the damage to the institution. We should not deceive ourselves and believe that the relative stability in FY10 will continue in FY11 and FY12. If we do not use this year with productive planning, our actions in FY11 will surely do damage to core values, important programs, and many individuals across the campus.

In these times it is essential that we come together as a campus community, face the tasks before us, and act without delays. The campus will be forced to make many decisions in the next year or two. Some may be unpopular; some may involve elimination of programs or jobs; some may implement reforms or structures that individuals will deem sub- optimal. None of us would choose this challenging reality, but working together we can emerge with our values and our commitment to the institution intact.

In this economic climate, we must keep in mind the good of the campus as a whole and our common desire to emerge from the current downturn in a position to move rapidly into the highest ranks of public research institutions in the country. I know that we can achieve this distinction, and I want to thank you for your cooperation thus far in difficult times, and express in advance my appreciation for your understanding of actions we as a campus community will have to take in the difficult times that lie ahead.

Robert C. Holub
Chancellor