For the past several weeks Cabinet has been reviewing the myriad of suggestions submitted to the budget site. We’ve been impressed with the sincerity and creativity with which people approached the challenge of looking for ways to increase revenues and/or cut expenses.

Although we have not made any final decisions regarding specific actions, I wanted to share with you our thinking regarding several broad categories into which the suggestions seem to fall.

Operating hours:
Several suggestions were submitted regarding office hours, length of the workweek and hours for services, specifically at the Library. While on the surface moving to a four-day week sounds like a good approach, in reality it only generates cost savings if employees agree to work a reduced number of hours. Because we are a 24/7 operation we cannot easily “shut down” for the evening or a full day so there would be very little energy cost savings. We are investigating the feasibility of adjusting hours in the Library, but only if doing so would not adversely affect students.

Use of paper (printing/duplicating)
Numerous people identified wasteful copying as an area we should examine. While this problem is particularly noticeable in the Library and the computer labs, it is prevalent throughout the campus. We’ve been discussing everything from how to convert all required forms from paper to electronic formats, to allocating a set number of free copies beyond which a user would have to pay a per copy price, to how to better utilize an enterprisewide network-printer solution. Reducing consumption in this area would not only save money, but would contribute to our sustainability commitment as well.

Building and energy use
Saving energy is another area where reducing use would save money and help the environment. We have already started a campaign to get people to shut off lights in rooms and buildings not in use, and have installed a networkwide program to put computers to “sleep” at night. Our biggest savings in this area will come from changing human behavior. We all have to be committed to practicing energy-wise habits daily. The Energy Building Conservation Committee has forwarded a number of recommendations, including consolidating activities during the summer session so that we use our buildings more effectively, and setting minimum heating and cooling temperatures, that we are considering. Now that the asbestos abatement in Kraus Hall is complete, that building has moved to emergency lights only status.

Travel
We will be reducing travel budgets in all areas across the University. It is impractical, if not impossible, to “freeze” all travel since various individuals are required to travel to Harrisburg to conduct system business, travel throughout the commonwealth to recruit students, or travel to present at or attend professional conferences to keep current in their fields. Where possible we are encouraging the use of audio or video conferencing or the use of such services as gotomeetings.com as means of reducing costs.

Catering
We have already implemented new guidelines regarding the use of University funds for catering. Use of these funds is only allowed for: events with outside speakers; student functions; advisory or regulatory board meetings, and events with external clients. In all cases minimal refreshments should be served.

Mission critical programs
We are reviewing all programs, activities and services to ensure that they positively contribute to the institutional mission. Those programs, activities or services that are undersubscribed, or that can be provided more cost effectively by outside agencies, will be addressed.

Personnel
Unfortunately, there is no getting around the fact that in order to reduce the budget by $9 million it will be necessary to reduce personnel costs. To do so, we are investigating ways to eliminate overtime, including distributing the workforce over various shifts to provide campus coverage. While we hope to recoup some costs due to natural attrition such as retirements or other voluntary separations, we, along with our sister institutions are working with PASSHE to develop sensitive and legal workforce reduction plans.

Parking
A number of people suggested that we raise parking fees and/or start charging certain work units for parking. At this time, only students pay for parking. Cabinet believes increasing parking fees at this time would be an unfair burden on students. Requiring other units to pay for parking is something that would have to be negotiated, and as such, would not have an immediate impact on the bottom line.

Per the calendar I shared with you earlier, we continue to welcome your ideas through Feb. 5, 2010. At that time, each of the divisions will begin the process of preparing its 2010/11 budgets. Divisional leadership will present their budget to the budget committee in April and the final University budget will be presented to the Council of Trustees in May.

I want to thank you for your interest and support throughout this process. Although we have difficult decisions to be made, I know they will be made based on the best thinking of many and that they will help us emerge from this crisis an even stronger University.

Sincerely,

Robert Smith, president

Slippery Rock University is a member of the American Association of State Colleges and Universities as are all PASSHE institutions. In addition to promoting our interests in Washington, ASSCU monitors federal and state trends that influence us. At the most recent AASCU meeting, several important economic trends that will impact SRU were presented by ASSCU staff member Daniel Hurley. He noted:

• For perspective, the recession resulted in total global output of about one percent, the lowest rate since WWII. "Following its worst six-month performance in 50 years, U.S. economic output returned to positive growth in the third quarter of 2009, with an expected year-end overall net increase of less than 1 percent.
• Unemployment may be the most important indicator to watch as those are highly likely to be our students' families. The national unemployment rate reached 10.2 percent in October, the highest level in 26 years. The combined unemployment and "under-employment" rate is 17 percent, the highest level in the 16 years that this has been calculated.
• The average time jobless individuals have been out of work extended beyond 6 months for the first time since data collection began 60 years ago. "All told, nearly 15 million Americans are currently seeking employment."

Is our mission worth our passion? Yes. Examine these points:

• Those with a college degree are one-half as likely to be unemployed compared to those with a high school diploma (9.4% compared to 4.7%).
• Facilitating college access and success doesn't guarantee individual prosperity but the odds greatly favor economic mobility, especially for traditionally underserved populations.

What can we expect as our legislature returns for consideration of the 2010-11 budgets? Other than the usual unusual political battles associated with Pennsylvania, watch for these issues in the coming term:

• Medicaid costs will continue to exert upward pressure on the budget. With unemployment up and increased poverty, Medicaid goes up as it did in 2009 to the highest rate in six years (7.95).
• Our state's favorite fallback to balance the budget: Gambling revenues tend to go down in recessions (if you are unemployed, you can't spend your paycheck at the tables). Illinois, Nevada and New Jersey were hit hard in 2009. Among the 42 states with lotteries, 38 suffered losses and the total revenue was down 2.6%. And forget about Ohio residences flowing across the border to those new casinos in Erie and Pittsburgh: Ohio voters approved a constitutional amendment for the construction of casinos in Cincinnati, Columbus, Cleveland and Toledo.
• We depend on tax revenues and tax revenues come from income, sales, transfer of property and other events that required people to spend. Usually, tax payments come after the expense so there is a lag. That lag may be delayed. In his November 22 report on the Pittsburgh region, Harold Miller, one of my favorite analysts, said, "The real question now will be — will Pittsburgh recover as rapidly as the rest of the country, or will it lag behind as it has in past recoveries? Already, there are signs that the recovery here will be slower than in other regions — job losses reversed nationally before they did in Pittsburgh, and most regions have seen a bigger reversal than we have." He added: "Even with the slight improvement in October, the Pittsburgh Region still has over 33,000 fewer jobs now than it did a year ago. What's worse, the region has fewer jobs today than it did a decade ago. The recession was so severe that almost every industry in the region has lost jobs over the past year, including some sectors like higher education that seemed recession-proof for a long time."

SATURDAY, OCTOBER 31, 2009

Getting down to business: Budget Update

In late October, the state sorted out the budget allocation for 2009-2010 to the PASSHE with the following results:

• For purposes of comparison across budget years, we will be receiving a total of $503,355,000 from state and federal sources. This includes an additional $27,068,000 in federal funds that is listed in the FY2008-2009 table but not received during that fiscal year. those are "stimulus dollars" (ARRA).
• "Key 93" funds (part of our appropriation) used for repair and maintenance were eliminated for FY2009-2010, cutting $13,893,000 in FY2008-2009 that will need to be made up. The likely source is from the additional funds identified above since those dollars can only be spent one time (nonrecurring).
• When the elimination of the Key 93 funds is taken into account, PASSHE total funding was reduced by 6.5% for funds identified as FY2009-2010. Most significantly, the state base recurring appropriation was reduced from $477,322,000 to $444,470,000. This difference was patched with additional federal stimulus funds as funds received in FY2009-2010, resulting in a net increase of 3.8% to PASSHE.

Follow this link to the TABLE that shows the details. What can be confusing is how the $27,068,000 is attributed to the 2008-09 fiscal year but paid in the 2009-2010 year. Remember: stimulus money (ARRA) is good only one time (nonrecurring). Very troubling is the reduction of the base from $477 million to $444 million. We will need political will to replace those dollars just to get back to even with the 2008-09 budget.

What happened between PASSHE and SRU is:

• We received $32,644,467 (down $3,561,272 or 9.8%). Overall, money from all state and federal sources including performance was $39,970,301 (less AFRP).
• In addition, our appropriation included $3,125,400 in stilulus money (ARRA) which is nonrecurring and represented 8.7% of our allocation.
• Performance money earned was $4,396,829, which covered the remaining portion of the almost $5 million we had to reduce from the budget. This allowed us to balance the budget for 2009-10.

Note: It is easy to concentrate on revenue and compare to previous years and forget that we have expenses that are increasing much faster than revenue.

As you know, after 101 days, the Governor signed legislation to enact a $27.8 billion state General Fund spending plan for 2009-10. Although there are still details that are being finalized, the general allocations to various agencies have been identified.

So what does this mean for Slippery Rock University and our budget planning process?

SRU is expected to receive $32,644,467 in state appropriation for 2009-10. This compares to $35,672,784 projected. We will also receive an additional $3,125,400 in stimulus money for a total of $35,769,867. While that provides an additional $100,000 compared to our projection, the bad news is that this is one-time money and can only be spent one time.

Looking to 2010-11, the appropriation stays at $35,769,867 with stimulus money as one-time money for one final year. That is close to what we estimated, so the projected budget shortfall of $8.9 million remains on target.

If dealing with that deficit isn’t a difficult enough challenge, the issue of using stimulus money to balance the budget becomes even more serious when it disappears in 2011-12. Based upon this funding scenario, our projected state appropriation for 2011-12 is now $32,644,467 – an additional deficit of about $3 million, for a total projected deficit of $15.5 million. (Remember, this is in addition to the $5 million this year and the $8.9 million next year.)

Performance money received is $4,115,457 compared to the projected amount of $2,778,015. This additional $1.3 million will go first to cover the unaccounted for deficit that we carried forward in fiscal 09/10 ($750,000) and then will be earmarked to cover unrealized savings in budget reductions for fiscal 10/11.

I realized these numbers are moving targets, but given what we know today, this represents the most accurate projection we can give you. Please continue to share your best thinking with us.

If you are reading this, thank you. It means you are visiting the budget page to read what others have suggested or you’re looking to make sure that your suggestion has been posted. In either case, this is is exactly what I had hoped for when we launched this site.

I’ve been impressed with the number of comments we’ve received since we launched this site a week ago. Yes, we have had the occasional miscue and let some things through that we should not have. However, contributors – faculty, staff, students, alumni and community members – have been very professional and taken the task at hand to heart as you can see in these submissions.

One result that is emerging is the consensus on saving energy and paper. Those are ideas that can be implemented today and not wait until 2010.

Thank you for your interest and support. This is a challenging exercise so let's keep the conversation going.

For the past two weeks, Vice President Charles Curry and I have been “on the road” doing a series of budget workshops to help the University community become more familiar with how the University budget is constructed and describing the financial challenges that face us immediately and in the future. Treading water and expecting the status quo are not options. If the University is to emerge from the financial crisis facing the Pennsylvania State System of Higher Education, we need to define our future and set our own course. I’m challenging each of you to be partners in this task. If you were unable to attend one of the workshops, start by reviewing the Budgeting 101 presentation on this Web site and the other links to inform yourself about where we are and where we need to go. With this knowledge, I invite you share your ideas about ways in which the University could increase revenue, avoid costs and/or decrease expenses. We’ll be sharing the ideas submitted so that the entire University community can share in our conversation. I hope you’ll be part of the conversation.