You have before you today the 2002-03 annual budget allocations to the campuses that will support their work for the coming academic year. This is not a new budget request — it simply distributes to the campuses the second year funds approved in Act 16 state budget a year ago.
As you know, the Legislative Conference Committee is still trying to reach agreement on a budget reduction bill to address the state’s $l billion deficit. The allocations in the document in front of you therefore are based on some assumptions, including the assumption that we will have to cut $10 million from our current (2001-02 budget base) and up to another $30 million from our ongoing (2002-03) budget base. The ultimate impact of these reductions on our enrollments and services cannot be known until we know what tuition increase will be included in the final bill — whether tuition will be capped at the Governor’s proposed 10%, or 8%, or somewhere in between. We are therefore not asking you to set a tuition schedule today but will ask you to do so in a special meeting no later than the first week of July, so that tuition bills can be timely sent and parents and students can plan for their financial obligations for the fall.
Before I ask Freda to walk us through some of the details of the annual allocations, I’d like to make several general observations:
- Timing — our university runs on a clear academic year calendar: we admit students and hire faculty in the spring for the following fall; we take advantage of the summer break to step up renovation and refurbishing of facilities; and we also use the summer months to plan, develop new curriculum and outreach activities, and for professional development. Start-and-stop budgeting by the state disrupts the orderly management of our responsibilities for our students, faculty, and the public. I want to express my appreciation to the Board for your understanding of these difficulties: we all share the goal of running an efficient, effective, and quality university system — even when the political cycle doesn’t recognize our academic cycle.
- Declining state support — in this 2002-03 operating budget, state GPR support falls to its lowest level ever, 31.3% of our total resources (last year, 2001-02 GPR was 32%; year before that was 33.1%) and “other” sources, including gifts & grants, auxiliary fees, and segregated fees for instructional technology, health care, and student initiatives will, for the first time, constitute more than half (51%) of our total resources.
- Budget reductions — totaling an ongoing -$41 million will be taken as described in Appendix E. Put simply, the first $10 million in cuts from our current year budget (2001-02) have come primarily from supplies and expense funds and hit research and instructional purchases the hardest. However, the projected 2002-03 cuts must come primarily from salaries and benefits (70%) which comprise 85% of our total base. In short, we must cut people to cut $30 million and those people cuts, in turn, impact instruction, student support services, administrative services, physical plant, and virtually every part of the university mission. This is why the pause in our admissions process was so essential — to meet these cuts, we have cancelled some faculty and staff hiring, frozen offers in-process, and worked to manage our budget resources and our service commitments as responsibly as possible. Each of these decisions has an impact on students and the quality of a UW education.
- Where will this 2002-03 budget allocation leave us, if it approximates the final budget reduction decisions of the legislature?
Under the Governor’s proposal of a $41 million cut and a 10% tuition cap, we would implement 50% of the Economic Stimulus Plan and enroll up to current enrollment targets. If the final budget adjustment cuts an additional $10 million (the latest Repub1ican proposal), we could do just 28% of the ESP and would reduce future enrollment targets by 2,000 FTE. If the final budget adjustment is $10 million less than the Governor’s proposal (the latest Democratic proposal), we could implement 72% of the ESP and increase our enrollment targets by 2,000 FTE.
I need to underscore that throughout, management flexibility has really paid off for our students and the state: without it, the future would be even grimmer.
- because of position and tuition flexibilities, we serve 8,600 more students with 179 fewer faculty and staff than in 1995;
- we maintain the lowest administrative overhead rate (5.8%) in the nation — the difference between our 5.8% and the industry average of 10.3% saves $115 million/year to support access and instruction;
- and, we have mounted customized professional programs for working adults including teachers, nurses, pharmacists — which otherwise could only have been done by reducing traditional undergraduate programs.
Without these flexibilities, the impact of the current budget uncertainties and probable future base cuts would be far more wrenching and severe. But I also want to caution that no amount of flexibility, overtime work, and other coping mechanisms can maintain our current service levels in the face of significant future cuts. We hear that future biennia are likely to be as tough again as this one. If this is so, we will have reached the end of the incremental adjustments we can make to maintain enrollments and quality. At that point, we will need a candid public policy dialogue about big changes to Wisconsin higher education and the level of access Wisconsin is able to provide for its citizens so we can adjust the scope of our operations accordingly.
Now, I’d like to ask Freda to walk us through some of the details of the specific items in the allocation document before you.