Since the board met last month, Governor Doyle has taken two budget actions that affect the UW System: first, he directed that state agencies cut a further $161million from current year(2002-03) budgets—the UW’s share of that cut was $6.9 million dollars. The Legislature subsequently increased our portion of the cut to $8.3 million, stipulating that the funds come from “institutional support” accounts. Since the fiscal year is already two-thirds gone, this constitutes a cut of nearly 20 percent of remaining funds in that account and would require significant and immediate layoffs.

So we have submitted a request to DOA and the Joint Finance Committee to take these cuts from a somewhat broader base of administrative accounts, while still protecting instruction and research, so that immediate layoffs will not be required in this fiscal year. To accomplish these cuts so late in the fiscal year, our institutions are having to eliminate positions in business services, accounting, auditing, human resources, computer and instructional technology support, bursar’s office, legal affairs, and police/safety units. Touchtone registration for UW-Madison students has been eliminated; university/alumni outreach staff and publications will be cut with predictable impacts, I’m afraid, on fundraising. Travel and professional training has been cut almost everywhere. I remind you that we have had travel and hiring restrictions in place for virtually the whole past year.

This last $8.3 million cut brings to $49 million the total cuts we have made to our GPR base just since this biennium began, a biennium in which enrollments increased by 10,000 FTE and are the highest in a decade. This chart shows the actual fiscal impact of these cuts by institution. These are 01-03 cuts, for the current biennium.

I underscore this so that you will keep this context in mind as we face the task of managing further cuts in 2003-05. Our institutions this year have cut administrative services, slashed S&E (Supplies and Expense) and are operating with 300 fewer positions than a year ago in order to manage $49 million in cuts without affecting access—they are stretched to, and in some cases beyond, the point of meeting the standards of service and quality that our students expect.

If you recall the four steps for reductions I outlined last month—administrative cuts, program consolidations, tuition increases, and enrollment adjustments—we have accomplished most of step one in managing $49 million of cuts this year as well as the cuts in previous years that Regent President Gottschalk mentioned. The next round of cuts will necessarily affect academic programs, student-teacher ratios, access to sections, and perhaps, admissions for fall ’04 and beyond, depending on how the final budget comes out.

Now, let’s turn to the Governor’s 2003-05 budget, issued three weeks ago. The Governor has proposed a further cut of $250 million in GPR (which takes away about $1,800 per FTE student), and he has proposed that the Regents be authorized to offset up to $150 million of the total cut with tuition increases not to exceed $350 a semester at Madison and Milwaukee and $250 a semester at the comprehensive campuses and UW Colleges.

To cushion the impact of these increases, the governor’s budget would also use $23 million dollars of our auxiliary funds for our UW student financial aid. But even with these tuition offsets, our campuses will have to cut another $100 million from their GPR resources, on top of this year’s $49 million reduction.

A reduction of $250 million is the largest cut the UW System has ever sustained. It represents 38 percent of the governor’s total cuts in state spending, even though the UW is less than 9 percent of the state GPR budget. The governor’s budget document projects that the UW System share of state GPR under his proposal would decline to 7.1 percent by the end of the next biennium—a decline from a little over a billion dollars of GPR today to $830 million in 2005 taking us back to our GPR base in the late 1990s.

At the same time, the overall state budget would grow by about 5 percent over the biennium, primarily with increases in health care and shared revenue. Thus, the university will not just share in closing a deficit, it will contribute in part to growth in other state programs. This falling priority for higher education is a long-term trend, and I know you share my concern about that, and we should ponder seriously where it will take us as a state and how we might plan better to maintain educational opportunities for our students in the future.

Since 99 cents of every state dollar we receive goes to the campuses, it is important to look at what these cuts may mean to our campuses. As you can see from this chart, if we allocate these cuts according to current funding levels, the cuts would range from $23 million for UW-Madison to $865,000 for UW Superior.

In a moment, I will invite the Chancellors to comment on these proposed cuts and how they are planning for them. But, remember, this is a best case scenario and assumes that the legislature will not make further cuts to our GPR budget and will approve the tuition increases provided for in the governor’s budget. Our choices will be much tougher and will have a more permanent impact on the structure of the UW System and on access for future students if our cuts go deeper or if tuition increases are reduced.

The governor’s budget also proposes to cut 650 UW faculty and staff and those reductions are also shown here by campus. Frankly, a $100 to $250 million reduction in funds will generate at least this many vacancies, but it is important to keep in mind that every position we eliminate also reduces our capacity to teach students, do important research and provide help to agriculture, business, and other units of government throughout the state. These reductions may be necessary, but they are far from costless in terms of what we can accomplish for our students and for our state.

The Governor’s budget provides authority for the Regents to raise tuition $350 a semester at our doctoral campuses and $250 a semester at our comprehensives and UW Colleges. Even with such increases, our tuition will remain below the midpoint for our peer institutions. As you can see from this map showing this year’s tuition increases at Midwest Big Ten campuses, our past tuition increases have been modest compared to those of our peer institutions. This chart shows that our resident tuitions would still remain $700-$1,100 below the midpoint of our peers, even with the authorized increases in the governor’s proposal.

We know that current UW students and their families would prefer not to face steep tuition increases over the next few years, but future students are more supportive of increases that will preserve their access to the UW System. Without tuition dollars, cuts of this magnitude cannot be met without reducing course offerings, reducing student services, reducing fields of study and reducing access to the UW System. Without these tuition revenues, our students may return next fall to very different educational experiences.

Now financial aid is a critical part of the tuition picture, and the financial aid increase of $23 million in the governor’s budget is needed to cushion the impact of these substantial tuition increases on our neediest students. However, these aid funds would come from student funds paid for maintenance and replacement of residence halls, student unions, and related projects. These are one-time funds—where will the dollars to sustain this aid come from in the future? I would hope that the Legislature could find a way to stabilize this financial aid commitment by funding it from GPR, in fairness to the students and to insure that this financial aid is preserved long-term into the future. I should note that the Governor’s proposal would lift the $1,800 cap on WHEG grants (Wisconsin Higher Education Grants) so that students could have their WHEG grants rise with the proposed tuition increases. This is essential for our neediest students.

Finally, I should note that our capital budget projects submitted for 2003-05 are being reviewed project-by-project by DFD (Division of Facilities Development) and the Building Commission. We are urging that carryover projects from 2001-03 (the current biennium) and projects with significant private contributions be released soon so that we can meet commitments to donors. We hope also that additional funding will be released so that we can continue to make progress on the renovation projects that are so badly needed to preserve our buildings and serve our instructional programs.

You will note perhaps also that the Governor’s budget proposes shifting responsibility for administering state financial aid, which is currently administered by HEAB, to the UW System. Having our existing financial aid offices include this aid in student aid packages would streamline the process, save students having to make aid applications to two separate entities (UW and HEAB) and facilitate a tighter fit between state aid and tuition policy going forward.

The bill provides that the UW System would manage data collection and reporting for ourselves, the technical colleges and the private colleges, but that aid funds for the technical and private colleges would be administered through DOA. This integration of state aid with tuition policy at the institutional level is occurring in other states around the country as well, and this is an appropriate historical point to make this change.

In summary, we have some major challenges before us. We must manage our 2003-05 cuts in such a way as to preserve our core capacity to carry out our mission for the future. This requires balanced choices and continued investment in our human resources, even if there must be fewer of them. Great universities are built gradually over many decades, and once dismantled, cannot be rebuilt quickly, if at all. I believe it is our duty to conscientiously seek and maintain that balance so that at the end of the coming biennium we are smaller but better, not smaller and poorer.

Now I would like to call on our Chancellors to offer their perspectives on these budget proposals….

Budget Proposal pdf