The State of North Carolina began projecting large revenue shortfalls in early 2001, resulting in expenditure reductions and required reversions being imposed on all State agencies and UNC. Ultimately, the negative revenue picture impacted the 2001-03 biennial budget proposals put forth by the Governor and then followed by the Senate and House Budget Committees. The 2001-03 fiscal situation was further compounded by the fact that the State’s Rainy Day fund had been depleted by Hurricane Floyd recovery expenses and the cost of losing some major lawsuits.
The fall-out of the news to State Agencies and East Carolina University was not good. First, a reversion of 1.9% was ordered by the Governor for the 2000-01 fiscal year that amounted to $2.4 million for the Academic Campus and $900,000 for the School of Medicine. In addition, by the end of the fiscal year, an additional $700,000 of Medicare Reimbursement Funds and $486,000 from FEMA reimbursements were “confiscated” by the State Budget Office and placed in the State’s reversion account. This news was particularly troublesome to the University since the Medicare reimbursement funds were earmarked for new facilities for Family Practice and the Brody Out-Patient Center, and the FEMA reimbursement were for expenses that we had already incurred for repairing damage inflicted by Hurricane Floyd. The on-campus fiscal picture continued to worsen as a fuel oil shortage greatly increased the cost of natural gas and electricity, requiring ECU to reallocate more than $1.8 million for utilities.
The legislative budget process for 2001-2003 began with the Governor’s proposal. Unfortunately for ECU, that included virtually no funding increases. Particularly troublesome was that the Continuation Budget did not include any portion of the $1 million requested to pay for utility price adjustments. Making the situation for ECU even worse, an anticipated $2.9 million budget reduction for the decrease in regular term enrollment (due to our actual enrollment being lower than projected in fiscal year 2000-2001) was not offset by the expected increase in Distance Education enrollment funding. The Governor included only a minimal amount for DE in his proposal for the entire UNC. In addition, he did not include the $1.5 million proposed by the BOG for the final installment of Doctoral II funding. The Governor’s budget also contained a number of other budget cuts totaling $2.2 million for ECU.
Early on in the process, the Joint Appropriations Subcommittees responsible for developing budget proposals for the General Assembly decided that the Governor did not go far enough on cuts and requested information based on a 6.5% reduction. They employed a “modified zero-based budgeting approach” and targeted a number of expenditure categories for reduction. These included cuts in travel, contractual services, equipment and cell phones. In total, such cuts would have amounted to $11 million for ECU, necessitating layoffs and other severe measures. The general response by the campuses was that cuts of this magnitude were unattainable and would set the University back ten years. The outcome of the dialogue was budget reductions for UNC of a significantly lower amount.
The legislative process has now resulted in two somewhat similar but not identical budget proposals, one from the Senate and one from the House. The inclusion of a proposal by the House to fund positions at only 98.5% is the largest problem. The process now requires that a joint Senate/House Conference Committee have to work out the differences. At the date of this report, it is not known when a final budget will be approved by the General Assembly. All that is known is that budget reductions and tuition increase will be included for UNC.
Upon word of the suggested 6.5% budget reduction proposal and subsequent discussion with the Cabinet, Chancellor Eakin commissioned the Task Force on Campus Reallocation to assist the university in addressing the impending fiscal issues.
The Charge of the Task Force was:
To advise the Chancellor and his Cabinet on strategies to be taken in response to the 2001-2002 financial challenges facing the university. The Task Force will consider the short and long-term impacts of these challenges and will make recommendations concerning the most effective ways in which these problems may be addressed. It will gather data and conduct analyses as needed to evaluate the effectiveness of possible recommendations. In its deliberations and recommendations, the Task Force will seek strategies that will enable the University to maintain a balanced budget, mitigate the impact on its instructional mission, while still allowing appropriate investments in the future development of the institution. The Task Force will make its recommendations directly to the Chancellor.
Members of the Task Force are:
Richard Brown – Executive Vice Chancellor and Vice Chancellor for Administration and Finance – Chair
David Batts – Chair of the Staff Forum
Sadie Cox – President of the Student Government Association
George Harrell – Associate Vice Chancellor of Facilities and Chair of Energy Conservation Committee
Phyllis Horn – Interim Vice Chancellor for Health Sciences and Dean of the School of Nursing
Peter Kragel – Interim Dean of the School of Medicine
Robert Morrison – Chair of Faculty Senate
Frederick Niswander – Chair of Faculty Senate University Budget Committee
Marilyn Sheerer – Dean, School of Education
W. Keats Sparrow – Dean, College of Arts and Sciences
Robert J. Thompson – Interim Vice Chancellor of Academic Affairs
David Jordan Whichard, III – Trustee and Chair of Finance and Facilities Committee
Staff to the Task Force:
Charles Hawkins – Associate Vice Chancellor of Financial Services
Anne Jenkins – University Budget Director
Gary Vanderpool – Associate Vice Chancellor of Health Sciences
The members of the Task Force were informed in April and the first meeting was held on April 26, 2001. Meetings were held approximately every two weeks through July.
At the first meeting, the Task Force approved the establishment of a Web Site to post all of the information about the Task Force (http://www.ecu.edu/suggestions). The web site includes the agenda, minutes, frequently asked questions and a detailed suggestion list. In addition the Task Force established an e-mail address (suggestions@mail.edu.edu) so the university community could submit their suggestions. A campus mailing address was also provided if someone wished for his or her suggestion to be anonymous or if they did not have access to E-Mail.
In total 163 suggestions were offered across campus and beyond. 70% of these suggestions were received through the e-mail account and direct e-mails to the Chairperson of the Committee or the Chancellor. The other 30% were received through suggestions brought to the table by the Committee members. After eliminating duplicates, the suggestions totaled 125 and were grouped into 32 themes for further analysis. Many of the suggestions were generated through group discussions with members of the Task Force and various groups on campus. These groups included the Faculty Senate, Faculty Senate University Budget Committee, Student Government Association, Staff Forum, Administrative Advisory Group and Chancellor’s Cabinet, along with numerous organizational staff across campus during their regular meetings.
The Task Force reviewed all of the suggestions and focused on items that would have both a large and immediate savings impact on state funds (relative to the magnitude of the anticipated budget cuts) as well as being readily implemented. As noted below, a general philosophy put forth by the Faculty Senate University Budget Committee also proved a valuable litmus test; take cuts where the damage will be repairable in the future when budgets improve. As a result of this evaluation process, suggestions that had a larger state dollar impact and/or were relatively easy to implement were moved to four categories. Those categories were:
Temporary (repairable) Reductions
Permanent Cost Savings
Revenue Generating
Energy Conservation
As stated in the Charge from the Chancellor, the group was to look at savings that would protect the instructional mission of the University. The Task Force members also added additional criteria to this guideline which were:
· To protect the jobs of current ECU employees to the extent possible.
· To look for items that would not permanently damage the long-term progress of the University.
· To make cuts that would not reduce the revenue generation activities of the University.
In discussions with the Faculty Senate University Budget Committee, these guidelines were consistent with their thoughts as well.
To the degree necessitated by the 2001-02 State budget, the following suggestions (many of which are temporary and, therefore, repairable) should be implemented to offset State Budget cuts. These suggestions are consistent with those recommendations by the Faculty Senate University Budget Committee.
· Maintain the managed freeze on SPA and Non-Teaching EPA positions to create enough vacancies to accommodate the position reductions required. Avoid cutting filled positions to the extent possible.
· Increase the Auxiliary Overhead rate by 0.75% to absorb part of the cuts in SPA and non-teaching EPA positions. This is readily implemented at little net cost to the auxiliaries and trust accounts as the TSERS retirement contribution rate has been reduced approximately 4% by the State, providing the auxiliary units with significant savings. This action would generate approximately $1 million per year of additional administrative overhead revenue and would permit an equivalent reduction of State payroll expenses without a loss of service or quality.
· Divisions should utilize non-state funds to accommodate cost reductions for a one to two year period.
· Take operating cuts in objects targeted by General Assembly in manner that distributes cuts proportionately among divisions in fair and equitable manner (Savings of $100,000 - $300,000)
· Implement travel budget reductions of 5% to 10% (based on prior year expenses), concentrating on reducing conference attendance and non- essential out-of-state trips. To accommodate, also maintain the 25-cent per mile reimbursement for personal vehicle usage. (Total savings of $150,000 - $250,000).
· Improve the streamlining of the job advertising process (Savings of $20,000)
· Extend the replacement period for the Computer Replacement Programs by one year for faculty and administrative units (Savings of $200,000 - $250,000)
· Defer furniture/equipment purchases (Savings of $250,000 - $500,000)
· Promote energy conservation measures including the continued use of “temperature setbacks” in buildings and campus education programs on turning off lights and office equipment (Savings of $200,000 – $300,000 against $1.5 million projected under-funding of utilities)
· Reduce the expenditure of funds for temporary staff by reassigning work to other employees (Savings of $100,000 - $200,000).
· Reduce Housekeeping positions by attrition and related workload by changing the intensity of service (Savings of $40,000 - $50,000)
· Reduce Landscaping positions by attrition and related workload by changing the intensity of service but recognize potential impact on campus appearance to parents and prospective students (Savings of $40,000 - $50,000).
· Reduce library support staff (vacant positions) if necessary but not acquisitions budget (Savings of $50,000 – $75,000).
Other Recommendations
The University community made many excellent suggestions that may not apply to the current budget crisis, but can be pursued as other opportunities for continuous improvement. These suggestions are being reviewed from a cost/benefit/customer service standpoint and will be implemented by units where feasible. These suggestions are:
· To synchronize the Scheduling Software (Resource 25) with the Energy Management System so that temperature and the turning off of lights can be automatically adjusted based on the room use.
· To utilize repair and replacement funds to purchase items that have a short-term payback where appropriate. One example will be the incorporation of using occupancy sensors in future maintenance plans.
· To further review the use of temporary employees and determine if staff in other areas can be used in some instances or whether students could be hired.
· To review the need for the number of office support staff given the extent to which faculty and administrators now perform many of those functions via email and office automation tools.
· To educate University travelers about looking and asking for the “State Rate” for in-state lodging.
· To review the vehicle usage with departments and determine the optimum vehicles necessary to meet needs.
· Reduce paper:
a. There have been many suggestions on how to reduce the amount of paper on campus, much of this by using technology and targeted E-Mails. The Suggestions include:
i. E-Mail Flag that identifies employees who have regular e-mail access so that e-mails can be sent rather than brochures.
ii. Implementation of E-Print to distribute administrative reports over the web.
iii. Use of the Payroll Advice over the web.
· Review the operating hours of computer labs, foreign language labs and other special service labs to determine if operating hours could be reduced or if there are any consolidation possibilities.
· Expanded use of electronic subscriptions by the Library.
· Use of the Medical Incinerator to dispose of documents that are currently disposed under vendor contract.
· Review processes to identify and eliminate redundant activities.
a. School of Medicine – Human Resources, Financial
b. Sponsored Programs/Grants and Contracts/ School of Medicine
c. Centralizing Administrative services within Schools and Colleges
Revenue generating suggestions include:
· Using Specialized Service Facilities rates to recover costs from grants and contracts.
· Continuing the further use of Campus-Based Tuition increases.
· Pursuit of “out of model” continuing studies programs and Executive Education type programs.
· Expansion of the One-Card to partner with a banking institution.
· Expanded use of Health Service for faculty and staff
While no one desires to have to absorb budget cuts of the magnitude being discussed, the Task Force believes that the recommendations outlined above form the details of a flexible plan that can achieve the necessary results while not permanently harming the institution or its missions. We stand available to discuss this report with you at your convenience.
Attachments:
Faculty Senate University Budget Committee Report to the Chancellor
Task Force on Campus Resource Allocation Suggestion List