The challenges our University faces this academic year are complex. Consequently, our response to these challenges is not a simple story. In the interest of clarity and transparency, I want to share our strategy. Because of its length, I’m presenting this post in two installments.
The situation—Declines in investment income from all endowments, including the Available University Fund, have largely offset increases in state general revenue and tuition income for the 2009-10 budget. Increases in employee health benefits, mandated financial aid increases, and other obligations have absorbed the majority of the new funds. As a result, our budget is essentially flat. Because of the way our endowment yields are calculated, we anticipate that this will continue through 2012-13. Consequently, the Board of Regents has allocated additional funds from the AUF to help alleviate the situation for a three-year period.
The strategy—In response to this situation, we could merely place our strategic initiatives on hold and cautiously balance the budget. However, we aspire to be the best public university in America. We have decided to continue to pursue our strategic goals. This requires that we combine our limited new revenues with resources made available through reallocations and greater efficiencies. In short, this means taking money from low priority programs to fund high priority programs. This kind of change occurs every day in the private sector.
Our priorities—In 2009-10, our highest priorities are to create more competitive faculty and graduate student compensation, continue faculty expansion, and increase student scholarships. Faculty raises for this fiscal year will not be effective until January 2010. They will be targeted to address inequities in our pay structures. This will not cover normal pay raises for most of our faculty. And we have been unable to give raises to our staff. We will need to reallocate our resources so that we can provide faculty and staff raises next year.
The process—In shaping this plan I consulted with students, faculty, deans, and staff. I made a presentation and fielded questions at the Faculty Council and Staff Council meetings. I will discuss the situation further and answer questions at a university-wide town hall meeting from 4:00-6:00 p.m. on February 2 at the Avaya Auditorium in the ACES Building.
Tomorrow, in part two of this post, I’ll talk about implementing our strategy and the future.
In Tower Talk I’ll try to answer questions that are raised in reader comments. While I am unable to respond to every question, I’ll look for issues of high interest or questions raised by multiple readers.
A number of comments asked, who is responsible for deciding how much money flows from Intercollegiate Athletics to the academic enterprise at UT? Also, why doesn’t athletics contribute more money to academics?
Ultimately, I make the decision, although I do it in consultation with the directors of men’s and women’s athletics. The goal is to make the contribution as large as possible. But it must be done in a way that ensures that athletics continues as a self-sufficient business model. As I said in a previous post, it was not that many years ago that academics subsidized athletics.
Some athletics revenues are predictable while other revenue streams are cyclical. Expenses can vary from year to year and from sport to sport. Recent reports concerning football revenue may lead some to believe that Intercollegiate Athletics enjoys large profits. Don’t forget that athletics must pay for many men’s and women’s programs besides football, and the majority do not pay for themselves. The profit of Intercollegiate Athletics is far less than the profit of the football program.
The good news is that our highest revenue-producing programs are experiencing great success, and Intercollegiate Athletics should again be in a position to contribute financially to the academic mission of UT.