Tuition Recommendation

I sent this message to members of the campus community yesterday:

I want to share with you my recommendation to the UT System and the Board of Regents regarding tuition policy for the 2010-11 and 2011-12 academic years.  The Tuition Policy Advisory Committee recommended an average increase for resident undergraduate and graduate tuition of 3.95%, which has been widely reported and discussed in forums on the campus.  My recommendation to the System follows the TPAC proposal to implement a 3.95% tuition increase and the $65 per semester fee approved by student referendum in 2006 to fund the new Student Activity Center.  The TPAC report also includes non-resident undergraduate, graduate, and professional program tuition rates, far more details than I can share in this message.

The economy is challenging all of us–students, parents, alumni, donors, and institutions.  No one welcomes a tuition increase in this environment. I understand that some families are struggling to keep up, and even a 3.95% tuition increase seems like too much.  For these families, I remind them to explore the many financial aid options on our campus.  In addition, 20% of the resident undergraduate tuition increase will be devoted to resident undergraduate financial aid, and 15% of the resident graduate and professional student tuition increase will be used for resident financial aid.

We raise tuition reluctantly and out of necessity.  UT is not alone in this situation.  The media have reported plans for tuition increases in many states, including a 7.5% increase at the University of Minnesota, at least a 9% increase at the University of Illinois, and a 32% increase at the University of California System.

UT remains a good value.  Kiplinger’s Personal Finance Magazine recently ranked UT 25th among the 100 best values in public universities.  The magazine evaluated more than 500 public colleges and universities.  Nevertheless, we know that the cost of an education is a burden for many students and their families, and we are doing everything we can to control our costs, increase our efficiency, and keep the University affordable.

Bill's Signature

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Comments

  1. Professor Hillis,

    Your posts appear to emphasize that (1) athletics consumes all of the trademarking profits; and (2) Mack Brown salary is exorbitant and unnecessary. I agree that both of these issues are outrageous and need to be addressed.

    These issues seem to be minor, however, compared with the enormous amount of DEBT the athletic department has incurred over the past few years. Notice that the athletic department has net income around $5 million* this year, despite it being a banner year for the football program (and in addition to getting various subsidies). Yet UT administrators have premited the athletic department to rack up almost a quarter of a BILLION dollars in debt in the name of the university at large. Doesn’t this impose a much more significant risk to the university than $5-10 million dollars from trademarking and Mack Brown’s salary? Say that the economic downturn hurts ticket sales, and the football team has a couple of bad seasons. Won’t this enormous debt then become a HUGE burden on the acadmic side of the university? Note the the university budget is about $2.5 billion a year. This is to say that the athletic departments debt is about 10% of the operating budget of the entire university.

    Am I the only one really really scared by this massive amount of debit?

    *Of course the athletic department only has $5 million net income if you exclude the $160 million in recent stadium renovations that have been debit financed.

    • David Hillis says:

      I think if you re-read my post, you will see that I did discuss the $222,488,000 in athletic department debt, and the need to transfer large sums from the trademark revenue into cash reserves to buffer against down years, so that we can meet these debt obligations. In addition to the use of trademark revenue to make up deficits in yearly athletics expenses, a large portion of these funds go into this cash reserve. So, yes, I agree that there are multiple reasons that athletics spending is a serious drain on the university’s budget. Trademark revenues could be used to address a wide variety of our budgetary problems, but we are severely constrained from doing so because the bulk of these funds are transferred to athletics every year. These transfers are needed both to make up the difference in income versus expenses, and also for a cash reserve to deal with the enormous debt obligations.

      In the interest of giving credit where credit is due, I should add that the trademark revenue funds were formerly managed by the central administration, and they produced much smaller revenues at that time. They are now managed by athletics, and are now producing more income. I applaud the improved management of these funds, but this does not detract from that fact that this still represents an enormous subsidy of the athletics budget.

  2. Travis R. says:

    President Powers,

    On this blog (in your second post on December 23, 2009 titled: “A Self-Sustaining Athletics Program” ) you wrote: “In the last three years they have made direct payments of $6.6 million to support academic.” However this does not appear to be reflected in the athletic departments financial documents that have recently been released.

    According to these documents the athletic department contributed (over the last 3 years) $5.2 million dollars to the presidents discretionary fund. In addition to this the athletic department contributed $180,000 to the Kinesiology program, $500,000 to create a “Mack Brown” chair at the LBJ school, $200,000 for the Film institute, and $700,000 for tree relocation (related to the stadium). To get to $6.6 million you need to include all of these items.

    This appears to imply that you consider tree relocation an academic initiative. Could you explain why you consider relocating trees is an academic initiative?

    [Of course, the UT athletic department contributes nothing to academics as they rely on large subsidies from the university at large, as discussed below. This is not to mention the $225 million debt the athletic department has racked up (at enormous risk to the health of the university at large) over the past few years.]

    Thank You!

  3. 160k+ Trip?? says:

    I would love to see the expense reports from the football team’s $160,000 trip to the White House in 2005 (see page 2 of the athletic department’s financials). As someone who has traveled on UT expenses before, I recall there is something like a $35 dollar a day allowance for food and essentials.

    Guy who was going to open record request documents a couple weeks ago: you should request the receipts from this trip! UT policy requires that these be archived.

  4. Hello Colonel Hegarty, CSP, Dr. Hillis, Dr. Palaima, Anonymous, Scott Cook, Larry Browning, Brian Kurtz, James, et al—

    I hope that Colonel Hegarty does not regret having joined this discussion. We’re just getting started!

    I had to take quite a few deep breaths and ponder what the Colonel said, and I appended a reply down there that I hope is not overlooked. In part, I commented that as UT’s head numbers person, we can depend on the Colonel to provide immediate concrete information which might take a subordinate several months to research and format to Administration’s satisfaction (let alone obtain permission to release). Instead of papering anything over or proffering excuses (which more cynical members of the Longhorn community might interpret as stalling tactics), the Colonel can part the sea of red tape because he is a direct source.

    In short: We need to see a spreadsheet supporting the Colonel’s broad assertions.

    I’ll repeat the maxim on the distinction between a mathematician and an accountant: Ask the mathematician what 2 + 2 equals, and he or she says “four.” Ask an accountant, and they say “What do you want it to equal?”

    ———————————————

    I have not weighed in on the Cactus question yet, but have you seen a film called “University, Incorporated,” which a former UT graduate student named Kyle Henry produced? If you’d like to see how UT administration in general (and the Texas Union in particular) operates, give it a viewing; there are detailed sections on the privatization of Union eateries (which occurred despite a student vote to keep them in-house), the shutdown of the Union’s once-extensive film series and some other interesting stuff.

    They keep a copy of “University, Incorporated” available in at least one UT library, since the film was Mr. Henry’s Master of Arts thesis; last time I checked you could buy it online, too. Former Texas Union Director (now “Executive Director”) Andy Smith plays a cameo role in the film as he runs away from students who were unable to make their way onto his calendar yet persisted in pursuing an interview.

    True enough, at many live shows the paying audience at the Cactus is mostly a non-student demographic, because most students cannot legally drink alcohol. However, it is definitely instructive (the school of life, basically) to students and everyone else to see solid musical careers such as those of Lyle Lovett, Nanci Griffith, Lucinda Williams, Ani di Franco, Patty Griffin (I apologize if I have misspelled anyone’s name; no doubt I have left out some favorites, too) and others with humble beginnings at the Cactus; such performers began to catch on, they kept at it even when most people would have given up and gotten a “real” job, and after they became household names they remembered the consideration afforded them early on by Griff Luneberg, Chris Luecke and other Cactus stalwarts. For anyone to write these guys off as “just a manager” or “just a bartender” demonstrates a profound ignorance of the music business. Although it hardly enjoys the fabulous riches of the football program, the Cactus does have a national and international reputation.

    It hurt the financial ledger of the Cactus severely for a Starbuck’s franchise to be set up in the Texas Union right outside their door. Before then, the Cactus was the preferred on-campus daytime coffee spot: consuming caffeine, hanging around as long as you like, discussing anything and everything with professors, students and others. No longer. One might well make an argument that the demise of the Cactus was deliberately engineered by the Texas Union directorship.

    Speaking of which: Not many years ago, at the Union they had a Director (Mr. Smith) and an Assistant Director (a genuinely kind and personable man named Gary Shelton; some people say that the heart and soul of the Union effectively disappeared after Mr. Shelton’s retirement) and the place got along swimmingly. Nowadays, even though the overall workforce of the Union is much smaller than it once was (what with having done away with UT-employed food servers and replacing them with Wendy’s and Taco Bell), they’ve got an Executive Director, some Associate Executives, a Director or two and at least five Assistant Directors. The Union is about as top-heavy with all these directors running around as any unit at UT.

    Go to the UT directory, plug in Union for some names, and then start plugging in those names to call up salaries at

    http://www.collegiatetimes.com/databases/salaries/salary?name=Dodds&dept=&school=ut&year=

    and you’ll see what the real priorities seem to be over there. No wonder this “$125,000 annual loss” of the Cactus and Informal Classes combined is not spelled out separately.

    Yup, sounds like a corporation to me!

    ———————————————

    And James, I appreciate your identifying some of the distinguished speakers in this forum. I am happy that as faculty members, they enjoy a measure of protection against retaliation which members of the classified staff do not.

    To follow your example and identify myself to the fullest extent possible without becoming an official target:

    “Argus” is a pseudonym for a UT employee who loves the University in many respects (and is not actually averse to watching a Longhorn game) but who also: 1) despises the hypocrisy of administrators and rich people who live high at UT’s expense but would rather not see that brought to light; 2) feels appalled at the staggering sums of money shifted around, hidden and lavished on a form of brutal entertainment akin to the Roman games; 3) fears for his or her livelihood because he or she has seen the HR mechanism at UT brand and railroad hard-working employees who asked too many questions or appeared on a witness list for someone filing a lawsuit against UT; 4) longs for the day when classified employees have a truly neutral party such as an Ombudsperson who might help them if they are getting screwed; 5) insists on specifics and the truth and 6) cannot tolerate bullying of any kind, including economic and high-level administrative perfidy.

  5. E. F. Schumacher coined the phrase “the tyranny of economic calculus” which means that if an endeavor doesn’t make a profit then it can’t possibly be worth doing. Seems the Cactus Café is doomed by this short term and not uncommon thinking. Students quoted saying the Cactus doesn’t meet their needs are being myopic. They won’t be students all their lives and some day after graduating and moving to Houston or Dallas they may return to the 40 acres. The Cactus Café is a great place to reconnect with campus. If the Cactus is closed on Mr. Powers’ watch he will certainly be remembered… and I doubt this type of decision will encourage thousands of alumni to donate money to the University when it cannot be trusted to protect a beloved and symbolic place that is embedded in our culture and consciousness – the Cactus Café. Mary Gordon Spence said it all, “this is the last straw.”

  6. David Hillis says:

    As Kevin Haggerty, Vice President and Chief Financial Officer for UT has stated, “indirect cost funds [from research] are used to cover all of the infrastructure costs associated with the conduct of the research, that is, debt service on research facilities, repair and renovation, utilities, libraries, administration, accounting, purchasing, environmental health and safety, compliance, etc.” I stated this slightly differently, by simply saying that indirect costs from research “support everything that UT does.” Kevin then said that my statement was “false,” so I will clarify “everything” to make my statement clearly true. Indirect costs from research support our buildings, utilities, libraries, the administration, staff salaries, environmental health and safety, repair and renovation, etc. Without support of these UT activities from indirect costs from research grants, it is difficult to see how UT could exist as a world-class university, or have any athletics programs for that matter. In contrast, the only funds that are “returned” to the rest of UT from athletics are funds derived from the UT trademark revenues, which would logically be assumed to support all of UT in the first place.

    • Dr. Hillis makes some very good points above. Just so everyone reading this is aware:

      Dr. Hillis is the Alfred W. Roark Centennial Professor of Biology at the University of Texas. He is a member of the National Academy of Sciences, a MacArthur Foundation Fellow, and a recipient of the (NSF) Presidential Young Investigator Award.

      In other words, he’s a very bright guy.

    • This debate over whether trademark, royalty and advertising revenues belong, or should belong, to what Texas Monthly calls Longhorns Inc is not simply a semantic quibble.

      Here follows my truly respectful and honest opinion as someone who is deeply familiar, as UT’s representative on the Coalition on Intercollegiate Athletics, with thee problems of big-time athletics in our colleges and universities.

      This decision over trademark and royalty revenues represents, in my view, the mentality that has made UT Austin the leader, or as Athletics director DeLoss Dodds put it, ‘the Joneses’ in the arms race that is destroying what is left of the principle of competitive collegiate athletics as a component of higher education.

      For the president of UT Austin, or any other institution, to hand over to the athletics program these royalty and licensing and advertising agreements and revenues and tell them to go their own way and use them as they see fit (‘returning’ 10% to the University) is a failure to live up to the responsibilities of the office of president.

      First, the trademark is only valuable because it is linked to the real University of Texas at Austin. Take away Longhorns Inc’s ever looser affiliation to UT Austin, and the revenues from licensing, royalties and advertising would be on par with those of the Austin Toros.

      Second, this policy is an open invitation to athletics financial officer Ed Goble’s “we eat what we kill” philosophy. It lets what is an auxiliary unit operate like an independent enterprise. This leads to uncontrolled higher and higher salaries and other lavish expenditures because they are set inside this separate world.

      Assistant football coaches here average $327,000. That is not what the economy dictates. That is what a cartel of 120 FBS schools have orchestrated because of like-minded presidential decisions around the country.

      When 70% of the FBS presidents polled by the Knight Commission said “Athletics is out of control and there is nothing we can do about it,” they meant, “We choose to do nothing about it, because it will have consequences for our careers.”

      As former University of Arizona president Peter Likins put it at a Hechinger Institute conference on NCAA sports, “UT Austin has gone from having a president who hated sports [Berdahl] to a president who tolerated sports [Faulkner] to one who loves sports [Powers].” That is neither here nor there, unless it speaks to a predisposition to go along with this kind of Manicheanism: there is Longhorns Inc and there is UT Austin.

      This agreement reinforces that Manichean dichotomy that says Longhorns Inc is off in a separate world so that on average $25-$30K bonuses for assistant coaches this year is just fine. And it is just fine while in a separate world, staff salaries are frozen, 98 staff are fired, TA’s and AI’s are cut back, academic programs trimmed, language instructions is changed for the worse, and 66% of faculty receive no increases, and the Cactus cafe is closed for want of $66K.

      Lastly, how many of you failed to notice the news item that the new coach of USC, who bolted from University of Tennessee, got a verbal commitment from a quarterback in seventh grade??!!??

      Read this story and look at the accompanying photograph and tell me that this is not morally corrupt:

      http://www.philly.com/inquirer/sports/83701822.html.

      But it is how we are changing the world by what we have done here. It does not matter that Mack Brown and his coaches are not yet recruiting seventh graders. They have fueled the machine that has raised the stakes to this level where such a practice is possible. Then we wonder why kids don’t concentrate on school work.

      I have great admiration for Mr. Hegarty and have always found him to be earnest and a gifted and helpful financial officer. But I think Mr. Hillis is correct on the underlying philosophy here. Trademark and royalties and advertising revenues are here not just an accounting matter, they are part of how the University should view itself and where it should put its priorities.

      It was expedient for Larry Faulkner to make a decision that made life easier for him. It is expedient for Pres. Powers to continue this practice. He can even convince himself that it is prudent by seeing it through the same lens as Pres. Faulkner.

      Would that they were able to see what a mistake this is in the overall concept of our University and what harm policies like this are causing on the Forty Acres and throughout our nation.

      • Once again, so everyone is aware of the status of those opining on these matters:

        Thomas G. Palaima is the Raymond F. the Dickson Centennial Professor of Classics at UT Austin. He is a MacArthur Fellow, and a former Fulbright Professor.

  7. Scott Cook says:

    As an ex-student who contributes regularly to UT, and who attends Cactus Cafe concerts and always thought it was a good way of visiting UT, I’m inclined to stop my UT contributions. I saw someone else post: Close the cactus cafe, close my wallet. I agree and will do likewise.

  8. anonymous says:

    I hope everyone looks over the athletic department finances carefully. If you do you will see that the athletic department is, in reality, operating at HUGE deficits.

    According to these documents in 2005-2006 the athletic department had revenue (operating income, development, subsidies from trademark, etc) of $79.6 million. Over this same period, according to the spreadsheet, the athletic department had expenses of $74.4 million. This left a $5 million “profit” that went into cash reserves (not a penny for academics).

    However, you’ll also notice that over this same period that outstanding debt went from $64 million dollars at the start of this period to $127 million at the end of this period.

    This means that the athletic department SPENT $122 MILLION MORE THAN IT BROUGHT IN IN 2006! If you exclude subsidies from trademarking, the athletic department lost over $125 million dollars that year. This is in contrast to a ‘mere’ $47 million dollars in operating income.

    The executives in the athletic department like to call it a business, and brag that they “eat what they kill.” However when you look closely at these numbers, you see that the athletic department’s business (in 2005-2006) brought in $47 million dollars in revenue. On the other hand the athletic department spent $135 million dollars over this same period.

    Despite the fact that the athletic department (even AFTER subsidies from the general university) was in the whole over a HUNDRED MILLION DOLLARS for the 2005-2006 budget year, the athletic department declared a $5 million profit.

    Apparently UT doesn’t consider spending an expense if it is debt financed.

    Keep in mind that recent years have been very good to UT football. Yet, even in these blockbuster years the athletic department has been operating at a (hidden) deficit and GROWING its debt. How in the world will the athletic department ever be able to pay its debt off?

  9. Larry Browning says:

    The important thing to remember about the Cactus is that it plays against type. The larger community sometimes sees UT as being distant and inaccessible–except for big time sports. The Cactus is the opposite: it is a smoke-free, acoustically perfect, musically creative environment, with good acts and a reasonable cover charge that has no match in Austin. If you were planning on something to meet these criteria, it would make sense to design and establish such a venue. Surely there is a way of keeping what is working wonderfully and is already here.

  10. David has some interesting points. I didn’t realize the athletic program was actually subsidized.
    I appreciate the recommendation to apply for financial aid to help with the tuition increases, but unfortunately, for most of us “financial aid” just equals loans…and there are only so many loans you can realistically take on. As parents, we’re committed and we’ll do what we have to do, of course. We’re not quite to the point of having to eat beans for every meal. I’m glad to hear some of the money will go back to students in the form of financial aid. Our kids have benefited from a few small grants and scholarships through the university and we greatly appreciate it. We realize the problems we’re having aren’t specific to the University of Texas and we’re happy our kids chose to be Longhorns.
    I’m curious about the new Student Activity Center – is there information about this somewhere?
    Thanks.
    Barbara Shallue

  11. David Hillis says:

    Congratulations to TPAC and President Powers for keeping UT tuition so affordable. This will keep UT among the very best bargains in higher education. This affordability does limit UT’s potential, however. This minimal 3.95% tuition increase will result in difficult budgetary issues for UT in the coming years, especially as we face much larger cuts to our budget from the state and rapidly increasing expenses (mostly beyond our control) in many areas (e.g., health-care benefits and inflation). Obviously, cuts will be required in many areas at UT as a result, since our expenses continue to increase and state support continues to erode.

    Currently, the UT budget is a three-legged stool, with the major sources of support from external research grants (the indirect funds from research grants heavily subsidize everything else that UT does), tuition, and direct state support. The third leg of this stool (state support) has been trimmed again and again in recent years, so that it now provides about 1/6th of our academic budget, rather than 1/3rd or more as it once did. As a result, we have grown increasing reliant on indirect costs from research grants, and to a lesser extent on tuition increases, so that we now are trying to balance on what amounts to a two-legged stool.

    In this environment, it is important to evaluate how we are using our resources, and to ensure that we make every effort to be fiscally responsible in all areas of the university. With this in mind, I applaud the efforts by President Powers to trim the expenses of administration. Across the university, most programs are making every effort to find ways to cut expenses, and our academic programs have now been trimmed to the bone. The staff and faculty firings, and loss of graduate student support, are heart-breaking for the university community. These cuts have hurt our academic reputation and standing among American public universities. We have cut everything that we can in these areas; we cannot afford additional cuts to academic programs if we hope to retain our core academic mission. So, where else can we save as we face even more looming cutbacks to our state support?

    Many outside UT seem to think that we also receive positive net income from intercollegiate athletics, since the gross income from this source seems enormous (e.g., gross income for intercollegiate athletics was $105,230,260 in 2008-2009, the latest figures available, or a little less than 5% of UT’s total income from all sources). But athletics expenses (e.g., $107, 283,744 in 2008-2009) are even higher than its income. To make up the difference, UT has to “transfer in” large amounts from general revenue funds such as Trademark Income. In addition, because Intercollegiate Athletics has run up an enormous debt ($222,488,000 by 2008-2009), we have to transfer even larger sums from general revenue sources to the Athletics Operations Cash reserves, so that we have enough reserves to pay our debt obligations from athletics in years that we do not go to a BCS bowl. This is necessary because when UT is not at the top of the national rankings, even the large “transfers in” to athletics from general revenues are not enough to cover our athletic department debt.

    Athletics at UT is often claimed to be “self-supporting”, so how does this description fit with the numbers above? It is only “self-supporting” once the transfers into athletics from general UT revenue funds are added to “Income and Transfers In” account.. This amounts to a huge subsidy to athletics, which comes at a cost to the rest of UT. Of course, athletics also brings many other benefits to UT, and many students want to attend UT because of its great sports programs. I am certainly not suggesting that UT scale back its sports programs…just that we exercise greater fiscal responsibility in this area wherever possible (as is already the case in every other department and program of the university). The salary structure of the coaches is clearly beyond what is necessary to maintain outstanding sports programs; we pay the football coach about ten times what we pay our hard-working university President! No other university in the world pays its football coach as much as we do, and UT drives the cost of coaching salaries ever higher. The Athletics department takes great pride in the fact that “We are the Joneses” that everyone else has to try to keep up with. And the unnecessary spending does not stop with coaches salaries; do we really need numerous luxuries such as flat-screen TVs covering the players’ locker and break rooms? It is hard to justify this kind of excess while the rest of the campus is struggling to maintain basic academic programs, staff and faculty are being fired, tuition continues to rise, and we are making ever greater demands on faculty to bring in more and more research grants to subsidize day-to-day operations. A recent visitor to campus was awestruck at the contrast between the Spartan facilities of most of campus compared to the opulence of the intercollegiate athletic facilities. No wonder the public incorrectly thinks that the athletics budget supports the academic side of campus, rather than the other way around.

    When I bring up these disconnects in UT budget, I often hear people say that “athletics is a completely different and independent budget”. This, of course, is simply false. UT has to have one balanced budget, and to pay for athletics, we have to transfer in millions of dollars to athletics every year from general revenue. All UT spending is connected. We all want UT to be great in everything that it does: education, research, outreach, and athletics. But to make this happen, especially as we face growing budget reductions, every area of UT must contribute to budgetary savings. Athletics can no longer afford to “eat everything they kill”, especially when that includes general UT revenue that is needed to maintain our basic academic mission.

    • David Hillis says:

      I had a request to post the actual numbers for the “three legs of the three-legged stool” that make up the bulk of UT’s budget. Here they are for 2009-2010:

      UT’s total budget is $2,140,000,000
      The three largest sources of income are:
      1. Tuition, $515,000,000, or about 24% of the budget
      2. Faculty research grants, $475,000,000, or about 22% of the budget
      3. State support, $346,000,000, or about 16% of the budget

      Students and faculty each provide a similar portion of the UT budget, with the state providing considerably less.

      The next largest source of income is the Available University Fund, or the income on UT’s endowment, at $161,000,000, or 8% of the budget.

      Intercollegiate Athletics provides $105,000,000 in income, and had $107,000,000 in expenses (latest data available for 2008-2009). That is approximately 5% of the budget.

      Income on Trademark Licensing Operations is $8,000,000, or a little less than 0.4% of the budget. This fund is used largely for three purposes: as a subsidy to make up the shortfall in athletics income compared to athletics expenses, to build up cash reserves to protect against the $222,488,000 in intercollegiate athletics debt, and if there is anything left over, as a Presidential Discretionary Fund, to fund programs such as the new School of Undergraduate Studies.

      These figures were all provided by the University of Texas at Austin.

      • David Hillis says:

        To see the complete Athletics Department budget, as well as information on Trademark Licensing Operations income and uses, go to
        http://www.utexas.edu/faculty/council/
        and under “Spotlights and Events”,
        click on “Athletics Financial Report”

      • Dr. Hillis,

        Thank you for this information!

        This may answer some of the many questions already posed about specifics of the athletic budget.

        In your opinion, does the spreadsheet on the athletic program at the link you provided tell not only the truth, but the whole truth? Or has it been massaged by accountants to provide a particular slant?

        Thank you also for the figure on the current State of Texas contribution to the UT budget.

        If that figure is now 16% of the budget, then the reduction to the overall budget in response to Governor Perry’s letter of January 15 equals less than one per cent. That is: 5% of 16% (.05 x .16) equals .008 (eight-tenths of a per cent).

        Moreover, when President Powers shared the text of the Governor’s letter, the President stated that “The governor does not call for cuts at this time, only that we prepare a plan that prioritizes reductions. More details will emerge in the days ahead.”

        Let’s hope that such details emerge soon.

        • David Hillis says:

          You asked: “In your opinion, does the spreadsheet on the athletic program at the link you provided tell not only the truth, but the whole truth? Or has it been massaged by accountants to provide a particular slant?”

          I have no way of checking the numbers, but I have no reason to doubt that they are accurate.

    • Kevin P. Hegarty says:

      It has recently been stated that indirect cost income from research “heavily subsidizes” the UT Austin budget and that athletics at UT Austin receives a “huge subsidy” from the transfer of “general revenue.” A careful examination of the UT Austin budget, income sources and expenditures, shows both of these statements are false.

      First, look at the indirect cost income/expense area. The indirect cost income is derived from sponsored research projects funded by external groups (federal and state agencies, foundation and private business.) The funds received from these awards are divided into two categories, direct expense funds under the control of the faculty member and the indirect cost funds under the control of the University. These indirect cost funds are used to cover all of the infrastructure costs associated with the conduct of the research, that is, debt service on research facilities, repair and renovation, utilities, libraries, administration, accounting, purchasing, environmental health and safety, compliance, etc. The faculty conducting the research do not pay for any of these services. The indirect cost rate is determined by a negotiation with the Federal government and is set by them to allow the University to recover the actual costs to provide these services to the individual research programs. Thus, while the University budgets indirect cost income as a separate income line item, the expenses associated with this source are imbedded in our operating budget. Since the amount of indirect cost income the University receives is directly tied to the costs to the University to provide these research infrastructure services, there are no funds available from this source to “subsidize” other parts of the University’s budget.

      Now let’s examine the athletics budget. Some years ago, then President Larry Faulkner made the decision to allocate the trademark income to athletics. In return, athletics agreed to fund all intercollegiate sports at UT Austin. Previously, as part of a Title IX settlement, a portion of the women’s athletics program was funded by the UT central administration. The decision to allocate trademark income to athletics was based on the reasonable assumption that the bulk of the trademark related sales, and thus the resulting royalty income, is derived from sports publicity, marketing, and fans. In recent years, while under the management of athletics, the trademark income has increased markedly, undoubtedly due in part to the recent success of our athletics programs and in part to the marketing expertise of athletics. In any event, these funds are clearly related to our athletic activities and, as such, are legitimately budgeted to athletics. These royalty derived funds are not “general revenue” and there are no general revenue or related academic program funds in the athletics budget, that is, athletics receives no funds from state appropriations, or tuition, or Available University Funds, or indirect cost income, or contract and grant funding, or academic program endowments.

      Kevin P. Hegarty
      Vice President and Chief Financial Officer

      • Mr. Hegarty,

        It is my understanding that the President’s office pays the athletic department $100,000+ a year for Power’s presidential suite in the stadium. Could you explain where this money is allocated from, if not “state appropriations, or tuition, or Available University Funds, or indirect cost income, or contract and grant funding, or academic program endowments”?

        Also I assume that the University on the whole ensures the debt (almost a quarter of a billion dollars!) of the athletic department. If you were to buy this insurance on the open market, it would probably run $10-20+ million dollars a year, how is this accounted for in your “we don’t subsidize the athletic department” claim?

        Thank You.

      • David Hillis says:

        Kevin:
        I don’t see how you can claim that my statement that indirect costs from research grants subsidize everything that UT does is “false,” and then explain this by saying “These indirect cost funds are used to cover all of the infrastructure costs associated with the conduct of the research, that is, debt service on research facilities, repair and renovation, utilities, libraries, administration, accounting, purchasing, environmental health and safety, compliance, etc.” Clearly, that means exactly what I said: indirect costs from research grants subsidize everything that UT does, including utilities, libraries, and administration. In contrast, UT athletics does not pay a 52% indirect cost return on their income, as researchers do. So, what this means is that athletics is heavily subsidized by the rest of UT, since they don’t pay all these indirect costs. Research grants, in contrast, pay for these basic operations.

        As for the trademark income being “defined” as income from athletics: this is simply a semantic argument. This is income that could and should be used to support all of UT, but it does not. The fact that an administrator made a deal to give all the income form the UT name to athletics, in exchange for an agreement to stop forcing the even heavier subsidy of athletics, does not change this point. It is still a subsidy from all of UT to support the activities of the athletics department.

      • David Hillis says:

        Kevin:

        The fact that a previous UT President made a deal to subsidize UT athletics using trademark income does not detract from the fact that this source is used to subsidize the athletics program. Trademark income on the UT name is logically “general income” that should be supporting all of UT’s mission, not just athletics. We clearly state that this money is “transferred in” to the athletics budget on our own budget records. It is unreasonable to state that my comments were “false” on the basis of such logical contortions.

      • Colonel Hegarty,

        Thank you for entering this discussion. This is fabulous!

        We are delighted to hear from you, because as UT’s head numbers person, we can depend on you to provide immediate concrete information which might take a subordinate several months to research and format to Administration’s satisfaction (let alone obtain permission to release). Instead of papering anything over or proffering excuses (which more cynical members of the Longhorn community might interpret as stalling tactics), you can part the sea of red tape because you are a direct source.

        Therefore: Welcome, sir!

        That said. . . .

        Begging your pardon, but your construal of the 52% overhead penalty UT exacts from competitive awards faculty members win from funding agencies (such as the National Science Foundation, the National Endowment for the Arts, the Department of Energy, the Defense Advanced Projects Administration and NASA, to name just a few) is some of the most convoluted prose I have ever read. Will you kindly help us parse your message?

        You state that this 52% deducted straight off the top of any grant awarded is “imbedded in our operating budget.”

        Really? What does that mean? By all means please decode that phrase.

        Please clarify another point on this matter of funds “imbedded in our operating budget.” It almost sounds as if you rely on banking the 52% overhead which UT takes from hard-won research funds in advance of a budget cycle, which would be an almost magical feat; as you well know, sir, a researcher who submits a competitive proposal has no guarantee of winning a single dime in award. As you are also aware, most proposals fail because the funding pool is finite, the competition for awards is so fierce and the evaluating panels are so rigorous.

        You further state that paying for “debt service on research facilities, repair and renovation, utilities, libraries, administration, accounting, purchasing, environmental health and safety, compliance, etc” with the 52% deducted straight off the top of grants does not in fact “heavily subsidize” the UT budget.

        Again: Really? Simple arithmetic dictates that 52% of a few dozen multi-million-dollar grants should add up pretty fast, but you practically characterize it as chump change. That’s hard to swallow.

        Let’s talk specifics. May we please see a spreadsheet to support your broad assertions? That would help clear up a lot of questions. Nobody’s asking for an explication of financial derivatives. Just numbers. For instance, what is the exact annual total of overhead which UT gleans from grants its researchers win? We don’t need a comprehensive multi-year survey (which might take years for your office to turn around); that figure for just one year will suffice. Surely these funds are not so deeply “imbedded in our operating budget” as to lie beyond quantifying, so will you kindly enlighten us? Even the little “etc?” What is “etc” and how many millions go there?

        Moreover, research proposals include precise outlays for capital equipment and materials entirely separate from the category of overhead; therefore what sort of “purchasing” does the 52% overhead penalty cover? Do researchers unwittingly buy things for people they don’t even know? If so, could we get the football program to follow suit? (And since nobody else will tell, could you answer once and for all where that $175 million for renovating the stadium’s north end came from?)

        You also state that “the faculty conducting the research do not pay for any of these services” (or “etc”) you name above.

        Once again, sir: Really? That assertion from you may surprise researchers who see UT claim 52% of almost every award those researchers win. Okay, we can agree that the researchers do not “pay” overhead in the strictest sense (that is, the 52% overhead deducted from grants is not debited directly from the researchers’ private bank accounts), but that 52% does most certainly and undeniably get lopped off awards before a given researcher has as much as one dollar to draw from a research account. If in fact the researchers do not “pay,” why is it that after UT grabs its share, the researchers only have 48% of the money they are awarded to spend on their projects? So please, let’s dispense with the absurd notion that the researchers “do not pay for any of these services.” Absent the efforts of researchers, the University would not rake in that 52%.

        • David Hillis says:

          To Argus:

          I think you do make one error about the indirect cost rate. The University charges 52% for indirect costs on most (but not all) direct costs, not on the total grant amount. For example, if the grant has $10 million in direct costs, and all of these costs are in categories that can be charged for indirect costs, then the indirect costs charged to the granting agency are a little over $5 million. That means that the total grant would be about $15 million, of which about one-third goes to pay for University infrastructure, and two-thirds (not 48%) goes to fund the research (e.g., salaries of graduate students and staff, costs of fringe benefits, graduate student tuition, supplies, equipment, etc.). In fact, some categories of direct costs are excluded from indirect cost charges (for example, equipment purchases). I realize that this is a fine point, but I wanted to clarify that closer to two-thirds, rather than 48%, of the grant revenue goes directly to fund the research project.

        • Dr. Hillis,

          [I hope this appears after or at least near your kind 8:46 a.m. correction of February 8; I am not sufficiently adept with this forum to assure its proper sequential placement. I would appreciate some notice that you have seen my response.]

          I stand corrected; therefore I thank you, sir. I am not above admitting that I make mistakes, and I welcome your help. I would hate for anyone to find one flaw in my logic and attempt to discount the entire thrust of my argument on that basis. In that sense you have done me a favor.

          I remain expectant of a full clarification from Colonel Hegarty (and, much better, a spreadsheet) to support his positions.

  12. Just curious as to
    • why the Cactus seemed to be lumped into a program with informal classes
    • Would the Cactus make or lose money on its own, if it were a separate entity?
    • Could the space be maintained as a privately-owned entity?
    • If so, what would rent on the space be? What would other implications be that any prospective owner/operator would need to know?
    • Is there any reason this can’t be an option to be considered?
    Please let me know. I’ll do all I can to keep the Cactus open. THANKS!

    Brian Kurtz