July 31, 2008
As most of you know, the economic recession in America and more specifically in Rhode Island continues. Last Friday we learned of yet another reduction of state funding for the University and new state imposed expenses. The cuts relate to a projected reduction of fte's, held until now in the Department of Administration, and to a state-budgeted one-day furlough. Our share of the reduced fte's (52) is $2M (out of $6M to higher education. We do not have a good number yet on the cost of the "furlough." In essence, this means that we must forfeit the cost of one day's pay for each of our employees. Because our labor contracts do not allow for assessing this to individuals, the University has been told that we as a whole will see a reduction equal to that cost.
The second state assessed increased cost relates to what is called the "assessed benefit allocation rate." This is the money that each agency of state government pays into a pool that is used to pay employees for such things as unused vacation and sick leave time upon retirement or resignation, unemployment compensation and workers compensation. The rate charged by the Department of Administration this year nearly doubled, with a result of a $3.1 expenditure increase for URI.
Further, National Grid has proposed and the PUC has accepted a 34.8% rate increase from the current 9.2 cents/Kwh to 12.4 cents/Kwh as of July 15, 2008. In addition there will probably be another rate increase of 24.2% on January 1, 2009 to 15.4 cents/Kwh if fuel prices continue to maintain and it could go even higher if fuel prices continue to rise. URI uses a mixture of oil and natural gas in our heating plant, and of course all of our electricity comes from National Grid, as does the gas. Our projected utility costs related to the rate increases for National Grid alone will total $1.3M above budget.
Taken together, these new reductions and assessed costs will total about $6.4M.
Offsetting a part of this are the latest full time undergraduate tuition and fee revenue projections. At this date, we are projecting that this revenue will exceed our budgeted number by about $700,000. Freshman enrollment and returning student registration looks good. Student demand for URI remains strong, despite the economic challenges facing families. However, enrollment in the fall is likely to be, for obvious reasons, more volatile, and a swing either way would not be a surprise. At this time, there is not enough information to project tuition and fee revenue from graduate enrollment.
These changes require us to reduce expenses and increase revenue by $5.7M. Further, given the still deteriorating Rhode Island economy, it is likely that there will be another reduction in appropriations at mid-year. Rather than making further permanent cuts to unit budgets operating expenses, we will freeze in place all unfilled positions until at least the mid-year review. The Office of Budget and Financial Planning will process all transfers except any money currently budgeted to vacant positions. This money will remain in unit and departmental budgets but cannot be spent until at least the mid-year review. Departments may not utilize position dollars for any other category of expenses, including overtime. Simply put, there will be a position freeze for all positions in Fund 100 for all divisions of the University with the exception only of positions related to health and safety. You may seek exceptions from your provost/vice president, but authorization to fill any position must correspond to a reduction in personnel of equal value. This freeze does not apply to positions funded by third party sources for research, or to auxiliary and enterprise accounts. By law, these programs must be self-sufficient, and neither the revenue they generate nor the expenses they incur can be commingled with general revenue funds (excepting the overhead charges that are levied against them).
We have opted for what we hope will be a temporary position freeze rather than further base budget cuts because we recognize that we have just recently cut deeply into our programs. We recognize the extraordinary and very difficult work that was recently completed by vice presidents, deans, directors, faculty and staff in reducing $17 million dollars from our general revenue budgets, while still finding the capacity to deliver the curriculum to all of our students. This was accomplished with great pain, and I am grateful for your collective efforts and community spirit throughout a very difficult ordeal.
In addition to saving money, the position freeze will buy us some time to aggressively pursue some revenue generation possibilities, and to consider ways to reorganize and re-engineer our offices and operations for the future. Any reorganization to be considered must be driven first by the potential to create new synergies and opportunities to enhance our education and research functions or services provided. A second motivation, but also a critically important one, will pertain to enhanced efficiency and/or cost savings.
There are three possibilities for increased revenue during the current fiscal year. The first involves a major initiative to enroll transfer students for the second semester. We will target non-residents in order to obtain the maximum increase in revenue possible. Second, we will ask the Board of Governors to approve a tuition increase effective in January, or, alternatively, a surcharge for the second semester. The amount has not been established. Finally, efforts to increase retention of students from summer to fall and fall to spring semester are critically important; ideas and initiatives that enhance the student experience can pay enormous dividends in both retention and resources. Our retention rates have improved over the last two years--thanks in large part to your good work--but we can still do better. Each of us can help with retention!
Looking ahead to FY10, the challenges will be just as great. Our budget request to the Board and the State are typically due in mid-August. However, to date we have received no instructions, and we anticipate some delay in submission. There are some things we can propose in that budget to achieve greater efficiency and cost savings, but we must also keep our focus on quality. It is time to push some "big ideas," actions that would help transform the University's financial structure and the quality of its programs. Each division within the University will be attempting to generate such ideas. All of their ideas will have some risk associated with them, but the risks around maintaining business as usual with less money are far greater. If ever there was a time to "think big," this is it.
This is a very challenging time for our university. We know we need to reorganize and reposition our programs, operations, and facilities so that we can become more self-sufficient. This work will be difficult and will require the best we can offer from all members of our community. This is a time to work together and not against each other. With this in mind, I will be forming a university-wide Task Force on Institutional Efficiency and Quality that will work across divisions to identify a new pathway to a vital and hopeful future for our university. I will also ask several alumni who have been change agents in their organizations to join us. Please stay tuned, stay positive, and stay engaged. We need you now more than ever! Thank you. RLC
Download this memo (pdf).
Office of the President * Green Hall, 35 Campus Avenue, Kingston, RI 02881-1303
Phone: 401-874-2444 Fax: 401-874-7149