President's Campus Communication 10/1/09
As you may have seen in the press, the most recent state revenue forecast shows that Colorado faces an additional state budget shortfall of $240 million in fiscal year 2009-10, which began July 1. The state indicated to us in August that further cuts to the FY09-10 higher education budget were unlikely because of the technical requirements to qualify for federal stimulus funding. Although the updated revenue forecast undoubtedly will put this question back on the table, we should not expect a quick answer. Fortunately, if there are further cuts this year, we are prepared to deal with them. You will recall that we designed the FY09-10 budget with flexibility in the timing of planned expenditures and identified one-time funds to use as a temporary cushion.
This allows us to turn our attention to future budget years instead of re-thinking the work we have already done. As I described in the State of the University Address, we are now receiving a total of $44 million in state and federal stimulus funding, which represents approximately one-quarter of our total operating budget. With the $230-million cut already made to the state higher education budget, which is being backfilled with federal stimulus funding, we should expect to lose approximately $14 million of our $44 million when the stimulus funding ends. This is the "cliff" we've been talking about.
While the size and timing of the cliff could change, $14 million is a reasonable starting point for our planning and budgeting work. We must determine how much of the $14 million we can address by generating new revenue and controlling costs, and how much we must reduce expenditures. We will also identify one-time dollars to help us smooth out the effects of the cut over multiple years. A number of planning efforts, many of which are under way, will help us answer these questions.
As we work to answer these questions in the coming months, we will also begin building a "cliff reserve" by setting aside $4.6 million in FY10-11. Assuming continued revenue growth from increases in enrollment and tuition, we can generate an additional $3.6 million in FY10-11, which means we will need to reduce expenditures by $1 million. Given that a significant part of our operating budget is for personnel, identifying salary savings from vacant positions is one important tool for finding the $1 million. While I am still not an advocate for a hiring freeze, given the uncertainties we face, it is important not to over-commit to ongoing costs such as salaries. Since we typically have some $6 million in vacant positions in any given year, we have the opportunity to identify $1 million from salary savings without using drastic measures like layoffs or furloughs. We will need to make thoughtful individual decisions about whether and how to fill vacancies.
When we add this $4.6-million "cliff reserve" to the FY09-10 budget framework we all worked so hard on, there will be no need for a formal FY10-11 budget process. We will invest our energy in planning for future years instead. As I mentioned in the State of the University Address, I will be hosting a series of campus meetings to discuss how to connect our existing planning efforts in order to articulate an ongoing university plan. More on that next week.