President's Campus Communication 6/08/11

Dear Colleagues:

I appreciate all of the time and energy that many people across campus have invested in identifying sustainable cost savings and developing the FY12 budget we will propose to the Board of Trustees on Friday.

The state budget picture for FY12 is as we anticipated. Higher education funding will total $519 million, a $134-million drop from the 2007-08 level. As expected, UNC will receive $7.8 million less in the coming fiscal year. This means our state funding will be reduced by a total of $11.3 million over FY11 and FY12. Since further cuts are likely in coming years, we will continue to plan for a total reduction of $14.5 million.

On a relatively positive note, the state’s FY12 budget does not include further shifting of responsibility for PERA contributions to employees in the state retirement plan. As anticipated, the 2.5-percent shift that began July 1, 2010, will continue in FY12, but the Legislature did not go forward with a proposal to increase the shift to 4.5 percent.

One of the difficult FY12 decisions we face at UNC regards salaries. Given the continuing uncertainty in state funding and the significant increase in tuition that our students will pay next year, we don’t feel it’s appropriate to recommend a salary increase pool for FY12. We are, however, recommending funding faculty promotions (approximately $100,000).

As you know, with input from the Compensation Committee and campus governance groups this spring, we also discussed the issue of total compensation—salary, health insurance and retirement contributions. Based on those discussions, we are not recommending changes in optional retirement plan contributions. In addition, we are recommending that the University continue to cover 60 percent of health insurance costs for faculty and exempt staff. (Decisions about health insurance for classified staff are made at the state level.)

Without a doubt, the biggest challenge in developing our FY12 budget has been identifying sustainable cost savings. We committed to making a down payment of at least $1.5 million toward our $5-million goal in FY12, and I’m proud to say that you’ve identified savings of $1.9 million to be implemented beginning July 1. In this first round of identifying savings, many people from across campus came together in the spirit of doing what’s best for the University. To each of you who helped in this, I offer my personal thanks, and I want you know I’m going to do my level best to insure that our continuing effort to identify $5 million in savings is as fair as it can be.

Best,

Kay