President's Campus Communication 2/17/11

Dear Colleagues,

Governor Hickenlooper announced his proposed budget for fiscal year 2012 earlier this week, and there are two elements of the proposal that would have a direct impact on UNC. It is important to note that this is still a proposal. The state budget has to go through a lengthy legislative process and will not be finalized until late March, at the earliest.

As we anticipated, the budget includes a further reduction in higher education funding, which deepens the cut from 14 percent to 19 percent for a total loss to higher education of $125 million. We will continue to monitor further changes, but the total proposed reduction remains within the working estimate we have been using to plan at UNC over the past two years.

I am more immediately concerned with a proposal that would affect our colleagues in the PERA retirement system. As many of you know, the Governor sent a letter yesterday to PERA members about a proposal that would further reduce state agencies’ contributions to PERA and require employees to increase their contributions to offset the reduction.

Beginning July 1, 2010, to comply with state law, UNC and other state agencies reduced their contributions to PERA by 2.5 percent while PERA members increased their contributions the same amount. The effect of this change has been a 2.5-percent reduction in take-home pay for the approximately 800 UNC employees in PERA. The new proposal would increase the 2.5 percent that is now in effect to 4.5 percent beginning July 1, 2011.

Once again we face a serious question of fairness, and we will be looking at all of our options in the coming weeks. This work will include a thorough analysis of employee benefits, with an eye toward maintaining fairness in how we make decisions about overall compensation and benefits. In particular, as I shared with you in my Feb. 2 campus address, we will look at the University’s contribution to the optional retirement plan for non-PERA employees.

We learned from our campus conversations last spring that this is a complex issue, but it is one we must take up as a campus community. We will continue this work, regardless of what happens at the state level.

Kay