October 7, 2008 Budget Update

 

Colleagues:

I am writing to provide an update on the budget implications for Western of directions we just, around noon, received from Olympia. I wish the subjects I must communicate were more positive but my commitment, always, on matters of importance to our university, is to let you know whatever we know when we know it.

Providing continuing leadership in a worsening national fiscal debacle, the Governor announced, this morning, 1% across-the-board reductions in the budgets of State agencies. A variety of endeavors were excluded, including financial aid and direct support of instruction. When such adjustments are made, our share of that reduction is $176,682. That seemed problematic enough but, it turns out, that is actually the lesser of significant challenges we now face.

There was a surprise in the spreadsheets sent to us from the Office of Financial Management. As you may recall, we received a memorandum on August 4 that directed agencies to pursue savings through hiring freezes, freezes on contracts, freezes on equipment purchases and consulting, and reductions in energy use. The memorandum did not apply directly to higher education institutions and that, we explicitly confirmed. Any savings were expected to be "one time." Further, no budget savings targets were ever communicated. We were advised, quite wisely, to prudently seek savings, and that, as you have been noticing, is precisely what we have been doing.

In the OFM spreadsheets received today, we were stunned to find that targets had been set for higher education. Western, today, is now expected, from the sorts of measures outlined in the August 4 memorandum, to "save" $1,827,000 in the current fiscal year. (This major reduction applies across all budgets, including instructional budgets.)

Add that to the earlier number, and our total budget reduction is NOT the $176,000 representing 1% of non-instructional budgets. It is $2,003,682.

While the numbers I am sharing are not final, we do expect them to be included in the supplemental budget reduction that the Governor will submit in January. Further, we have been advised to expect these reductions to be permanent; that is, to also be a part of our 2009-11 budget.

The budget reductions are very serious. The decision to set additional reduction targets for higher education is a surprise to all of us. However, we also fully understand that the nation"s financial situation surprises us on a daily if not hourly basis and the Governor has the responsibility to act decisively in the face of these wider forces.

Fortunately, you and your colleagues have been acting prudently, scrutinizing new hires, travel, contracts, fuel use, and such. We must continue to do so through the remainder of the fiscal year.

Through such savings and the use of reserve funds, we will be able to meet the meet the $2,003,682 reduction target. These are one-time savings, though, and here is the critical important point: one-time savings do not, in the long-run, help with recurring reductions. Those recurring reductions will be very difficult.

How will the longer-term reductions be made at Western? Through an open and transparent budget process. And, that is another reason to buy some time with short-term savings. We do want to share, critique, and test a new approach to budgeting that will allow us to make decision based upon our shared objectives, strategies, and mission rather than being driven by short-term expedience.

I wish I could end there. However, I must caution that, when it comes to the $2,003,682 reduction to our ongoing annual budget, nobody I talk with expects the cuts for the next biennium to end there. There is the very real possibility of substantially larger reductions, perhaps partially offset by significant tuition increases which, of course create serious problems for students and their families. We all need to be thinking, strategically, about how to manage additional reductions.

That is all speculative at this point. I do wish to end on one observation I always remember over the course of many years of dealing with such matters: when things look really bleak, they never turn out that badly; and, when they look really good, they never turn out that well.

We will get through this together and, I am confident, continue to flourish over the long run.

Thanks for all you do to make Western such a special place,

Bruce