FROM: Interim President Joseph S. Wood
Newsletter #12: BOT Finance Committee Presentation
January 14, 2008
Earlier today, Monday, January 14, Chief Financial Officer Dick Campbell and I presented to Trustees a plan that will balance USM’s budget; replenish reserves used to cover deficits; and make investments in marketing and related areas that will build the university’s revenue stream.
I made a point of telling Trustees that we have put together a sound plan and instituted new policies and procedures that will put USM back on a firm financial footing. I also told them that these are challenging times, but that I am proud of the way that the entire USM community has come together to help ensure that this remains a strong and vital institution that serves the people of Maine.
Here are the plan's dates and targets:
USM will cut a minimum of $2 million in fiscal years, 2008 through 2010.
We'll continue to run deficits in those years but the budget will be balanced at the end of 2010.
From that point through fiscal year 2014, we will make loan repayments to the University of Maine System, which will replenish $8.2 million in reserves used to cover the deficits. We also will make internal reallocations so that we can make investments in targeted areas.
Trustees approved the internal loan of $8.2 million and the repayment schedule. More information is available at http://www.usm.maine.edu/mcr/news/0708releases/bot.1.14.htm.
Here's what we reported to Trustees on progress made to date:
$2 million in cuts have been made for the current fiscal year. We took $1.6 million from salaries and fringe benefits. We’ve cut nine positions since July 1 of 2007, resulting immediate, permanent savings of $217,000 and providing an additional $321,000 next year.
The remaining total of nearly $1.4 million came from the additional savings from 30 positions eliminated in the previous fiscal year and the elimination of funding for temporary positions that would have been used to replace faculty and staff on leaves.
We made $96,000 in one-time reductions, primarily by limiting out-of-state travel to faculty and staff development programs, and $120,000 in one-time savings by deferring equipment purchases.
But using mid-year budget reports that became available just this past
Wednesday, January 9, we have projected that decreases in revenues, combined with increases in expenditures, require us to cut another $900,000 this year.
Why?
Spring enrolment is soft, down about two percent over the same time last year. As a result, we now expect summer enrolments in May and June also will be down.
Reflecting national and regional trends, grant and contract activity has declined. This reduces what USM will receive to cover indirect costs.
Energy costs have increased beyond expectations.
We told Trustees that strategies are in place to deal with the additional $900,000 in cuts.
Meetings have been scheduled with vice presidents, deans and major budget managers to review these projections and find additional savings for this fiscal year.
I have charged the Provost, Vice President for Human Resources and Chief
Financial Officer with responsibility for scrutinizing and giving final approval on all requests to fill positions or make purchases in excess of
$2,500. We also are lowering the limits on department purchasing cards, and are reducing the number of staff authorized to make purchases.
In addition, direct instructional costs are expected to decline as a result of the lower spring enrolments. Fewer course sections will be taught. How much this contributes toward resolving the additional $900,000 problem will be determined early next month, after payroll records have been adjusted. For summer, the minimum enrolment threshold for offering a course has been increased to help contain these costs.
We will update Trustees with additional details and our progress toward making additional cuts as part of our third quarter report.
We also discussed with Trustees plans for fiscal year 2009, which begins on July 1, 2008.
We will increase our FY 2009 goal of $2 million in cuts because the temporary, one-time cuts made in the current fiscal year (FY 08) will have to be replaced by permanent reductions. One-time cuts simply buy time, while permanent, base-budget cuts provide long-term fiscal alignment and sustainability.
We also will find $1.8 million in salary and fringe benefit savings by eliminating at least 30 more positions. As of today, 14.5 have been identified and steps to complete the personnel actions required for elimination are in process.
We also will downsize and restructure public service-related operations within our Division of University Outreach. Programs will be expected to generate sufficient revenues to cover all direct costs. After FY 2009, these programs will be expected to contribute toward university overhead.
Later this winter, we will announce other program reorganizations, which will generate longer-term savings and enhance our capacity to make reallocations that support institutional development.
We have a lot of hard work in front of us this semester, but we will lay a firm fiscal foundation for a new president and return this university to fiscal sustainability. USM, as a result, will continue to deliver its core mission: engaged learning that transforms lives and communities.
Later this week I will send another Moving Forward update that will serve as a mid-year report on our efforts at righting our fiscal ship in preparation for a new president.
Sincerely,
Joe Wood
Interim President
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