UVM CFO and Provost discuss upcoming budget cuts

The Cynic sat down last week with UVM Vice President of Finances and Administration Richard Cate and UVM Provost John Hughes to discuss the upcoming budget cuts.

The following is a full transcript of the interview.

Vermont Cynic: For starters, there’s been a lot of talk about what’s going on and what is the plan behind the action?

Richard Cate: You start with a baseline of a need to reduce the budget by $15 million.

All we did from that point is say that we would give everyone targets and, when I say everyone, it’s the major units — so the College of Education and Social Services, the College of Engineering and Mathematical Sciences — so that the colleges and the major administrative units, for instance my unit is the Division of Finances and Enterprise Services, so I’ve got all the people who take care of the buildings, all the people who do finance, all the human resource people, that sort of thing.

And they have a vice president for Student Life, who has all the residential activities and athletics, these types of things.

So each of the vice presidents and each of the deans was given a target and the way it worked is it was a 4.75 percent cut target for academic units and a 6.5 percent target for administrative cuts.

And the provost and the president, at best, could get the target to the leaders of these units and have them come back with a plan rather than sit here and say, well, that particular program in that particular college should go.

So the deans consulted the faculty and staff, I consult with my staff and then in the latter part of January, we all had to submit our plans to the provost and the president in terms of how we would reduce our budgets by that amount.

They are currently in the process of reviewing those plans and then, our original time frame was, in the last week of February they would render judgment on those plans and we would announce what we were going to do.

Most recently, because of some uncertainty about the size of the appropriation we get from the state, what we said is, we’re going to go forward with the bulk of those plans subject to the approval of the provost and president, but most of the layoffs associated with those plans would not occur.

And I say most, because there are some limited layoffs that have to occur in February that have nothing to do with this budget gap — there are particular parts of the organization that were running structural deficits before any of this budget situation came up, so there will be limited layoffs that you will hear about, not from the academic units probably, but mostly from the administrative units.

VC: So those layoffs are being put off because of the fact that the governor has said that he might not decrease appropriations?

RC: Right, the rest of the layoffs, other than those that I just described. What the president has said is that we will revisit this matter probably in April when we have a better sense of what’s going to happen with this appropriation.

The governor, actually, recommended an increase in funding for the University over this past year, but obviously they’ve got some major issues to deal with and we don’t know what the legislature will come up with as a result of that recommendation.

So what we’re hoping for is that, by probably early April, the House will have acted on the budget and sent it to the Senate — somewhere in that April time frame.

It’s not for me to judge, but just based on past experience, typically by that time, they will move the budget to the Senate and we will have a better idea of where things are headed at that point, it won’t be done, because it’s not over till it’s over.

The Senate has to act and then they have to have a committee to conference and then the government has to sign the bill, but we’ll know more than we do now.

VC: When will non-personnel cuts be released?

RC: We’re actually talking about that right now in terms of probably a lot of it will be available in February, early March.

For instance, there are a number of positions the deans have offered up and said “let’s not fill those positions,” so they’ll probably be aware of that within the next few weeks.

VC: What reasoning is there behind deciding what’s on the table to be cut and what’s not?  For example, why not filling positions, but not pay cuts for senior members of the administration?

RC: I think everything was on the table, the plans in front of the president and the provost are from the units, for instance, the example you just gave is something that would have to be decided University-wide.

We’ve got a list of hundreds of recommendations that people have sent to the president in terms of recommendations of what to cut and what’s not to cut.

That’s still on the list, that’s still out there — President Fogel hasn’t said absolutely this is going to happen or that’s going to happen.

John Hughes: Perhaps I can step in there, as Richard says, the recommendations come from the units and everything is on the table.

Some units chose not to fill [any] vacant positions others chose to fill vacant positions, some chose to fill some [positions] and not others. The whole goal is to preserve the academic mission as best we can and emerge faster and stronger than any other institution — and I’ll give you some background on that in the nation.

As to cutting administrators’ pay, when things like this happen, people say, “Cut the football team and cut administrator’s salaries,” — it’s two knee jerk things that you hear across the nation. But as we look, we have been spending a lot of time trying to get the faculty up to the median salaries in their positions, we’ve used the OSU survey, the Oklahoma State University survey.

We believe that now in the latest contract we will be at the median for faculty salaries, and we think it’s very important that we can do that to attract people from around the nation.

And same for administrators, I get very nervous every year when I look at some of our gain salaries, they’re not near the median salaries and I think it’s important that we at least get to that area, so a knee-jerk reaction of cutting administrator salaries may not be the best answer, certainly it’s on the table, but it may not be the best answer.

RC: I think, also maybe another piece of this is I think we have to be careful not to presume that the ship can operate without the qualified people at the helm.

The president and provost put the academics of the institution far on ahead of everything, but somebody does have be looking at the whole picture and, I think if dig deeply, you’ll find that we’re actually light in administration compared to a lot of our peer institutions in terms of the way we’re set up.

Now, you can cut back anything in this life, but, the provost and I, we have to be careful in the message we send to anyone.

VC: Was there any concern at all when considering the message that might be sent to students with the specifics of what will be cut?

JH: There certainly is that, but what I would urge you to do, is take a look at the national picture — if we were the only one experiencing this I would be very nervous.

I truly believe we are in a much better position than the majority of other institutions. So, several weeks, or maybe a month and a half ago now, or two months ago, I spoke before the faculty senate and I stood up there and said, “I think every institution in the country of higher education except Harvard, is facing what we’re facing.”

And that very afternoon, while I was speaking, President Drew Gilpin Faust, of Harvard announced their salary freezes, their hiring freezes and the large problems that Harvard’s facing.

I would urge you to just hop on some Web sites — I’m a Dartmouth alum, and just this week we got the letter from Jim Wright, President Wright, outlining the problems at Dartmouth.

I don’t know if you’ve heard about that, but I suspect it’s on their Web site and I can even give you a copy of the letter, but don’t quote my numbers here until I give you the letter, but I think they have to cut 72 million or 70 million, 150 positions, 90 vacant ones, and I think 60.  But Dartmouth is just one — Harvard, Yale, Stanford, Cornell is facing some very, very serious difficulties.

RC: Arizona.

JH: Oh, Arizona is the worst, they were talking about cutting $600 million from their higher education budget, they’re talking about closing whole campuses.

So I don’t believe in delighting in the woe of others, if you read a newspaper, you watch television; you know what’s going on around the world.

I truly believe we will emerge from it stronger, many places are cutting salaries, freezing salaries, our faculty salaries are going up 5 percent a year for the next three years, and that will give us an advantage against those institutions that are freezing salaries or cutting salaries.

So, it is bothersome, but I like our position.

RC: I think the president’s been clear on our first and foremost priority; it really is about student-based issues.

And the data don’t demonstrate significant changes on average in class size or anything else. There are a few anecdotal instances, where partially because of the reorganization and partially because of the budget, there may be significantly larger classes, but on average, it looks like the average, our median class has got 19 students in it now.  It looks like it will have 20 or 21 after this, so there aren’t significant changes in what’s really happening.

The student experience is a priority across the board, but that doesn’t preclude a need to cut the budget.  I would argue that anything we do here has some effect on the student experience, even if we had fewer administrators.

JH: If it doesn’t, we shouldn’t be doing it.

RC: That would it affect it as well.

VC: I was also wondering, back to how other universities are experiencing similar issues, how does the endowment play into all of this in our school and in other universities?

RC: Well, the good news about the endowment is that we do not rely on it for a significant portion of our budget, so the income from the endowment is only about 1.5 percent of the operating budget.

So if you’re at Harvard or Dartmouth or Yale and you’re getting 30-40 percent of your operating income from the endowment and the value the value drops by 40 percent, you’ve got a problem.

With us, the endowment dropped, it didn’t drop as much as a lot of endowments did, but the degree that which we rely on it is much less.

A lot of people say, “Cure the problem by spending from the endowment,” and the bottom line issue with that is, we have a structural problem that is going to go on forever unless we fix it.

So it’s not like we can take $15 million out of the endowment and solve the problem, because we would have to take it out next year and we have a commitment to those donors that those assets will be preserved in perpetuity for the benefit of the institution. So that’s really not an option.

Most of out state peers at other state universities rely more heavily on the state, so state budget cuts hurt them. Our private peers rely on endowment, so the endowment declines and the stock market decline has affected them.

In some ways, we’re fortunate that we’re more dependent on tuition.

VC: You mentioned that the effect on class sizes will be fairly small — are there any places where the effects of the cuts might be felt more by students, faculty and administrators?

RC: I think that there are some classes, based on what I’ve heard — and this is still anecdotal — but there are some classes that were larger classes anyway that are going to be much larger.

I wouldn’t argue, necessarily, that that makes it a negative student experience, but it will make it a different student experience, and of course it depends on how it’s done.

I have heard of some classes that have been 80 that are going to be 150, but that’s a very limited number on it of classes of that size on campus to begin with, so I think there is something like that.

You know, in terms of affecting faculty, one thing that’s going to affect faculty and staff on this campus is that custodial services will be different. We won’t be doing things quite the way we have been, because there won’t be as many people doing the services, because we won’t be back filling some positions.

Some people may have to engage in some part of the custodial services on their own, those types of things.

But mostly, this is — a lot of it is — about trying to do things differently and not bringing in quite as many more people to do them.

VC: Is that a trend that might prevail for a long time?

RC: I don’t think class sizes are going to decease dramatically.

I think the provost and the president have been trying to get the ratio up between 16 and 17 for some time — and the strategic plan has called for that — and so, I think after this, we’ll be where we have been trying to get to all along.

But I don’t think the average student is going to detect it on a regular basis.

There may be one class where a student says, “This is bigger than it used to be,” but most cases, again in comparison to our peers, we are still in the land of small classes.

JH: Our student-faculty ratio, as Richard said, was our target in 2004 — 16-1.  We never got there because it is more fun to add faculty and times were good.  We did not have to.

16-1 puts us among the lower if not the lowest in public higher education.

I recently completed a comparison for our board of our top 25 competitors in terms of cross-admissions.

In other words, UNH is our top competitor among students that apply both here and there, and, if we compare our top 25 among those, in the publics we are second to lowest in student-faculty ratio.

Delaware does 13-1, I don’t know how they do it.  I assume they get a huge state subsidy.

I decry what is happening in higher education, but I certainly like our position and our leadership through this better than the vast majority of institutions.

Even the mighty are falling — Stanford, Cornell, Harvard, Yale.

VC: Is there concern how hikes in tuition will affect incoming students?

JH: Every other night I wake wondering how students are going to pay for it and then every other night I wake wondering how we do it so inexpensively.

Our 6 percent tuition increase puts us in the lower half of publics, and my guess is way lower half.

Because a lot of schools are solving the problem by —it takes so much to run a university and when the state cuts back it has got to come from somewhere — and they choose to do it by raising tuition.

The average among publics last year was 6.6 percent and we raised 10 percent lower than that at 6 percent. But keep in mind that when we raise tuition by 6%, that only increases our recovered money by 3.8 percent, because a third of it, or little more than a third, immediately goes to financial aid.

So if you are receiving financial aid and tuition goes up by 6 percent, we raise your financial aid. So out of that 6 percent, a third immediately goes to financial aid, so we realize, 4 percent, or in this case 3.8 percent, so it’s not a draconian increase, because we plow a third of it right back to you, and you and your colleagues.

RC: What we are finding in the analysis we’re going through right now is that on a proportionate basis we actually are going to have to drive more money to financial aid — we’ll be putting up more financial aid on a proportionate basis because of some of the impacts that incoming students are feeling.

So that is going to be another budget challenge that we’ve got to deal with.

VC: Will you be able to make the enrollment targets of 300 additional students?

RC: Well right now we have record applications — about 22,000.  I don’t think there is any doubt we can fill the positions.

The challenge is always about maintaining the academic excellence of students and the diversity of students.

And that is what is driving this additional financial aid, because as the enrollment management folks bring forth that quality and diversity, basically it is costing more financial aid to maintain that this year.

But I think the president, the provost and I are all confident that the students will be there.

VC: What about housing for those students?

RC: So, obviously, they are not all going to be first year — maybe about a half of them — 140 of them, perhaps, will be first-year students.

And what we took to the Board this weekend was a proposal to renovate a dorm over on Trinity Campus, that will hold about 160 students.

VC: Will there be more dorm crowding?

RC: Well, what we are doing is talking about adding more room than the increase in on-campus students so we should be staying neutral.

We have another project that is a couple years out that we call Redstone Two, which would add another 400 beds that would hopefully alleviate some of the crowding we have now and then perhaps down the road perhaps yet again more dorm rooms.

JH: One exercise I might suggest you try — Do you both live on campus?  In doubles or triples?

Well, we’ll choose the example of a double.

If you go down Williston Road and choose a cheap hotel, motel, call them up and see what their rates are — it will  be $89, $99, $79 a night.

Add the taxes and calculate what it would cost you to live in that room, double occupancy, for 224 nights.  If you do that, you’ll find about $22,000 to $24,000 a year.
What do you get?  You get a room, double occupancy, maybe a color TV.

If you come to UVM as a Vermont student, you get a room — double or single occupancy — you get world-class education, you get a library with millions of volumes, you get health care, you get counseling, you get a marvelous faculty, you get admission to NCAA sporting events, you get an art museum and a geology museum, you get computer labs, you get wireless, you get access to computers, you get transportation and oh, food! You get three squares a day.

As a Vermonter on the average it costs you $9,000.

That is what keeps me awake — How can we provide that for you for $9,000, on the average, as a Vermonter?

Yet if you went and made that comparison, I think you would find that interesting.

VC: Has the ratio between in-state and out-of-state students changed at all over the past few years?

JH: It has been fairly constant.  We are going to keep an eye on it over the next few years because people like you are getting more and more rare.

Vermonters are, the number of Vermont high-school graduates is declining, the decline starts this year.

And we are getting larger and stronger pools of Vermonters as we become more attractive to in-state students.

So we hope to buck the trend of there being fewer and fewer of you in the demographics, and attracting more and more by simply being a desirable place to be, which we have seen happen in the past few years.

I don’t know what the buzz was in your high school, but we are hearing that people are thinking that UVM is a stronger and more desirable place to go these days.

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