LEXINGTON, Ky. (April 19, 2011) – An e-mail from University of Kentucky President Lee T. Todd Jr. to all students, faculty and staff today outlined major aspects of UK's proposed budget for 2011-12. Among the items he discussed in the e-mail are a plan for a 6 percent tuition increase and a 3 percent salary increase pool to be based on merit.
The full message from Todd is below.
Dear Colleagues and Students,
On April 6, the Kentucky General Assembly finished its 2011 Extraordinary Session. We now have a clearer picture of the condition of the state’s budget and the Operating Budget of the University of Kentucky for 2011-12.
I am pleased that for the first time in three years, we will provide a three percent salary increase pool for non-UK HealthCare faculty and staff. As with past practice, all salary increases will be based on merit (meaning that the three percent increase is an average). In addition, there will be no increase in health benefit premiums for employees (UK HMO) again this year. By making this decision now, units will have sufficient time to determine how to allocate the merit increases.
I am glad we are able to make this happen. But it does not mean the University’s budget is in better shape than it has been in previous years. We still face a very tough financial environment – our state appropriation will be reduced again next year, our fixed costs will rise substantially, and we need to keep making investments to keep making progress. From a budgetary perspective, it is obviously much better for our bottom line to go another year without a salary increase.
But the long-term impact on our University – and our state - of another year without an increase in salaries at the flagship university is much greater than the short-term cost of getting it done. The only way we will achieve the goal our Commonwealth is expecting us to accomplish – becoming a Top 20 public research university - is to retain our best people; the people who teach over 28,000 students, generate $360 million in external research dollars, and provide a multitude of economic, health care, arts and social services to every part of our state. We’ve been lucky to avoid losing a substantial number of our people so far. We’ve been able to get by with a combination of targeted incentives, a lackluster job market, and the devotion of our faculty and staff. But the job market is beginning to revive and even the most devoted faculty and staff cannot ignore forever the potential for better opportunities available somewhere else. The risk of massive departures that would come with another year without salary increases is a risk we cannot afford to take.
The most important thing I can do for my successor is keep this University’s best faculty and staff intact and focused on teaching Kentucky’s children and solving Kentucky’s problems.
It is going to be very difficult to provide the funds necessary to create the salary pool because we must absorb a one percent ($3.1 million) reduction in our state appropriation next year. With this cut, our operating state appropriation will have declined from $335.1 million in 2007-08 to $303.4 million in 2011-12 (almost 10 percent). While that has made our work much more difficult, it is important to acknowledge that the Governor and the General Assembly have shielded us from even greater pain. Most state agencies have been cut over 25 percent in the last four years. And many of our sister universities across the country have faced far greater reductions in state support.
In addition to the $3.1 million reduction in state support, we face over $21 million in increases in fixed costs and other operating expenses (including scholarships, implementing general education reform, and utilities). The three percent salary pool will cost an additional $11.2 million. With all of these expenses and reduced income, the hole we face for 2011-12 approaches $35 million.
We can partially off-set this deficit with a tuition increase. I intend to ask the Board of Trustees at their May 3 meeting to approve a tuition increase of six percent. This is the same increase as last year and we anticipate it will be within the parameters established later this month by the Council on Postsecondary Education. This is a $259 increase per semester for our lower-division resident undergraduate students (or about $17 per week during the semester) and will generate $14.8 million. That’s $20 million less than we need to balance the budget.
This tuition increase strikes the right balance between the continuing struggles Kentuckians face in a still fragile economy and the needs of the University. I understand the pain tuition increases cause our students and their families. But we do our students a grave and lasting disservice if we let the quality of their undergraduate experience erode. And it will erode if flat salaries result in faculty and staff departures and if flat budgets keep us from investing in this University’s progress. While many of our fixed costs increases are associated with the administration of an expansive university – such as utilities and the general maintenance of facilities – there are other costs we will incur because we’re moving the University forward. Our students will see it with investments to maintain access through financial aid packages and to keep our scholarships competitive (for new and transfer students); the full implementation of the new General Education curriculum and the creation of more small classes and discussion sections; increased emphasis on oral and written communications as part of our preparation for our re-accreditation by the Southern Association of Colleges and Schools (SACS); increased availability of on-line courses, especially in the summer; strengthened academic support services; substantial renovations to the Student Center; and commencement of the effort to build new residence halls.
We are able to fill some of the remaining budget gap thanks to the hard work and creativity of the University community. We will carry forward excess revenue from the current academic year because our fall-to-spring retention rate is well above 90 percent for the fourth year in a row (we are always conservative on projecting retention for the purpose of our operating budget). What makes this part of our University’s story even more remarkable is that we enrolled a large first-year class in Fall 2010 – almost 4,300 – and 93 percent of those students came back in Spring 2011. This is a result of the integrated, University-wide “War on Student Attrition” led by Provost Subbaswamy. We smartly invested in the people and aggressive student services programs that help students enroll, stay, and graduate. It’s good for our students, it’s essential for Kentucky, and it has a positive impact on our bottom line. We also anticipate generating additional tuition revenue in Summer 2011 as we continue to expand our summer course offerings to meet the needs of our students. This rapidly expanding part of our instructional mission is making it easier for students to stay on track and graduate on time.
New and carry-forward tuition revenue still leaves us millions of dollars out-of-balance. So we will have to find the remaining funds internally. Many of the efficiencies we need to create are already underway, thanks to the inspired participation of University faculty and staff in the “Think 2.0” initiative launched in January. The response has been substantial and has identified areas of our operations that can be updated, reduced, or eliminated. For example, we have started working to reduce our paper utilization and our carbon footprint; we are leveraging rapidly advancing technologies for student recruitment, enrollment, and retention; and we are making more efficient our student accounting, employee payroll, and other administrative systems. These and other efforts will move us forward efficiently and effectively. To see a full list of current initiatives and make suggestions, go to the Think 2.0 website. We need more creative ideas to reduce costs and improve services, so everyone is urged to look at everything we do and think how we can do it more efficiently.
But all this will not be enough to bring the University’s Operating Budget into balance. I am therefore directing the senior leadership to work with their colleges and units to make further changes to our internal operations so that we can fully fund the three percent salary pool. Each academic and administrative unit will be asked to come up with additional savings, which will require a combination of efforts. And it will likely impact all of us.
We will be holding a “Budget Forum” next Monday (April 25) at 8:30 in the Center Theater of the Student Center to discuss the budget in more detail. Every member of the University community is welcome to attend.
As you know, this is the last time I will lead the construction of the University of Kentucky’s Operating Budget. I am disappointed that so many of the budgets of the last 10 years have been marred by results of events we could not control. The erosion of state revenues and support and the decline in income from other sources in the last three years have been especially difficult to manage. But what I am most proud of is the incredible resilience of this institution and the people that give it life and character. I appreciate very much your tireless effort and heart-felt dedication. It has been an honor to serve with you in the cause of building a better University and a better Kentucky.
Lee T. Todd, Jr.