Budget Situation and Tuition
LEXINGTON, KY (April 27, 2010) — On April 15, the Kentucky General Assembly concluded its 2010 legislative session without approving a budget to fund the programs and services of Kentucky state government for the 2010-11 and 2011-12 fiscal years. The 2010-11 Fiscal Year begins July 1, so the General Assembly still has two months to approve a budget so that state government – and Kentucky’s colleges and universities - can continue to operate. The Governor has said publicly that he will call the General Assembly back into session in May to complete a budget.
We have been talking with the legislative and executive branches and until they say that an agreement is unlikely, we will operate the University of Kentucky on the assumption that the state’s budget for 2010-11 will be enacted in the next several weeks. I appreciate your willingness to stay focused on the University’s business in the midst of uncertainty, especially as we do the work of concluding another successful semester.
We therefore will continue to develop the University of Kentucky’s Operating and Capital Budget for 2010-11, which I will present to the Board of Trustees at its June 8 meeting. Both the House and Senate versions of the 2010-11 budget included a 1.4 percent reduction in the state appropriation for Kentucky’s postsecondary institutions. For the University of Kentucky, that is a $4.4 million reduction in state funding. Under that scenario, our state appropriation would be $306 million. That is the number we will use in building the budget. In addition, our preliminary estimate is that just running the institution at our current level will cost at least $13 million more next year. This includes increases in fixed costs such as health care and other benefits for employees and retirees. The combination of a reduction in state funds and investment income and increasing costs results in a “hole” of over $18 million for 2010-11.
As for tuition, the Council on Postsecondary Education has the statutory authority to set maximum levels for tuition and fees. At its April 23 meeting, the Council set a maximum tuition increase for the University of Kentucky of six percent. Given the increased costs we face and the real prospect of a state appropriations reduction beginning July 1, I recommended a six percent tuition increase that the Board of Trustees approved at its meeting today. As I told the Council last week and the Board today, the amount of money generated by this increase will not be sufficient to cover the University’s gap between revenue and expenses, much less provide the necessary funding for critical academic initiatives. But the Council ultimately decided that six percent was appropriate. So we will be working between now and the Board’s June 8 meeting to make up for the estimated $7.5 million shortfall by reducing costs and reallocating funds.
Given the circumstances we face – and the prospect that 2011-12 will be another difficult year - we will not be able to provide across-the-board salary increases to faculty and staff. I assure you that we have looked at every potential way to fund an increase, but the fiscal condition of the state and the necessary increases in fixed costs make it impossible to take on the recurring expense of a salary increase (a one percent salary increase would cost the University's General Fund $3.6 million). I understand how difficult this is for UK employees who work hard and provide enormous benefit to our students and people all across our state. I wish the current budget conditions allowed us to give the kind of raises you deserve. But it is simply not possible.
Because UK HealthCare does not rely on any state appropriations and because hospital operations are generating sufficient revenue, the senior leadership of UK HealthCare continues to analyze whether they have the capacity to give a salary increase to their employees.
Thank you for your continuing commitment to our University and our state.
I will continue to do everything I can to convince the Governor and the General Assembly that their flagship university continues to be a sound investment of tax dollars and that our work must not be hampered by further reductions. This institution is far too important to Kentucky’s present and future.