UA Budget Rescission Discussions (MEMO)

September 9, 2009

TO: Faculty and Staff
FROM: Robert N. Shelton, President, and Meredith Hay, Provost
SUBJECT: UA Budget Rescission Discussions
DATE: September 9, 2009

On August 24, we sent a memo to all faculty and staff to provide an overview of the philosophy behind our budget allocations and our Transformation efforts. We have received many thoughtful comments from across campus and write today to amplify that conversation and answer some of the questions that were posed.

As you know, the University was cut by $77 million (18%) in last year's state budget allocation. Planning for the FY2010 ABOR Budget reductions began many months ago as information regarding the federal rules for the State Financial Stabilization Fund (SFSF) was released. The easy path in a difficult time like this is to make across-the-board reductions. But that is also the quickest route to mediocrity and would have been the wrong choice. From the very beginning, our commitment as a campus has been to ensure that in these dire financial times we protect and strengthen the University of Arizona's world-class programs. That principle has provided the underpinning for all our budget decisions.

As we began planning for the current fiscal year, we were unambiguous in stating that the University would make differential allocations that were guided by its strategic planning priorities and the collegial input that is vital in a shared-governance environment. We appreciate that some on campus may believe that our budget decisions were made in a vacuum, but this is not the case. In developing this year's budget we considered input from SPBAC, the Faculty Senate, the Provost's Advisory Councils, the Transformation Plan white papers, the UA Strategic Plan and meetings with many groups across campus. All of these shared governance and faculty advisory groups strongly support the principle that to protect the University of Arizona's strengths it is necessary to make differential budget cuts and targeted, strategic budget investments.

The reputation of the University of Arizona is derived in great part from the breadth and depth of its many academic programs. As an academic community, we value all the components that contribute to the stimulating intellectual environment that makes this campus so unique. Without question, the humanities, arts and social sciences are as essential to the land-grant mission of the University of Arizona as are the sciences, agricultural and engineering disciplines and our professional colleges. Unfortunately, in the current financial environment we cannot do everything that we have done in the past, and we must look to those units that can, in hard times, generate new revenues that will help sustain the entire University until a stable financial environment returns and reinvestments can be made in all areas.

To guide our decisions on the University's future directions, we relied on our University Strategic Plan, which was developed through a broad campus consultation process and articulates research themes that capture the essence of what makes the University of Arizona unique. The Provost's Advisory Councils also resoundingly supported areas of strategic importance that the University must leverage as we position ourselves for the future. Our recent announcements about initiatives in Arts, Humanities and Social Sciences programs, Environmental Sciences, Engineering and Policy, and Translational Medicine were all generated from these critical participatory discussions.

Using these roadmaps for where we want to go as a university, we developed core operating principles.

First, it should be acknowledged that the greatest value is being placed on undergraduate education and teaching. All of our colleges do a tremendous job teaching and provide a world-class experience for our undergraduates. In addition to supporting the undergraduate mission, it is also imperative in these difficult financial times that we look closely at all avenues for increasing new revenues into the University.

Following consultation with the above shared governance bodies, we developed three key principles that would be considered to allocate differential budget rescissions:  First, which units have the greatest capacity to generate new external revenue into the University above and beyond tuition dollars? Second, which units have the greatest outreach and impact on the citizens of our state? And third, which units will most likely have a positive economic impact on the state with an emphasis on job creation and growth?

The process used for determining the amounts to be reduced from each unit started with the dollar goals that needed to be met to cover $22M, which included the amount needed to cover the reductions in state support ($19.3M) and the small additional amounts of permanent monies needed for $600k/year for Arts, Humanities and Social Sciences programs, $1M in support of Environmental Sciences, Engineering and Policy, and $1M in support of Translational Medicine, all of which were investment priorities.

In applying the criteria noted above, the fact that the College of Science generates the largest share of our indirect cost dollars loomed large. Any further erosion of these revenues would potentially result in long-term, irreversible loss of revenue for the entire campus.

This year, the College of Science has seen tremendous losses in many of its best and brightest faculty to both private and public universities. While the UA is always at risk of losing our very best to wealthier institutions, our ability to retain these faculty and protect the extraordinary, internationally recognized quality of our College of Science requires substantial financial resources that could only be realized via modest protection of their base budget from budget cuts.

The academic and research units that generate indirect cost recovery dollars already experienced in FY09 a 16% reduction in the amount of ICR returned to the program unit. This decision was made to support the administrative infrastructure across the University that sustains our sponsored research enterprise and our excellence as a student-centered research university. This financial management decision, already taken, was considered as we looked to the next set of decisions we needed to enact.

The College of Optical Sciences, while having a substantially smaller state budget than the College of Science, also required modest budget protection in order to retain both faculty and national reputation and generate external revenues. The James E. Rogers College of Law and the Eller College of Management also required relative protection in order to secure the hiring of a new dean for the James E. Rogers College and to preserve the national rankings of Eller, respectively.

The second and third principles that were used to guide the second level of budget decisions involved an evaluation of those units that have the greatest outreach to the State of Arizona and have the greatest potential to help Arizona rebuild its economy. It is well-known that the Colleges of Agriculture and Life Sciences, Engineering, and the colleges within the Arizona Health Sciences Center all have a huge impact across the State and are essential engines of economic growth for the agricultural, technological and health industries that will be required for the long-term recovery of Arizona's economy.

Importantly, very difficult and hard decisions are also being made at the college level. The Provost's Office began meeting with all of the college deans and unit vice presidents in August to discuss how, within each unit, budget cuts would be differentially distributed. Each college dean is expected to work closely with their respective department heads and faculty to communicate how these differential cuts will be made within each college. Each college and VP unit will have to work with their own shared governance mechanisms to determine the priorities that must be protected within each unit.

Lastly, the Deans within the Colleges of Letters, Arts and Science have been working closely with the Executive Dean of CLAS to determine which programs within CLAS must be protected and how additional administrative savings might be found within the administrative organization of CLAS.

Our country and the State of Arizona are experiencing economic challenges that have not been faced in generations. It would be naïve to think that in this very challenging time everyone on a campus this diverse is going to agree with every budget decision made. Our efforts are guided by a genuine desire to act in the best long-term interests of the University of Arizona. We are confident that the one thing we all share is a commitment that this University stand as a beacon for access, quality and discovery, and we appreciate the determination and sacrifice of so many on this campus to help us achieve our goals.