Subj: [UnivAdm] Budget Update Date: 10/9/2009 5:17:19 A.M. Pacific Daylight Time From:
Dear Members of the University of Iowa Community:
I am writing to you with a budget update on the current 2010 Fiscal Year (FY). The Revenue Estimating Conference (REC), which projects the state's revenues, has met, and the budget news is not good. So far this year, state tax revenues are down $141.1 million compared to last year. The REC now projects a $415 million deficit in the current year's state budget. In response, Governor Chet Culver has issued a 10 percent across-the-board mid-year cut to all state agencies and departments. For the Regents universities, that translates into a $59.8 million budget reversion for FY2010. The UI's share of that budget reduction is $24.7 million.
These cuts will involve some very difficult decisions. So far we have managed our budget reductions through a combination of methods and programs, including early and phased retirements, hiring freezes, and attrition, as well as reductions in supplies and services and in building renewal. While we will do all we can to continue making budget reductions along similar lines, this new reversion may have to involve what we have tried to avoid: campus-wide layoffs and furloughs.
However, I want to assure all students, faculty, and staff: we will maintain our focus on our missions of providing a high quality educational experience, world-class research, and service to the state of Iowa.
Please let me put our current budget situation in some specific contexts, which also involve some promising developments.
As you probably know, our current fiscal year's budget already has incorporated a $35 million reduction in state appropriations, most of which impacts the General Education Fund (GEF). This year, we were able to mitigate that reduction with a one-time influx of federal stimulus funds from the American Recovery and Reinvestment Act (ARRA).
We used $20 million to plug a number of budget gaps, and we are using $15 million for projects, funded by competitive grants, that would enhance new innovations while reducing recurring costs or increasing revenue streams in the coming years.
We have awarded $14 million of that funding, which we estimate will annually save us $2.6 million in direct costs and provide $2.7 million in net revenue. While there is good news in these resulting cost savings and increased revenue, the fact remains that the ARRA funds are intended to be spent by the end of this fiscal year, and there is not likely to be additional funding for the next fiscal year. As well, the state budget forecasts for FY2011 do not indicate a swift recovery, so we will no doubt face another significant reduction in state appropriations next year.
Our overall University budget involves several revenue streams, and there is good news on some of those horizons. Our research enterprise remains robust. Last year, we broke another external funding record with $429.5 million, a 10% increase over the previous year, keeping us within the top 20 public universities in research funding. We also are grateful for the tremendous success of our ARRA grant applications. We have received 128 such grants, totaling nearly $52 million over the next three years.
As well, our private fundraising has been very successful in the past year. Last fiscal year, thanks to the excellent efforts of the UI Foundation, we posted the second-best fundraising year in our history, totaling more than $200 million. Our endowment has rebounded in recent months beyond our expectations, recovering to approximately the same level it was last year at this time before its value began falling.
However, these funding sources do not, for the most part, flow directly into the General Education Fund, which supports the basic educational functions of the University. The state budget difficulties will affect the GEF for some time to come, perhaps permanently. For that reason, strategic realignment of the University is necessary. Under the direction of Provost Wallace Loh, the five-year extension and re-focusing of our strategic plan, The Iowa Promise, carries forward our priority of faculty vitality and folds in the priorities of focused excellence and student success.
By focusing excellence in research and graduate education and increasing undergraduate student success, we aim to reallocate resources to our greatest strengths, allowing for hiring of new faculty in interdisciplinary clusters to enhance and create focused research excellence. Similarly, undergraduate student success efforts focused on enrollment and retention will allow for new tuition revenues to the General Education Fund. The Strategic Initiatives Task Forces are continuing their work in this realignment effort, developing ideas that will further articulate our strategic vision as well as align budget allocations with academic planning.
In the past year and a half, the University of Iowa community has shown itself to be highly resilient to some of our most historic challenges, the Flood of 2008 and the worst economic difficulties of our generation. That resilience comes in large part from the dedication of our students, faculty, and staff to continued achievement and excellence, as well as a deep commitment to the institution and to our students, colleagues, and the public we serve. I thank you for all you have done to support our University in these challenging times.
The budget challenges still ahead of us are daunting and will likely require additional sacrifice. But every time the UI has faced a crisis, our University community members have risen to the occasion. I have no doubt that each of you will do so yet again. As we move forward, I will keep you updated regularly whenever new information is available and new decisions are made.
I have every confidence that The University of Iowa will remain one of our nation's premier public universities and will emerge from the current economic challenges leaner yet stronger. I am proud to be President of a University community that cares so deeply for its mission, for each other, and for the people it serves.