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UW Trustees Back Plan for Budget Reductions

June 15, 2016

The University of Wyoming Board of Trustees has approved a budget that will reduce ongoing spending by about $19 million and internally reallocate about $6 million in one-time funding during the fiscal year that begins July 1.

In addition, the board today (Wednesday) endorsed a plan recommended by President Laurie Nichols to identify ongoing savings of at least an additional $10 million for the following fiscal year. Those reductions would include program cuts and restructuring following a review process that is underway this summer.

The board’s actions are in line with the budget-cutting approach presented by Nichols to UW employees and students during a town-hall meeting on campus in May.

“We have managed to avoid program cuts and layoffs in the fiscal year that begins next month, but those types of reductions will be unavoidable in the following year,” Nichols says. “With the initial round of cuts approved, we’ll now move forward with a fair and open process to tackle the second round -- with a continuing commitment to student success, quality programs and excellence in research and service to the state.”

Nichols says she will present a plan to achieve the necessary reductions in the second year of the biennium to the UW Board of Trustees in September. To accomplish that, she will declare a financial crisis under university regulations, triggering a process that will involve a university-wide meeting and consultation with a committee composed of administrators, faculty and staff members.

The reductions are a result of a drop in the university’s state block grant, driven by Wyoming’s economic downturn and loss of state government revenue. For the biennium that begins July 1, UW faces a loss of nearly $41 million in state funding. In addition, the university needs to reallocate dollars internally to cover costs related to a new financial and reporting system, increased utility expenses and other needs. For the biennium, that brings the total of necessary reductions to more than $50 million.

The budget approved today for the coming fiscal year includes a total of $7 million in cuts based upon allocations given to campus units when the Legislature mandated a 1.5 percent reduction during the 2016 session -- and as a result of a need for internal reallocations. Subsequently, Gov. Matt Mead directed that $35 million be reduced from UW’s state appropriation for the 2017-18 biennium.

Under the approved budget, UW will reduce spending by about $19 million in the upcoming fiscal year -- cuts that will carry over to the second year of the biennium and likely beyond. The biggest piece of that reduction is eliminating at least 70 vacant positions across the university, which is expected to save about $5.2 million per year. Additional savings will come from standardizing the teaching load for faculty members and severely limiting temporary faculty appointments ($2.5 million); offering a retirement and separation incentive to some longtime employees ($3 million); not allowing part-time positions to be benefitted between half-time and full-time ($1.5 million); and eliminating overtime and overload pay (at least $100,000).

Separately, the board approved the details of the retirement incentive plan -- which is offered to employees who are at least 61 years old and have worked at least 15 years at UW, 10 of which must be consecutive -- and a separation incentive plan for employees 61 or older with fewer years of service to UW. Those wishing to participate in the plan must retire or resign between July 1 and Aug. 5, and among the incentives is a payment equal to the employee’s salary from the date of retirement/separation until Dec. 31, 2016.

Also, in the coming fiscal year, the university expects to identify about $6 million in one-time reallocations and savings to be used for immediate needs. That money will come from a number of reserve accounts across campus; unspent salary funding; and a voluntary program in which summer hours for certain full-time employees could be reduced to 32 hours (with pay for 32 hours).

The reductions that will be necessary in the following fiscal year, which begins July 1, 2017, will be more difficult, Nichols says. Reducing spending by at least an additional $10 million annually likely will require elimination of some programs, based upon the program reviews.

“University (academic and non-academic) programs must be evaluated for reduction or elimination if the university is to be able to construct an FY2018 budget in light of the reduced revenues from the state of Wyoming, possibly reduced tuition revenue, the need to fund utility costs, and the need to ensure the university’s information technology operation meets the needs of the campus,” the president wrote in her message declaring a financial crisis under university regulations. “As such, immediate steps must be taken to identify those programs so that plans for implementing changes can be developed during FY 2017 in anticipation of implementation in FY 2018.”

A general meeting for the university community to explain the financial crisis declaration is scheduled Wednesday, June 22, at 3 p.m. in UW’s Arts and Sciences auditorium. UW employees unable to attend in person will be able to view the meeting on the WyoCast system.

The next step is the convening of a Financial Crisis Advisory Committee, composed of the vice president for academic affairs; the vice president for administration; two deans selected by the Deans’ Council; two faculty members each from the Faculty Senate Executive Committee, the Academic Planning Committee and the Budget Planning Committee; two Staff Senate members; and the president or designee from the Associated Students of UW. The president will consult with the committee in the creation of the plan to present to the Board of Trustees.

Nichols says she doesn’t intend to declare a financial exigency, which denotes a financial crisis so severe that the termination of positions held by tenured faculty members is required. Before submitting such a request, she would have to inform the Financial Crisis Advisory Committee.

“I believe there are actions UW can take when reducing or eliminating programs to avoid a recommendation of financial exigency,” the president says. “The declaration of a financial crisis is different than a recommendation to declare financial exigency. The declaration of the former does not mean that the latter is a foregone conclusion -- far from it.”

No decisions have been made about reducing or eliminating specific academic programs, Nichols says. But the program review process that began this spring is continuing, focused on undergraduate programs with fewer than 25 graduates over a five-year period, and master’s degree programs with fewer than 15 graduates over a five-year period.

Additional review will be performed on undergraduate programs with 25-50 graduates over a five-year period, and master’s degree programs with 15-25 graduates.

While the Office of Academic Affairs began by looking at programs with low demand, the review process takes into account demand, quality and centrality to the UW mission. Review can result in retention because of critical need, retention with further review at a later time, consolidation or termination.

“I understand the concern and uncertainty for those associated with the programs under review, but program reviews are a routine practice required by the university’s accrediting agency,” Nichols says. “It’s just that the financial climate the university faces right now makes the review process especially important, because it will help inform the plan we present to the Board of Trustees.”

Other potential cost savings starting in the second year of the biennium could come from reorganizing academic and non-academic units; reducing, eliminating or combining non-essential services and programs; reviewing all administrative appointments; analyzing all positions and moving as many as possible to nine- or 10-month contracts; studying opportunities to reduce staffing levels or task frequency; and evaluating opportunities to outsource some UW operations.

At the same time, the plan calls for the pursuit of new revenues for the second year of the biennium and beyond. That could be done by developing a plan to fully utilize private endowment and gift dollars; developing a plan for program fees and differentiated tuition for high-cost programs; and increasing enrollment of nonresident students.

For the long term, the administration proposes, among other things, to develop a strong strategic plan to include higher fiscal performance; diversify revenue sources, with less reliance on increases in state support; develop a plan for tuition and fees, along with enrollment growth; implement a responsibility-centered management budget model; develop a merit salary policy and ongoing plan for salary increases; incentivize external funding and grow technology transfer; and launch a capital campaign to support the strategic plan.

“I have heard faculty and staff repeatedly express concerns about low morale. Declaring a financial crisis is a step that, by its nature, is unlikely to improve morale,” Nichols says. “The university must deal decisively with the reductions in revenues that affect both FY 2017 and FY 2018. But, as I will continue to emphasize, refocusing our efforts over the next two years will place UW in a far more favorable position for the future. That is the reason I accepted the position of president, and I remain committed to that as we move forward.”

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