PRESIDENT’S 2009 SUMMER BUDGET UPDATE

Tennessee State University, Nashville

Thursday, June 25, 2009

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I want to thank the campus community for joining me this afternoon to receive an update concerning our planning efforts and campus budget.

Following this presentation, I will have to leave to attend a Planning Commission meeting. As many of you already know, today the Commission will make a recommendation concerning rezoning property that TSU proposes to use for our Research Park and Center for Sustainable Agriculture. We expect a positive decision, but it will be necessary for me to speak to the Commission on TSU’s behalf. The Research Park and Center for Sustainable Agriculture are examples of the ways in which the times we live in are both promising and challenging. The land donation to the University, the largest gift of its kind in TSU’s history, represents promise and opportunity for academic growth as well as innovations in agriculture.

Yet we also face challenges, in part as a result of the national economic climate as well as shift is consumer demand. Keeping both opportunity and challenges in mind, this budget update will focus on four areas:

• Our Planning Context

• The University Budget

• Enrollment Strategies

• Our Strategic Direction

Over the next several months, I will provide additional updates, either in person or through other means of communication, to the campus community.

I. OVERVIEW

A. Planning Context

In 2008, the Pappas Consulting Group concluded as follows in its report about TSU:

The University is in a very competitive higher education marketplace in Nashville, in Tennessee and beyond.

TSU has too many academic programs for the number of students it serves and for the resources available.

TSU faces two enormous barriers to a bright future: its relatively poor academic reputation and its poor reputation for basic services.

B. Institutional Response

The University responded to the Pappas Report by engaging in a process that developed planning and implementation documents to drive our decisions:

These three developments--The Academic Master Plan, the Strategic Plan, and the Business Intelligence Plan--form the foundation of our approach to responding to the University’s current institutional challenges.

II. THE BUDGET

While the University’s planning processes were ongoing, we experienced major budget reductions following an enrollment decline, the downturn in state budget, and the national economic climate:

• Enrollment declines resulted in an $8.8 million shortfall.

• Appropriation cuts from the state totaled $3.9 million

• This resulted in a total shortfall of $12.7 million

• Other revenues increased by $300,000.

TSU experienced a final revenue shortfall of $12.4 million, of which $4.5 million was restored by stimulus and maintenance of effort funds.

Given our annual revenue budget of $112 million dollars, the $12.4 million shortfall represents a significant cut--over 11% of our funding streams.

IN SUMMARY:

• Our total funding gap is $12.4 million.

• This represents about 11.6% of our annual operating budget of $112 million.

• The balance of our budget is $99.7 million.

• $4.5 million was added back as stimulus and maintenance of effort funds, leaving us with a net decline of $7.9 million.

A. Revenue Sources

Where does our revenue come from?

• 33% comes from state appropriations.

• 60% of the University’s revenue comes from tuition/fees.

Thus, our enrollment decline had a major negative impact on our funding streams. Our revenue sources are:

B. Reduction Strategies

In Messages to the Campus Community during the past year, I have stated that we would both take measures to address the budget shortfall and take steps to address the enrollment decline.

To address the funding shortfall, we decreased expenditures using the following strategies:

• Reductions in travel and operating budgets

• A moratorium on overtime and reclassifications

• A reduced subsidy for athletics

• Reduced use of extra service pay

• Hiring freezes

• Decreased telecommunications device expenditures

• Reassignment of job functions to alternative funding sources; and

• Elimination of vacant positions.

• University divisions and departments decreased their operating expenses and travel expenses.

• The average decrease in operating budgets was 24% and the average decrease in travel budgets was 22%. These numbers include everything in E&G budget, meaning that with the exception of a few accounts, most of which are fixed costs or costs that we do not control, by 2009, TSU implemented an across the board, 30% reduction in travel and operating.

These budget saving measures resulted in $6 million to offset the initial shortfall of $8.8 million.

• TSU also implemented a reduction in force (RIF) to help offset the shortfall, while continuing to protect its academic core.

• Only administrative employees were affected by the RIF. Implementing a RIF is not a decision that was made lightly. The decision was preceded by a thorough review of University operations by all functional units.

• The percentage of the budget expended for instruction and academic support have increased during this time, and the percentage of budget and dollar amount expended for institutional support decreased.

While institutional support has had to deal with workload increase as a result of reduction in workforce and other cost saving measures, faculty members were been insulated from any reduction in force.

C. Cost increases and investments

Although we have had a revenue decline of $12.4 million and made the reductions mentioned previously, our net expenditures only decreased by $3.5 million. This is because:

In FY 2010 (beginning July 1), our budget will reflect an additional $ 5.6 million in reductions to help balance the fiscal year.

III. ENROLLMENT

Last September, I made a commitment to the University community to implement long-term strategies to ensure that future enrollment goals are met.  To date, the following strategies have been implemented to improve services:

Other steps have also been taken:

As I have noted, our budget is linked to enrollment. Thus, growing our student enrollment and improving persistence and retention rates must be seen as a campus-wide responsibility, not just the work of Student Affairs or any single group.

IV. MOVING FORWARD: BUDGET PLANNING

Both the State of Tennessee and TBR have directed all institutions to provide three-year budget plans that show how each plans to deal with the fiscal gap resulting from the institution’s shortfall.

In spring 2009, I presented a set of budget and work planning principles to guide cabinet and division-level discussions regarding our budget shortfall. Based on cabinet and divisional level discussions, we developed a three-year budget plan. Last week, we presented our budget plan to TBR and held discussions with the Chancellor concerning how we plan to proceed. An important component of this plan is the Voluntary Buyout Plan (VBP), which we announced in early June to help the university deal with budget and Work Force planning.

Our goal from the employee voluntary buyout plan is a work force reduction of 100 positions. Annualized savings of $5 million from salaries and benefits would be achieved. This would produce a 16.7% reduction in workforce.

If we are unable to reach this number, other measures, including further work force reductions (RIF’s), will be implemented during the 2010 fiscal year.

The three-year plan TSU submitted to TBR is a fluid document, and we expect that revisions will be made as we further engage the university community and as we move forward with administrative and academic restructuring that will be recommended through our planning processes.

I have asked the Vice President for Business and Finance to develop and finalize a scope of work/scope of services in anticipation of having an independent entity or corporate partner to evaluate the university’s operations and make recommendations concerning the following: 

The recommendations will include timelines for implementation and will be guided by the priorities stated in the Academic Master Plan and the Strategic Plan.

Reorganization, restructuring, and reductions in academic programs will take place and will be led by Academic Affairs consistent with Academic Master Plan and the Strategic Plan goals. As the Pappas Consulting report states: “TSU has too many academic programs for the number of students it serves and for the resources available.”

The Strategic Plan and Academic Master Plan call for prioritizing our academic programs to match our resources and focus investments on essential areas. The process of identifying signature programs has already begun. Next month, I will hold the president’s retreat, and I have asked the [academic] deans to join us. The retreat will focus on how we link the resources we have — human and financial — to our strategic direction, including such issues as accountability and data-driven decision-making.

The chair of the faculty senate is a member of the president’s cabinet. The president of the student government association is also a member. This is a change I made when I became President to have diversity of voices and opinions, and to enhance the process of shared governance at the university. This arrangement has worked well.

However, as we move to implement our academic master plan and our strategic plan with more vigor in a period of budget challenges, it will become important to expand my engagement with various campus constituencies, and I am asking my senior leadership team to do so.

Effective fall 2009, I will expand the opportunity to engage with the Faculty Senate, and Cabinet members will visit with the Faculty Senate to provide periodic reports as appropriate regarding the state of the University. Because faculty members are a vital part of strengthening academic quality and excellence, and an important part of our planning processes, I intend to have ongoing and regular small group meetings with faculty. Beginning next semester, faculty will be receiving invitations to my office, an opportunity that provides further engagement on the core mission of our University. My office will be working with Academic Affairs to plan these meetings.

In fall 2009, I will begin a series of college-wide meetings to inform and engage each college unit as we work together to advance the future of the University in these tough times. Members of the Cabinet will accompany me to each of these meetings, and I intend to hold these college-wide meetings each semester. Similar arrangements are being developed to permit engagement with staff and students across the University, as well as with alumni.

We are at a critical juncture in our University’s history, and all hands must be on deck as we strive to improve business and academic processes at the University.

Let me also note that the percentage of the budget expended for instruction and academic support has increased during this budget period, and the percentage of the budget and the dollar amounts expended for institutional support has decreased. While institutional support has had to deal with workload increase as a result of reduction in workforce and other cost saving measures, faculty members have been insulated from any reduction in force.

Moving forward with our planning processes, academic program prioritization and reduction will impact faculty, but will be implemented through data-driven decision-making approach that will include input from faculty before a final decision is made.

Last year, I appointed a University Budget Advisory Committee (UBAC) chaired by the former Faculty Senate chair, Mr. Sam Comer, to advise on the budget. Today, I am reconstituting and expanding that committee as follows:

UBAC membership

• At-large members: three members appointed by the president (two-year terms):

• Faculty: two faculty members recommended by the Faculty Senate (two-year terms).

• Immediate past chair, Faculty Senate (Sam Comer, one-year term)

• One department head recommended by department heads to the Chief Academic Officer (one-year term);

• Students: two students recommended by the SGA president (one-year term).

• Ex-Officio member/staff: Bradley White, Assistant Vice President for Business and Finance

Other committee members will be announced as soon as the process for selecting them is completed.

University Budget Advisory Committee (UBAC) Charge

Working with the President and cabinet members, the University Budget Advisory Committee will:

1. Review, analyze, and advise the president regarding significant external budget actions impacting the university, such as the annual THEC and TBR budget proposals

2. Facilitate development of a budgeting process that integrates campus strategic goals, budget review, planning, allocations as ultimately set by the president, and accomplishment of goals by vice presidential divisions.

      3. Facilitate development of an informative and participatory campus budgeting process.

      4. Review annually the relationship of enrollment targets to the proposed campus budget.

      5. Provide annual recommendations to the president regarding budget allocations in line with business operations and the University’s strategic goals.

       6. Advise the president regarding the format for reporting annual budget data to the campus community in a consistent manner such that annual changes in the budget are easily tracked and understood.

In reconstituting this committee, my goal is to ensure that we have captured as wide an input as possible as we move through tough decisions that will enhance the future of the University.

V. MOVING FORWARD: INSTITUTIONAL PLANNING

We have developed a strong Academic Master Plan and a Strategic Plan that provides a clear roadmap for the University. We will remain focused on our institutional goals and planning. Planning will be guided by our mission and core values, and by our AMP and Strategic Plan goals. Our planning process calls for data-driven decision-making and accountability. Through our successful partnership with Deloitte Consulting which concluded last week, we have developed key performance indicators for the strategic goals we pursue. The Business Intelligence Project will help us monitor progress.

As you know, the estimated cost of the strategic plan is $36 million. We are making provision for funding the AMP, QEP, and other goals as required for FY 2009 and 2010.

We have conducted careful review of Title III funding, and we have committed to strategic deployment of these dollars to build institutional capacity, and strengthen graduate and undergraduate programs. We will pursue very vigorously external dollars through grants and contracts to support our core mission and strategic goals.

IN CONCLUSION:

Our budget cycle requires us to look forward; to stay focused; to do what we must to grow enrollment; to improve the quality of services we provide so our students will persist and graduate on schedule; to work together as a family to weather the current challenges that we face. Our goal is simple and clear: to serve our students and to provide the quality instruction to enhance their participation in a changing global arena.

Thank you.

QUESTIONS