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FY15 Budget - Frequently Asked Questions
- How is UVM's budget allocated and spent?
- How large is the FY 2015 budget problem?
- Why are budget cuts continuing every year?
- What is the size of the endowment and how is it spent?
- Will there be layoffs?
- Why are reductions in benefits under consideration?
- When you talk about competitive salaries, what does that mean for the salary pool?
- With all of these challenges, why are we considering adressing facility needs, including the proposed construction/renovation of engineering and science labs and classrooms?
- Why are we proceeding with plans to build new residence halls?
- It seems like we have to deal with multiple budget cuts with no reductions in workload, correct?
- Why can't we just raise tuition to offset rising costs?
- Can we balance the budget by cutting positions and pay in the senior administration?
- Are senior administrators overpaid compared to faculty?
- Why aren't academic areas being held harmless from reductions?
- I have heard that there have been recent increases in student/faculty ratios. Won't that negatively affect academic quality?
- Shouldn't we recognize that compensation is traditionally low in Vermont, and pay people accordingly?
- Are there cuts being proposed in salaries and/or benefits?
The following information is from a budget briefing given to campus leaders on October 15, 2013 and the the Board of Trustees on October 25, 2013.
Primary Sources of Revenues and Cost Drivers
|Tuition||Compensation (wages, salaries & benefits)|
|State Appropriation||Financial Aid|
|Indirect Cost Recover (F&A)||Operating, Equipment & Facilities|
|Endowment Income & Gifts||Debt Service|
Total Operating Budget Expense Categories (including Financial Aid) - Fig. 1
|Institutional Support (Central Services)||6.5%|
Gross General Fund Budget Allocations (Including Financial Aid) - Fig. 2
|Institutional Support (Central Services)||11.8%|
General Fund Spending Categories - Fig. 3
Investment in people ~77%
Other Investments ~23%
We know we must deal with a deficit carried over from last year of $6.7 million. We are also seeing lower facilities and administration (F&A) reimbursements from federal grants (down approximately $1 million) and expect increased employee benefits costs of around $4 million. Other continuing commitments like academic promotions and deferred maintenance add another $2.5 million. Dealing with these and other challenges will require looking at a series of tradeoffs, such as determining a salary and wage pool that still allows us to keep tuition at a reasonably affordable level. With respect to salaries and wages, every 1% added to the pool is approximately $1.6 million.
We cannot simply raise student costs to address budgetary challenges, or we will not be competitive and will price ourselves out of the market. Increasing significantly the size of the student body is also not an option due to limited capacity. We must continue to enhance our value proposition by lowering costs and increasing efficiency – limiting student cost increases to a modest level. There is continuous work to do in areas such as improving educational quality and the student experience, developing new revenue sources, maintaining competitive programs and facilities, and creating innovative structures and approaches across the University. Increasing our quality and expanding the demand for a UVM education, including expanding to new markets, will be important to our success.
UVM’s current endowment is approximately $400 million. The vast majority of endowment proceeds are restricted, and must be spend in accordance with the specific intent of the donor. As the chart below illustrates, virtually all endowment spending is directed to academic and financial aid categories.
There is no current plan for University-wide layoffs but there could be a modest number of position eliminations included in college and unit budget reduction plans developed by the Deans and Vice Presidents that are due to the Provost in December.
The cost of total compensation (salaries, wages, and benefits) represents 68% of the general fund budget, excluding financial aid. Our benefits package is generous compared to most employers. Without some adjustments, our benefits costs are expected to rise by as much as $4 million, including the impacts from the Affordable Care Act. The limited amount of money available for compensation, and our goal of sustaining competitive salaries and wages drive the need to mitigate projected increases in benefits costs.
We want to make modest increases in salaries so that we can maintain our current competitive standing among our peer institutions. For example, we have worked hard to reach the average compensation levels of comparator institutions for faculty. We do not want to see that position erode. As noted earlier, every 1% added to salaries is approximately $1.6 million.
8. With all these challenges, why are we considering addressing facility needs, including the proposed construction/renovation of engineering and science labs and classrooms?
We need to address these issues because our current science and engineering laboratories are inadequate and, without better facilities, we will quickly become less competitive in terms of our ability to attract and retain high achieving students and faculty. A significant portion of the funding for this project is expected to come from private gifts.
To be a University of choice, we need to be competitive on a national scale. We have some residence halls that are over 60 years old and need replacement. In addition, we want to design communities that give our first year students an outstanding experience in order to boost retention and student graduation success. New housing will be constructed using private developers, thus eliminating significant debt and costs to the University, and Residential Life is a self-supporting operation that adds resources to the general fund.
10. It seems like we have to deal with multiple budget cuts with no reductions in workload, correct?
We fully understand that there have been multiple budget reductions over the past several years. We recognize and appreciate the adaptability our faculty and staff have shown in managing through the budget challenges in recent years. Our resilience, and our commitment to our students and to one another are what set us apart from many other institutions facing similar (and often larger) budget challenges.
The University is working hard to build a sustainable budget model. That said, we have to continue to work as efficiently as possible; this will mean that we have to prioritize and shed work functions that are not core or critical to the long-term success of the institution. Part of the decrease in revenue is due to declining enrollment at the undergraduate and graduate levels as well as decreasing F&A recovery, trends being felt at many universities today. However, student/faculty ratios, in fact, have decreased since 2010 and will likely do so again for the most recent academic year. A cost-effective strategy for reducing costs and improving quality is increased student retention. Every 1% increase in our retention rate represents a positive impact of $500,000 for the institution.
The number of graduating high school seniors in the Northeast continues to decline, and competition within higher education continues to increase. It is already a challenge to maintain enrollment targets while maintaining academic skill level and diversity of incoming students. Significant increases in tuition would increase the challenge, considering that average published tuition and fee rates for four-year public universities have been quite modest in recent years (2.3% and 2.8% respectively, per The College Board). The perceived quality/value of a UVM education vs. our cost must be addressed in tandem if we are to succeed in this highly competitive environment.
The Strategic Action Plan calls for a focus on the relationship between tuition and scholarships and financial aid. The question is: What is the right balance to maximize prospects for student enrollment and retention and minimize student debt?
At the core, the University must achieve the right balance in decision making among: 1) promoting affordability for students, 2) advancing institutional quality and value, and 3) maintaining financial sustainability for the institution. This requires all members of the UVM community to focus on achieving a reasonable, predictable cost for a high quality educational experience for our students.
Expenditures for the president, provost, vice presidents, and their respective staffs constitute 1.3 percent of the total operating budget when financial aid is included as an expenditure. These units are taking budget reductions along with other areas of the University. Statistical analyses indicate that UVM has fewer executive/administrative staff FTE than would be predicted given its total expenditures, student enrollment, and other institutional characteristics (IPEDS, 2009 Executive Staffing Study and 2012 model update)
Both groups are close to the norm of national benchmarks:
For 2013-14, Executive Senior Institutional Officer salaries (n=11) benchmarked in the CUPA-HR database are at 100.4% of average for the Oklahoma State University (OSU) Faculty Salary participating institutions (OSU is the only annual national survey of faculty salaries by rank and discipline for public research universities, and has been used at UVM for many years to benchmark faculty salaries).
Faculty salaries are at 100.1% of the OSU Faculty Survey Average (accounts for rank and discipline, FY13), and at 98% of the AAUP public doctoral average (accounts for rank but not discipline, FY13).
From FY03 through FY13, the UVM faculty salary pool increased at an average annual rate of 4.5% compared to a 2.6% average annual salary increase for continuing faculty at public doctoral universities (AAUP Annual Survey); UVM staff pool increases averaged 3.5% from FY03 through FY13.
In addition, based on the 124 UVM employees in the 2013-14 annual list of base pay who are listed with a base salary at $150,000 and above:
- 72 (58.1%) were faculty with a median of $179,456
- 28 (22.6%) were institutional administrators (president, provost, associate provosts, vice presidents, associate/assistant vice presidents, doctors, directors, classified executives, and an administrator on leave) with a median of $195,156
- 13 (10.5%) were deans with a median of $194,172
- 11 (8.9%) were academic administrators (associate deans, chairpersons, director) with a median of $179,073
Last year, the overall non-academic cuts were four times larger, on a percentage basis, than those imposed on academic units. This year, non-academic units will shoulder overall reductions approximately three times the size of those assigned to academic units. Many non-academic functions are self-supported (income/expense) operations. Others, depending on what one includes in “non-academic” are in direct support of the academic mission (student services, academic support, co-curricular programs, infrastructure and facilities-related costs.
UVM’s instructional costs (department-level instructional investments) per student credit hour, as calculated via the Delaware Study of Instructional Costs and Productivity, are approximately 20% higher than the participating public research university average (Delaware Instructional Cost and Productivity Study, FY12)
15. I have heard that there have been recent increases in student/faculty ratios. Won't that negatively affect academic quality?
In fact, UVM’s student-faculty ratio has decreased from a peak of 17.5 to 1 in 2009-10 to 15.7 to 1 in 2012-13 as student FTE decreased from 10,163 to 9,667 and faculty FTE increased from 582 to 608, as we have continued to invest more into the core academic mission.
16. Shouldn't we recognize that compensation is traditionally low in Vermont, and pay people accordingly?
We are competing for faculty and other professionals in a national market, not just Vermont, and need to offer competitive compensation to hire and retain talented individuals. (Note: Despite some perceptions to the contrary, Vermont’s per capita income is above the national average by state, ranking 21st).
To meet the goal of sustaining competitive salaries and wages, no pay reductions are under consideration, and as previously stated the goal is to implement a reasonable salary increase for FY 15. Cuts in retirement or medical benefits are not under consideration. However, in order to balance the budget we need to mitigate projected increases in benefits costs. Accordingly, a modest adjustment in our progressive system of health care insurance premium cost allocation is under active consideration. Such an adjustment would retain fully the system in which payment levels and compensation are linked, continuing the practice of higher paid employees paying significantly more than lower paid individuals. UVM has been a leader for years with this progressive approach, which is relatively rare in the employment sector.
The only other change being discussed would apply to undergraduate dependent tuition remission, with a proposed limitation of four years of tuition payments by UVM, consistent with the University’s goal of timely graduation for all students.
Last modified February 21 2014 07:13 AM