Budget 2010

Town Meetings

Budget presentation to Town Meeting
June 18, 2009 — Strom Thurmond Institute

Download Town Meeting slide presentation (pdf).

I want to welcome everyone to today’s town meeting — both those who are here in person and others watching online. With the state budget process completed, issues related to stimulus funding resolved, and today’s action by the Board of Trustees to set tuition for fall, all of the components are in place to finalize our budget strategies for 2009-2010.

We are near the end of an academic year that has been marked by many positive achievements, but also by challenges and uncertainty.

The global recession that some experts say is the worst since the Great Depression has led to losses on Wall Street and in personal savings.

State revenues declined by more than $1.3 billion, and unemployment in South Carolina reached an all-time high.

The impact on Clemson University was an unprecedented budget challenge.

(See slide: Cumulative Funding Reductions)
The cumulative funding cuts to Clemson exceed $45 million from state and private sources. 

  • Our state appropriation has been reduced by $40-point-7 million since the good old days of June 30, 2008.
  • The State Board of Economic Advisers this week revised its revenue estimates down again, so we have been warned that even more cuts may be coming.
  • State funding now accounts for less than 20 percent of our budget;
  • Educational funding per student, adjusted for inflation, is more than 40 percent lower today than it was in the early 1970’s;

This graph shows Clemson’s E&G appropriation for student, adjusted for inflation, since 1971. The trend of long-term, declining state support is very clear. 

(See slide: Clemson State E&G Appropriations Per Student)

Faced with this new reality, the simplest course of action would have been to put all of our goals on hold, toss out the Road Map, and abandon the idea that South Carolina could have a top-tier research university – a university where South Carolina students could have both a very high-quality education AND a state-funded scholarships.

But for better or worse, that’s not the Clemson way.

The Clemson way is to buck the odds, face problems head-on, and work together to figure out a solution. And that’s exactly the approach we took this year.

The magnitude of the financial challenge required that the work be divided into three distinct categories. My presentation will follow that same format.

(See slide: Category timeline)

Category one required immediate action.

The goal was straightforward if not easy – balance the 2008-2009 fiscal year budget.  Specific steps taken included:

  • Appointing a team to develop university-wide budget strategies that could be implemented quickly.
  • Issuing a call for ideas from faculty, staff and students. Virtually every Category One solution was based on suggestions from the campus.
  • Implementing hiring and travel restrictions, a five-day mandatory furlough, increased contributions from auxiliaries, deferral of construction projects, reallocation of savings from outsourcing of motor pool operations, and permanent internal budget cuts.

These swift and extensive measures allowed us to absorb multiple budget cuts that came throughout the year, without having to go back to departments time after time, and without mid-year tuition and fee increases.

Category two involved preparing for the fiscal year starting July 1, 2009, and adjusting to a new funding environment.

The task was considerably more challenging because there was a longer list of objectives:

  • First, replace all of the one-time funds used to balance this year’s budget with permanent dollars;
  • Second, make strategic rather than across-the-board cuts in order to protect hard-won gains in academic quality and maintain critical services to students and the state;
  • Third, protect jobs through attrition and reassignment as much as possible, recognizing the state’s rising unemployment rate and the ripple effect that layoffs at Clemson would have on families and the local community;
  • Fourth, develop a plan that honors commitments already made to faculty and students by providing modest levels of funding for start-ups, scholarships, capital improvements and infrastructure;
  • And finally, create a solid footing for the future in a new economic reality, and set the stage for development of longer-term solutions that will allow Clemson to thrive as a more privately funded university.  Managing unprecedented funding cuts was only part of the job. Equally, if not more, important was developing a plan that ensured a bright future for Clemson.

The process for developing category two responses included:

  • Budget hearings with vice presidents and division leaders in which we looked at every activity in priority order, line by line.
  • Developing targeted proposals for federal stimulus funds – both those earmarked for states and for federal agencies. 
  • Realigning private fundraising priorities toward replenishing base funding for core mission areas and support for students.
  • Two aggressive retirement incentive programs that would allow us to downsize in a compassionate manner.
  • And finally, the appointment of 11 budget task forces to take an in-depth look at targeted areas, with the goal of identifying ways to reduce costs as well as increase revenue.

Let me pause here and thank every member of the Clemson community who served on a task force … who served on a departmental committee to brainstorm ways to cut budgets … who submitted a suggestion to a task force, or to me through e-mail or the web site. Every single strategy that we have employed, and will employ, has come from a suggestion from this community, and I am eternally grateful to you for being so engaged in this process.  

In particular, nearly 100 faculty, staff and students worked tirelessly and creatively on the task forces, identifying many of the cost-cutting measures that are included in the 2009-2010 plan. They also identified long-term strategies to generate more non-state revenue. Last month, steering committees were appointed to write implementation plans for recommendations related to:

  • Online and Distance Education;  and
  • Continuing and Professional Education;

In addition, the Provost is appointing a Faculty Fellow to lead a team to follow up on recommendations regarding curriculum and general education. This work will honor and continue the legacy of the task force’s chair, Professor Jerry Waldvogel, who personified Clemson’s passion for students and high standard of excellence in teaching.

Clearly, much of this work will continue after July 1, but the primary business today is to present the budget strategies and plan for the 2009-2010 fiscal year, and then open the floor to questions.   

We obviously will not be able to address every potential or detailed question today.  Please ask your questions directly to your department head, director, dean or division head.  

I’ve encouraged all of them to keep open the lines of communication and dialog.  If you have a question, it’s important that your question be addressed.  Please feel free to continue to give me your suggestions and comments either by e-mail, or when we run into each other on campus.

(See slide: Key Budget Strategies and Guiding Principles, 1.  Get back to business)

The primary driving force in developing a plan for 2009-2010 was this idea: It’s time for us to get back to business. 

We have spent 8 months dealing with a funding crisis, and that’s enough:  It’s time to get back on track.

That means Clemson will continue to fund investments in quality.  Yes, they will be at a modest level, and our rate of progress will be slower.  But there are many good ideas in your academic and support plans that will benefit students and the state, and they should be implemented – at a scale and a pace that makes sense for the current environment.

This plan addresses the needs of students and honors our commitments to faculty and students by providing for modest investments in start-ups, equipment, capital improvements, and scholarships. It is a plan that is responsible to the state, to families who trust us with their future, and mostly to students who come to Clemson with high expectations. We need to deliver.

The plan was built with enough flexibility to manage likely additional state cuts without disrupting the campus. You have important work to do that requires your full attention and focus. Please don’t panic every time you read another story about a state budget cut.  Our plan is flexible and it allows you to continue doing your jobs without constantly looking over your shoulder.

Deans, directors and department heads are the people closest to the action.  You are most knowledgeable about your particular problems and priorities.  This plan calls for you to get back to the business of managing your own programs.

It does not include furloughs, university-wide hiring freezes, restrictions on travel, or other normal management decisions.  However, this does NOT mean business as usual. There will be high expectations for rigor and discipline in budgeting, both centrally and in individual units. Any vacancy should be carefully evaluated before a search begins. Compensation increases should be justified from both a funding, a merit and a market standpoint. Initiatives requiring long-term commitment of resources should be ruthlessly vetted.

This new climate also requires that we constantly look for ways to reduce costs and increase efficiency, which means there may be more restructuring, consolidation of units, or outsourcing in our future. It is the new norm. The difference is that it will be planned and strategic rather than in response to a crisis. Having time for a transition reduces the likelihood of layoffs.

In short, this new era will require us to be more disciplined, flexible, and accountable than ever.

(See slide: 2.  Protect the academic core and minimize impact on students.)

The next priority was to protect the academic core and minimize impact on students.

Beyond what has already been taken in 2008-2009, there will be no further cuts to college budgets.
Administrative and support areas will be cut disproportionately, with the following exceptions – public safety staffing will remain at current levels, and budgets for the Libraries and Academic Success Center will be protected.

We will retain instructors needed to protect classroom quality and to address the need for students to be able to get the courses they need to graduate on time.

However, “protect” does not mean “exempt.” Academic programs will be as rigorously assessed as administrative and support services.

(See slide: 3.  Significantly reduce personnel and operating costs and create more financial flexibility.)

A budget cut of more than $45 million could not be absorbed without a substantial downsizing of the payroll. We will eliminate more than 450 positions in order to permanently and significantly reduce personnel and operating costs, and to create more financial flexibility.

About a third of these positions were vacant at the beginning of the current fiscal year, and more became vacant because of hiring restrictions. More than 70 people elected to take retirement incentives.  

Other strategies will include filling vacancies through reassignment of existing staff, shifting positions to grant or generated funding, and being very selective and targeted in refilling temporary or contract positions.

We have worked hard to protect people through attrition and reassignment, and we will continue to follow that model. There are further permanent organizational and structural changes that will be needed in PSA – which does not have the benefit of revenue from enrollment or tuition. These changes take time to implement, and they will not all be in place by July 1. Therefore, we plan to use PSA stimulus funding to help fund ongoing operations while organizational changes are implemented.
 
(See slide: 4.  Reduce administrative costs and positions)

Another strategy is to reduce administrative costs and positions, which will be done through elimination of vacant positions, reassignment and restructuring of reporting lines. For example, the Chief Human Resources Officer position will not be refilled – those duties will be absorbed through restructuring of the business and financial operations.  Student Affairs is restructuring executive-level staffing, Academic Affairs and the colleges will reduce the number of vice-provosts and associate deans. PSA is targeting administrative costs.

We also are consolidating similar units to cut administrative costs while protecting the programming. Examples include consolidation of all PSA youth programs under the Youth Learning Institute, and combining the Gantt Intercultural Center and Center for Student Involvement.

(See slide: Internal Cuts and Reallocations)

This slide of budget cuts by organizational groups shows that the smallest cuts were made to the core academia areas, with administrative and support units taking a disproportionate share of the cuts.

(See slide: 5.  Increase non-state revenues and move more units toward self-sufficiency)

An important long-term solution will be increasing non-state revenues. Beginning with the new fiscal year, E&G or PSA funding for many units will be reduced in a move toward greater self-sufficiency.

Many research centers and institutes will become self-supporting over time. We will work to increase county support for Extension units. Our PSA youth programs – which already generate significant revenue – will need to become even more entrepreneurial.

Student Affairs direct support for organizations, clubs and recreation programming will be reduced and replaced by revenue generated from fees.

There will be an increase in contribution from auxiliary units, part of the internal reallocations that will  help fund the Road Map.

(See slide: 6.  Focus the capital improvement plan on core academic, research and student priorities.)

Private fundraising efforts will be realigned to focus almost exclusively on scholarships and fellowships, faculty support, Lee Hall renovation, and unrestricted funds.
 
Almost two years ago, we announced an ambitious, $250-million plan to revitalize the central campus and add much-needed academic, research and student space. Obviously, the scale and timetable must be adjusted because of the current economic environment, but “adjust” does not mean “abandon.”

There is a capital improvement component included in the 2009-2010 plan. The Rhodes addition will be completed this summer for fall occupancy. The Board has approved a proposal to direct a portion of the federal stimulus funding toward the much-needed renovation and expansion of Lee Hall. The two projects that were deferred this year – Life Sciences and Academic Success Center – will be restarted, on a timetable to be determined. The budget will include some funding for maintenance, renovations and repairs.

(See slide: 7.  After implementing all cost-reduction and revenue opportunities,  address student fees.)

I know that many of you have sons or daughters attending Clemson, and we may have students or parents watching online – and you want to know what impact budget cuts will have on tuition.

Earlier today, the Board of Trustees approved fees for fall 2009. We always promise that we will explore all other opportunities for cutting costs and finding other revenues before we turn to tuition. We know that the recession has impacted many of our students and their families. Student jobs are hard to come by; parents may have lost wages; savings may have lost value; and credit is harder to obtain.

The increases approved today will protect academic quality while keeping Clemson affordable, particularly for in-state students who will benefit from the impact of federal stimulus funds as well as state-funded scholarships (which did NOT receive a budget cut this year).

These cuts and reallocations, added to the tuition revenue, will allow us to cover the budget cuts, protect academic quality, and make modest investments in the Clemson Road Map.

This is a responsible, strategic plan that provides flexibility to guard against further budget cuts and creates a platform for future recovery and progress.

It is not without pain:  There is no way that we could take a $45.7 million budget cut without impacting people and programs.  But it allows us to protect hard-won gains in academic quality and maintain momentum.

Category Three: Defining Clemson’s Future

This plan represents hundreds of hours of research, discussion and work, and many difficult decisions about priorities.  However, it does not represent the end of the task at hand. It is now time to move to Category Three and define a long-term future for Clemson University as a more privately-funded institution.

It would be naïve, perhaps even irresponsible, to place our bets for long-term recovery on increased state appropriations. There is no reason to believe that a 20-year trend in declining state support will be reversed when the economy rebounds.

Clemson University has survived through World Wars, the Great Depression, and multiple recessions. It has emerged stronger when faced with profound change, such as coeducation and desegregation. This year, we faced a challenge as great as any in our past – and our response must go beyond merely balancing next year’s budget.

This financial crisis can provide us with opportunities that we won’t have again – opportunities to redefine institutional priorities, to fix inefficiencies that we worked around when funding was better, to remove obstacles that limit creativity and collaboration, and to set a course for the future.

Where do you see Clemson 5 or 10 years from now? What kind of university will it be? The answer to that question will determine which faculty members are hired and what they are expected to do, which academic programs are added or grown and which are eliminated, what facilities we build, who is enrolled, and what we charge for tuition.

The events of this past year have helped lay a foundation for that kind of discussion. The time we have spent together scrutinizing budgets line by line, redefining priorities, engaging the campus in brainstorming and problem-solving, and even dealing with tough questions about administrative costs and the Top 20 vision – all of this has created a golden opportunity to decide together where we go from here.

With your good work, Clemson will seize the opportunity.