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	*Office of the President
*

	October 7, 2013



To: The UVM Community

From:Tom Sullivan, President
David Rosowsky, Provost and Senior Vice President

Re:***The Budget:****FY15 and Beyond*

    We are writing to update you on the status of planning for next
    year's budget (FY15) and beyond.The Board of Trustees will consider
    for the first time the parameters of next year's budget on October
    25 -- but we want to share an update with you now to offer a
    preliminary preview of the fiscal landscape ahead.There will be
    budgetary discussions with a wide range of governance and other
    campus leaders throughout the academic year.

    The University has been managing through financial challenges for
    some years. The challenges continue, but they are
    manageable.Institutions across the country are facing similar
    issues.Fortunately, UVM has not suffered the drastic and rapid
    reductions that many other colleges and universities have been
    forced to implement since the recession began.

    We are building a budget that balances our need to invest in
    academic quality -- including our people -- with the compelling need
    to keep UVM financially accessible for our students while ensuring
    fiscal sustainability. There are challenges, tradeoffs, and hard
    choices to be made.There will be dialogue with the campus community
    in a variety of forums during the academic year that will inform the
    decisions that will need to be made to achieve a balanced budget for
    FY15.

    It is important that this balanced budget reflects and supports our
    strategic action priorities:

     1. "Access to Success":Promoting affordability, financial access,
        and academic support for students
     2. Promoting a culture of advancing academic excellence and
        cultivating talent
     3. Identifying necessary investments to ensure a bright future
     4. Instilling an institutional commitment to efficiency and
        effectiveness that optimizes the use of facilities, technology,
        assets, and shared services

    There are multiple factors affecting the budget, including:

      * Responding to rising and unpredictable health care costs
      * Coping with declining indirect cost recovery from grants due to
        the federal sequester and related grant productivity
      * Providing financial aid funding that keeps UVM affordable for
        our students
      * Recognizing our limited capacity to expand undergraduate
        enrollment while maintaining quality
      * Focusing on the need to increase student retention and
        graduation rates
      * Investing in upgraded academic facilities and funding deferred
        maintenance in order to be a university of choice
      * Sustaining competitive salaries and benefits

    As we all know, our largest source of income is tuition, and our
    largest expense is employee compensation -- a dynamic relationship
    that demands careful attention, especially now.

    Although the FY15 budget won't be finalized until May of 2014, we
    want our University conversation to begin now, much earlier than
    normal.Through a combination of strategic choices, we believe that
    any shortfall can be reduced to a manageable level that will avoid
    compromising our academic quality, mission, and reputation. Clearly,
    some difficult decisions will need to be made in order to sustain
    and advance quality and make necessary investments.Our goal is to
    keep overall unit reductions below those we experienced in FY14.The
    hard work of last year, combined with the steps we will take for
    FY15, should allow us to reach that goal.

    As we approach this task, we will be mindful of the need to mitigate
    significant negative impacts on academic quality and individual
    members of our community.We are confident that our community is
    resourceful and will be successful regarding the task at hand.

    Potential savings across the institution will be identified prior to
    distributing budget targets to units later in the fall.A few
    examples of steps to be considered and tradeoffs to be discussed
    include:

      * Sustaining a salary and wage pool that supports our competitive
        position, recognizes performance, and allows us to recruit and
        retain highly talented faculty and staff
      * Making moderate adjustments to our benefits package, whose costs
        continue to rise, often unpredictably
      * Raising revenue targets for selected units that have the
        potential to meet those goals
      * Expecting the UVM Foundation to advance private fundraising to
        record levels and beyond
      * Raising student retention levels
      * Eliminating vacant positions where feasible
      * Proposing a package of tuition and fees sufficient to create
        opportunities for much needed investments while remaining true
        to our commitment to financial access for students

    Steps such as these will allow us to reduce expenditures and the
    levels of reductions to individual units.We will continue to employ
    a combination of expense reduction, revenue generation, and
    strategic investing, guided by the priorities of the Strategic
    Action Plan.As articulated last year, any reductions will be
    differentiated rather than across the
    board.http://www.uvm.edu/president/?Page=strategicplan.html
    <http://www.uvm.edu/president/?Page=strategicplan.html>

    Beyond FY15, the implementation of an Incentive Based Budget model
    will make our processes even more transparent and predictable,
    giving all units greater incentives and freedom to manage more
    entrepreneurially and effectively.We expect the implementation of
    this model to be completed in two years.Also, in the interest of
    greater accountability and effectiveness, a more formalized
    Administrative Unit Review Process is being established later this
    semester, which will complement our existing Academic Program Review
    Process.

    There will be numerous opportunities for further discussion as the
    budget picture becomes clearer.  We also recognize that there are
    some outcomes that will need to be resolved through the collective
    bargaining process.We will keep you informed as progress is made
    toward finalizing the FY15 budget. By working together and
    supporting each other, we will address successfully our budget
    challenges and move forward productively.

    Cc: UVM Board of Trustees




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