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Update: State Budget Deficits and UMD budget cuts
Dear University of Maryland community,
I write to update you on how the state's budget shortfalls will affect the University and each of us individually.
The cuts I told you about last month were ordered by outgoing Governor O'Malley to balance the books for the rest of this fiscal year (FY15, ends June 30, 2015). For UMD, the one-time cut was $15.6M. We responded as equitably as possible: (1) furloughs for faculty and staff, (2) mid-year tuition increase for students, (3) savings from a hiring freeze, and (4) return of unspent funds.
In the interest of fairness, we apportioned furlough days by salary level. State-funded employees who earn less than $60K—about 40% of our workforce—will have no furloughs; those who earn $60K+ to $100K will have 1 furlough day; $100K+ to $180K will have 2 furlough days; and those that earn $180K+ will have 3 furlough days. Details forthcoming from University Human Resources and at www.uhr.umd.edu.
Incoming Governor Hogan's budget for FY16 (starts July 1, 2015) provides a 1.3% increase for the University System of Maryland, or $2.8M more for UMD. This increase to the revenue side of our budget is welcome and appreciated. It shows that he values higher education as essential to the state's future.
However, the state still faces a $750M structural deficit in FY16. Faced with the formidable task of putting the state's fiscal house in order, Governor Hogan's FY16 budget also requires all state agencies to (1) make permanent some of his predecessor's one-time cuts; (2) rescind a 2% cost-of-living increase, effective June 30, 2015; and (3) withdraw a 2.5% merit increase due to go into effect on July 1, 2015.
Hence, the expense side of our budget next fiscal year—which includes on-going mandatory costs for health benefits, debt service, financial aid increases, etc.—will decrease by $39.3M. This figure could go up or, optimistically, go down, depending on new state revenue projections and actions by the General Assembly over the next three months.
Here is our plan to live within our diminished means:
(1) Eliminate vacant positions, saving $6.6M.
(2) Continue the 2% mid-year tuition increase, generating $3.1M. Please note this is not a new increase as reported in today's Diamondback. It simply represents continuing revenue from the mid-year increase I announced on January 16. To put this in perspective, we had four consecutive years of zero tuition increases (FY07 to FY10). UMD's in-state tuition and fees are now near the bottom of all our peer public research universities, substantially below the peer median.
(3) Faculty and staff bear the brunt of the reduction. The giving back of the cost-of-living increase and the foregoing of any merit raises for UMD employees will save the state $29.6M. To put it in perspective, we had four consecutive years (FY10 to FY13) of zero merit raises, in addition to furloughs. We are now more at risk of competitor universities "raiding" our best people.
In FY13 and FY14, there were also a series of smaller, state-mandated cuts, which for UMD totaled $11M. This has made it more difficult for us to absorb the current cuts to operating expenses.
When the General Assembly designated UMD the state's flagship, it charged us to be "equal to the best" among public research universities in the nation. Over the past 25 years, UMD has risen to the ranks of the top 20 of flagships.
But today, some of our premier programs are at risk of slipping because the resources required for academic excellence are not equal to the demand. To preserve our quality and competitiveness with our peers, we need more faculty and smaller classes; more academic advising and career-readiness programs; more opportunities for student research and internships; and we must upgrade teaching facilities and learning technologies.
Remarkably, our University continues to over-achieve despite these fiscal constraints. We enrolled the largest, brightest, and most diverse freshman class ever last fall. Our seniors are graduating at a record rate. Faculty research grants are rebounding, on track to match pre-sequestration levels. There is a construction boom on campus. Philanthropic giving reached a new record last year, including for financial aid. Athletics is ascendant, its fiscal future secure in the Big Ten. UMD is an engine for innovation, economic growth, and quality of life in Maryland—all key priorities of Governor Hogan.
As we right-size today's budget, we must also plan for tomorrow's University. I will soon announce task forces comprised of faculty, students, staff, and alumni. Their charge will be to position UMD to be "equal to the best"— a top 10 flagship university—in the "new normal" of constrained state funding. They will recommend strategic priorities for 2020 and beyond, align budgets with priorities, and develop new ways to innovate, cut costs, and generate new revenues.
The University's continued progress would not be possible without the indomitable esprit, capabilities, effort, and loyalty of every one of you. Thank you for shouldering your share of the sacrifices and doing your part to keep our University on its upward trajectory.
Wallace D. Loh
University of Maryland