- Home
- Feb. 25, 2020 | Budget Reduction Efforts Progressing
- Title:
- Feb. 25, 2020 | Budget Reduction Efforts Progressing
- Date:
- 2020-02-25
- Category:
- Presidential Memos
- Harvested from:
- https://www.uidaho.edu/president/communications/presidential-memos
- Type:
- text
- Digital Format:
- text/html
- Reference Link:
- https://www.lib.uidaho.edu/digital/fridayletter/letters/president_memo_2020-02-25.html
Please note, archived email messages are in a variety of formats and may not display as originally intended. Some images, links, and functionality may be broken or out of date.
Feb. 25, 2020 | Budget Reduction Efforts Progressing
TO: University of Idaho Faculty, Staff and Students
FROM: Scott Green, President
DATE: Feb. 25, 2020
SUBJECT: Budget Reduction Efforts Progressing
Many pieces of our budget-reduction plan are in play as we continue through the spring semester. I have visited with several colleges and units and met with staff and faculty to review the initiatives and provide up-to-date information on the status of each. I know this is a lot of information, but my goal of transparency throughout this process requires it. We will also post this on my webpage for your reference at any time. The hard work continues to be done with three primary goals in mind:
- Balance revenue and expenses;
- Rebuild and maintain adequate reserve funds;
- Maintain and build on an exceptional student experience.
In the meantime, some of the decisions are approaching important deadlines and the results will help as we reset and prepare to move beyond the budget challenge. I appreciate your patience, will continue to review feedback and take into account the constructive input from the university community.
Early Success
While we are focused on setting the FY21 budget, it is important to recognize the great work done since July 2019. You acted quickly, putting the institution above your own personal agendas, implementing $14 million in difficult spending reductions. The hard work, sacrifice and commitment of many has put us on track to realize those savings. These cuts will not eliminate our deficit, but they will greatly reduce it. They have slowed our cash burn rate, giving us the time to prepare a long-term plan for balancing our revenues and expenses, rebuilding our reserves and identifying new sources of revenue to fund our priorities.
Voluntary Furlough
The Voluntary Furlough idea, which came at the request of our faculty and staff, has proven popular and has brought a certain solidarity as each of us finds a way to contribute to the future of this institution. As of Jan. 25, 5,231 hours of furlough have been realized, totaling $274,253 across all funding sources. As you evaluate your spring calendar, if it is personally viable, please consider helping us meet the remainder of the state-directed holdback. The program is open until the last working day of the fiscal year, Friday, June 26. Visit the furlough tracker to find up-to-date information on our progress.
FY21 College and Unit Budgets
All vice presidents, deans and unit leads are working on thoughtful and thorough budget reduction strategies that have the least impact on our students and our ability to deliver on our mission of teaching, research, discovery and service. These proposals are informed by other cost-saving tactics, like retirements and separations as well as program prioritization.
Some non-academic units have submitted budget proposals and all academic units continue to work through the process. We should have all proposals in the coming weeks.
Voluntary Separation Plans
We have finalized agreements for the Voluntary Separation Incentive Program (VSIP) and an Optional Retirement Incentive Program (ORIP). Final numbers include:
- 36 VSIP agreements totaling $2,590,536 in base salary;
- 76 ORIP agreements totaling $5,855,895 in base salary;
- 112 total agreements totaling $8,446,431 in base salary.
We will realize fringe savings of $3.1 million in connection with these agreements. Some of these positions will be refilled and we need to fulfill the incentive promises associated with these agreements. Consequently, we will not realize the entirety of the $11.5 million, but a portion of this will be available to address the budget shortfall. While these agreements help on the financial side, we are losing a lot of institutional knowledge in this dedicated group of employees. We wish each person well; please join me in thanking them for their service to our University of Idaho.
Outsourcing
The facilities outsourcing committee has reviewed five proposals from outside companies to support custodial, grounds and maintenance operations across campus (Auxiliary Services, Administrative Operations, Facilities Services and custodial staff at the Student Rec Center). The proposals ranged from management only to full outsourcing. The committee considered the concern and input from our community and is only recommending options that allow all U of I employees to remain as such. The committee will make a final recommendation in the coming weeks.
Texas Book Company will begin to manage textbook sales at the VandalStore. We lost $130,000 managing our textbook sales last year. Texas Book Company will pay us at least $160,000 annually (or 11% of textbook sales, whichever is greater). They have buying power that should have positive results. This is a nearly $300,000 enhancement to our bottom line, which will improve the university’s financial position. All other functions of the VandalStore will remain unchanged.
Public/Private Partnership (P3)
I talk about Public/Private Partnerships at every opportunity. Again, this should not be confused with outsourcing. This is a financial engineering tool that allows an entity, like our steam plant, to be leased long term to an outside company. The full lease payment (often a more than 30-year agreement) is paid up front. While we will need to maintain the cash for annual purchase of steam, the remaining money would be invested in the priorities of the university.
We continue to work through this process and a recommendation will be finalized later this spring.
State Insurance Versus Self-Insurance
After thorough analysis, our university health benefits will remain self-insured, for now. While looking for cost savings by moving to the state’s insurance plan, our review indicated that the move would ultimately cost the university as much as $5 million more. This is due to how the state treats employees who waive medical coverage. (The state still requires payment into the system for these employees.)
Other Post Employment Benefits (OPEB)
Changes in accounting standards regarding how retiree benefits are reported diminished the university’s net position by over $30 million in FY18. An OPEB advisory group proposed ways to meet our State Board of Education reserve requirements while still taking into consideration the needs of our employees and retirees.
We have solicited feedback from the leadership of the University of Idaho Retirees Association, Faculty Senate, Staff Council, our Distinguished Professors, as well as the President’s Cabinet, Deans and the Center Executive Officers. Feedback to date has been largely supportive, and the proposal deemed fair given our financial situation. In short, there are no changes to the benefits of those already retired and no changes to pre-Medicare benefits; however, post-Medicare benefits for individuals in Tiers II and III who are not eligible to retire by Jan. 1, 2021, will be phased out over four years. In many cases, Medicare supplement plans are financially superior to the university plan and we expect to provide counselors to help employees pick the best plan for their situation. The sick leave buy-out benefit for Tier IV will also be discontinued for new employees who join the university after June 20, 2020. The benefit will stay in place for existing employees.
These changes will reduce our OPEB liability by approximately $10 million. They alone will not bring our reserves into compliance with State Board of Education requirements but provide a substantial improvement. The next step is to work with the Faculty Senate to update our policies to conform to the new benefit structure. We expect to finalize these policy changes and implement the recommendations shortly.
Sustainable Financial Model Working Group
This first working group has nearly finished providing its feedback on a new financial model. A white paper describing the model will be reviewed by the working group and submitted to our community for comment. This white paper will not address the immediate budget reduction tactics and programs; this group was tasked with recommending an overall financial model that will better fit the long-term financial needs of the university.
Next Steps
I continue to be grateful to the entire Vandal Family for your dedication and selflessness as we move through these challenges. It is not easy. The conversations are hard and the decisions are harder. Keeping the students and our university at the forefront of our decision-making is vital to our success. And, we will need to be kind, empathetic and supportive of each other as we all adjust to the changes.
We will not let these challenges define who we are, as we have much to be optimistic about. The University of Idaho has a tremendous foundation on which to build. We are identifying new revenue sources to invest in strategic areas. We have the brightest students in the state — hard-working Vandals demanded by industry. We conduct world-class research that solves real problems. Together, we will work through our challenges and come out the other side stronger for it.
Thank you again for putting the financial health and strength of the University of Idaho first.
Scott Green
President
president@uidaho.edu
uidaho.edu/president