Making cuts are difficult for anyone, especially for a new president. They are particularly hard when you had hoped to recommend pay raises. In fact, that's just what we were prepared to do here at the University of Houston-Downtown. We had planned on giving a mid-year raise conditional on increased enrollments and growth in the economy. And, enrollments have gone up.
So, we were in the process of preparing our budget submissions for the UH System and to the UH System Board of Regents with a 2% merit increase, when we received notice from the Governor, Lt. Governor, and the Speaker of the House requiring all Texas public universities to prepare for a 5% rescission for each of the two years of the budget cycle. The budget reductions are necessary because of declining state revenues from sales tax and declining revenues from oil and natural gas (prices dropped dramatically, but are heading upwards again).
UHD must now prepare for budgets cuts of nearly $1.4 million for each of the two years in the biennium (a total of roughly $2.8 million). Add in the amount of money that came from stimulus funds, about $1.2 million (which will disappear in 2012), and we must prepare for various cuts which total about $4 million. That may not sound like a lot, but we depend on state appropriations to fund our basic operations.
Nor do we have much turnaround time. As a system, we have to submit our plans by February 15th. Campuses have to submit their plans to the UH System office even earlier. So, we are already putting together plans for the first round of cuts.
At this past Friday's Convocation with faculty and staff, I assured everyone that we will pursue and an open and inclusive process in making these decisions. While we will not be able to give pay raises this year, it is important that we undertake the reductions in a careful, reflective, and planned way, securing jobs as much as possible, and expanding services to our students so that we can continue our growth. UHD currently has just under 13,000 students and we are growing every year.
The new base period begins this summer. Enrollments achieved during the base period will drive funding for the upcoming FY 2012/2013 biennium. So, UHD will continue to grow its enrollments and we will qualify for more funding through state appropriations. We will hire new faculty and we will hire the staff we require to support student success. UHD is known for its small classes, for the attention students receive from faculty and staff, and for our focus on helping students succeed. That won't change. If anything, we intend to do an even better job of retaining and graduating students.
Also, we will do everything we can to provide pay raises next year. Going two years without pay increases damages faculty and staff morale. It would undercut our efforts to recruit top talent and hurt our ability to retain our highly committed and high-performing faculty and staff, who are the heart of UHD and who are critical to our success.
Our situation reminds me of comments by John F. Kennedy made in a speech in Indianapolis on April 12, 1959. JFK pointed out, that the Chinese character for the word 'crisis' (wei ji) contains two concepts. One represents 'danger,' while the other represents 'opportunity.' In times of great difficulty, whether severe crisis or simply difficult challenges, some recoil from fear of danger, while others prosper by pursuing opportunity.
At UHD, we will grow stronger, for we have a strong foundation to build upon. We have already begun a planning process to decide on areas of strength we want to expand. These discussions will guide us as we begin to make the tough decisions ahead.
We are not going to take across-the-board cuts. Rather, we will pin-point reductions. While cuts for the current year (FY2010) won't be easy, they should be relatively straight forward. We will use savings from lapsed or vacant positions, unallocated funds that would have been distributed later this year, along with the monies that would have gone to pay increases. That just about gets us to $1.4 million.
Reductions for FY2011 will be more challenging. This year enrollments are projected to grow over last year by about 4%, so we need to provide sufficient class sections, advisers, transcript evaluators, and support staff. Also, we are initiating classes in a new educational facility at the HP campus near Hwy. 249 northwest of Houston. The University Park, owned by Lone Star College System will house several universities, including UHD. We will begin classes there this summer and expand classes in the fall and spring.
Moreover, it is very important that we begin some of the initiatives identified through the planning process, particularly those that will help retain and graduate more students, ensuring that they receive the high-quality education for which UHD is known.
So, we actually need more money and more positions at the same time we will have less. This is a conundrum confronting many higher education institutions throughout the country. How you do provide more with less?
Clearly, we can't do it the same way we've done it in the past. We have to change our processes, find efficiencies, reduce low-enrolled courses, expand enrollments for some classes without affecting quality, provide more classes in the evenings and weekends, offer more online and hybrid courses, institute cost savings, etc. And, we will accomplish these reductions while also improving the quality of student learning.
We have decided to institute two approaches to help us decide on the budget reductions. First, I will appoint an Efficiencies and Budget Reductions Task Force composed of representatives from faculty, staff, and some students. I have already asked constituent groups to submit nominees. The Task Force won't have enough time to draft the Feb. 15th response to the Governor and the LLB. That will be developed by the vice presidents with me and shared broadly throughout the campus. Rather, the Task Force will review the budget, examine data on space and staff utilization, cost centers, expenditures per area relative to peers, etc. The Task Force will recommend short and long-term solutions that we can take as a university to reduce costs while also expanding services and pursuing new initiatives and priorities.
Secondly, we will ask employees to submit their suggestions for cost savings. We hope to receive many helpful recommendations. We will implement all those that reduce costs and strengthen the institution. The faculty or staff member who submits the idea which results in the most savings will be honored next year.
The U.S. economy will pick up and the state budget will improve. On Friday (Jan. 29), we learned that nationally the economy grew by 5.7% in the fourth quarter. This is the second quarter in a row that we have had some growth. The previous quarter the economy grew by 2.2%. So, we are seeing good signs.
The Dallas Fed predicts that by the end of 2010 Texas will have a net increase of 100,000 new jobs (over and above those lost during the recession). According to projections by the Greater Houston Partnership, Houston should complete the year with a net increase of 10,000 new jobs.
Houston is doing well and so is UHD. We may be making reductions, but we will use them to grow stronger. As we embark on the cuts, I suggested to our faculty and staff that we consider a basic principle from Jim Collin's book, Good to Great, which is that you must focus your resources for success. As anyone who has ever grown roses knows, you can't just let them grow unattended. To produce strong, healthy roses, you must prune the bushes from time-to-time.
That's what we will do. We will trim the bushes. And, I assure you, we will produce beautiful roses here at UHD. It is an opportunity to examine the institution and make improvements. And, we will grow stronger and better in the process.