Va. budget hacks into VCU’s funds

Sarah King
News Editor

In response to a more than $880 million budget shortfall at the state level, VCU has begun immediately rolling out a new budget model lead by a steering committee selected by President Michael Rao.

“Now we face $8.75 million in cuts to the budget for the fiscal year that has already begun (fiscal year 2015), increasing to $12.25 million in cuts for fiscal year 2016,” Rao said, in a message to the VCU community following governor McAuliffe’s announcement on the shortfall.

McAuliffe mandated on Aug. 27 that as a result of the shortfall, state institutions must shave off 5 percent of their budget this fiscal year, and 7 percent the following. This announcement came more than a month after the state budget was finalized three months late due to partisan conflict in the general assembly.

Thus, when the Board of Visitors passed VCU’s budget for this school year last May, they did so without knowing how much the state would allocate state institutions in the 2014-16 biennium. Therefore, the BOV and university officials had to work off their best assumptions.

Now, despite the state budget having been established, there is not enough tax revenue coming in to fulfill what the government allocated for the next two years.

“Really for the first time in Virginia there was a reduction in revenues when we’re not in a recession, and they didn’t have enough money to fund what they had just passed,” said associate vice president for finance and administration and steering committee staff member Pamela Currey.

She added that state institutions have until Sept. 19 to submit their “savings plan.” The Board of Visitors will meet with Rao on Septhvvvv. 18, a meeting that was scheduled before McAuliffe made his announcement.

“We are also hopeful that you will look to alternatives to tuition increases to address the FY 2016 reductions as much as possible, as students and families continue to face challenging financial pressures as well,” Paul Reagan, the governor’s chief of staff, said in the memo to state institutions regarding their mandated budget cuts.

Currey concurred, saying that she does not think it is likely a mid-year tuition spike or hit to faculty salaries will take place. The Richmond Times-Dispatch also reported that Reagan said state funds provided for student financial aid were exempted in calculating the amounts each school will need to cut, and therefore should not be reduced by the universities.

“The problem was with the forecast. Basically folks at the state had assumed that a one time revenue was coming in from ’12 and included it in ’14-16, and it was like $1.4 billion,” Currey said.

“They thought they had it all when they passed the budget. However, when revenues came in what they noticed was a softness in the payroll withholding taxes, and they started realizing that this was something going on in the economy,” she added.

Currey said that this is the first time that an issue with the economy has spawned when a recession is not taking place, which is worrisome.

In response, a new budget model is expected to be in place by July 1, 2016, “that can withstand the vagaries of government funding and support the long-term sustainability” of the university according to Rao. The new model will run in conjunction with the existing model as a trial for the first year.

The steering committee appointed by Rao to spearhead the new model is co-chaired by VP of finance and administration William Decatur and interim provost John Wiencek. There are nine other members and four individuals on staff who represent each aspect of the MPC and MCV campuses. The university also hired Larry Goldstein, Campus Strageties, LLC as their consultant firm.

“Even before the budget cuts, VCU has initiated efforts to address the serious shortcomings of unreliable government funding combined with our incremental budget system,” Rao said.

Currey added that one of the problems with the current incremental model is that it does not allow much to occur at the departmental level. While deans and professors make decisions every day, they have the authority but not necessarily the financial responsibilities for those decisions.

“So we’re trying to pull apart how we can allocate resources so that people at the activity level would be incentivized to be more responsible for their actions. For instance, if the business school enrollment is underestimated, they don’t get as much money,” Currey said.

This way, there’s more of a cause and effect relationship between decisions and consequences, she said. Currey added that she does not think the university will follow any pure budget model, and will instead try to build a more efficient hybrid model.

To aid in this process, Rao sent out nomination letters for a budget task force last week. Thirty-four faculty representing each department were nominated by the president, although an official list has not been compiled because acceptances are still rolling in. A handful of students were also nominated to have a stake in the process.

“The task force will do the heavy lifting and make recommendations to the steering committee, and the committee will ultimately say yes or no, although I think they’ll mostly be in agreement,” Currey said.

Currey will staff both the steering committee and task force.

“This is a big deal. It could fundamentally change how we look at future allocation of funds to everybody. The task force will meet every three weeks for hours at a time for two years,” she added.

Reagan wrote that although each institution “will determine its lowest priority activities and savings actions,” reduction strategies should preserve “the known priorities or directives of the governor and protect priorities that are essential to Virginia’s economic growth as much as possible.”

Currey explained that the BOV “wisely doesn’t spend” every dollar they’re provided and that contingencies are set up for emergency situations as such. She said that despite the governor’s warning against utilizing “one time savings” it’s hard to avoid that in this instance with such an abrupt announcement in the middle of the academic year.

“We’re a university where we do things openly and we have a BOV that governs us and we can’t do things in a vacuum in three weeks. We need to have a deliberative process to do long term things,” she said.

Currey said that in the short term for this year, there are certain things the university can do because of the BOV’s contingency funds.

“You can wait to purchase things, put things off, use turn overs in vacancy positions; these are all things that I’m sure every state institution will do. A lot of the money that might have gone back into the university is instead going to be funneled back into the state,” she said.