One-time stimulus funds to temporarily help specific projects

TTU President Bob Bell and Claire Stinson, vice president for Business and Fiscal Affairs, met with the campus budget advisory committee, the executive advisory committee and academic deans on Friday afternoon to discuss what they learned from the Tennessee Board of Regents quarterly meeting held Thursday, March 26.

They provided an overview of the budget reductions the university is expected to face and outlined the challenges and opportunities that lie ahead in planning the university’s budget reductions.

“Within the next 90 days we will have to make some commitments and submit permanent reductions in our budget,” said Bell. “Within the next 30-40 days we need to know what those will be.”

The budget proposed last week by Gov. Bredesen will reduce TTU’s permanent state funding by almost $12 million. Campus officials are making plans to address those reductions at the same time federal stimulus funds will offer some temporary resources.

The campus can expect to see an influx of $12 million over the next two years related to the federal stimulus package. However, those funds will be specifically allocated and cannot be used for anything related to recurring funds. Even with those stimulus dollars, campus officials are preparing now for permanent state funding reductions. After two years, the campus will not receive the $12 million in stimulus funding, and will have to conduct business with a $12 million reduction in permanent state funds.

STIMULUS FUNDS

TTU dealt with a budget reduction at the beginning of this fiscal year ($2.7 million), and then a reversion where more money ($1.6 million) was taken back by the state permanently. But now that money and more is coming back within the next 60 days as one-time money — with strings attached — in the form of stimulus funding and state “maintenance of effort” funds (about $4 million). While many restrictions will be placed on how those one-time funds may be used it is anticipated TTU will be able to carry these one-time funds into the next fiscal year.

Maintenance of effort (MOE) funding, is state funding tied to the federal stimulus program. They are dollars the federal government requires the state to provide in order to receive stimulus funding. For higher education, that means the state must restore higher education funding to the levels it provided for the 2007-08 fiscal year. The caveat is that once the stimulus money goes away in two years, so does the MOE money.

Beginning this July 1, the state will begin a major, permanent reduction of regular state funding for higher education (not counting the stimulus or MOE funds, which are one-time monies). The governor’s planning assumptions for the next several years are that universities will NOT be back up to last year’s funding level any time in the foreseeable future.

In his budget address to the legislature, Gov. Bredesen stated higher education dodged a bullet with the stimulus funding. What that means is TTU now has a two-year cushion of funds that will help the university migrate to its new, lower permanent state funding level in a few years. Campus officials still do not know what all the constraints will be for the stimulus and MOE funds. They have been told money cannot be used to build labs, but it can be used for energy improvements.

“At each of the budget hearings held recently, I mentioned the different categories of hurricanes this budget scenario might represent. We are at the category 5 level,” Bell said. Despite the $12 million in stimulus and MOE funding the campus will receive, TTU must still plan for a new permanent budget reduction within the next 90 days. That will require cuts of almost $12 million from the permanent budget, or about 15 percent.

“To be clear — stimulus and MOE funds will help us in the next two years — but not in our permanent budget,” Bell said.

STILL UNKNOWN

Here’s what campus officials still do NOT know:

• A tuition increase could help offset some of that $12 million reduction IF an increase is passed. However, tuition rates will not be set until June, and reduction plans must be submitted before then. Tuition increases over the next 3 years and expenses reductions over the next two years will be needed to bring the university to a budget that reflects the $12 million reduction in state funding.
• Uncertainty still surrounds the constraints and limitations that will be attached to the stimulus and MOE funds.
• The governor submitted his proposed budget to the legislature last week. The legislature still may change the budget or pass bills that could affect higher education.

WHERE WE GO FROM HERE

“We have challenges ahead — some short term, some long term,” said Stinson. “We will be implementing our Tier 2 reduction plans — those already submitted by all the units. Over the next few weeks we will begin evaluating every line of that plan to forecast the implications of each reduction. Then we will develop a plan to address our budget scenarios for the next four years.”

“We are currently in the last year of our TBR strategic plan, so as we prepare for our next five-year strategic plan, we will incorporate budget planning to ensure the two are tied together,” announced Bell.

Stinson then outlined short-term and long-term objectives to prepare for the budget.

Short-term Steps:

• Now through July 1 campus officials will test all reduction plans previously submitted in the Tier 2 reduction scenario and finalize the permanent budget. One question to be asked while evaluating those plans is whether they are strategic, permanent choices or ones that will just further common misery. “We cannot afford to implement a campus-wide cut again. We need strategic changes,” Bell said.
• Campus officials will review the recommendations submitted by the eight task forces (administrative costs, printing services, athletics, extra service pay/reassigned time, custodial services, scholarships, non-credit programs and possible enrollment caps) and compare them to the reductions submitted for Tier 2 to see where strategic changes can be implemented.
• The voluntary buyout plan began March 30. The goal is a reduction in force of approximately 40 positions.
• By June 1 TTU should receive about $4 million through stimulus and MOE funds. The university will be expected to submit a spending plan based on the constraints provided for the two years money will be available.
• By the end of June campus officials should have some idea of what the tuition increase will be and how the TBR plans to gradually implement the tuition cap removal.
• The October budget revision will provide the most realistic picture of what the university’s actual budget will be and how stimulus and MOE funds may be used.
• Faculty members are encouraged to look at how partnering with other agencies receiving stimulus/stabilization funding could support bringing additional funds to the university. Partnership and research dollars are likely more available as a result of the extra funding agencies like NSF, NASA, NIH and Oak Ridge will be receiving.

Long-term Steps:

• Implement a new university strategic plan and tie it to the financial plan.
• Migrate from the existing strategic plan and create a five-to-10-year strategic planning model taking into consideration the situation we now face.

Questions to be considered in these planning models include:

• Should the campus increase, decrease or continue its current rate of growth?
• What new programs investments should be made in?
• What programs of excellence or distinction should be maintained and strengthened?
• How can the campus master plan be integrated?

Watch the Tech Times and campus e-mail for more information as the budget and planning process continues.