Topics, July 12, 2007
A wake-up call from Tallahassee
As most of you know, the Governor has asked state agencies, including the State University System, to be prepared to reduce their budgets by at least 4 percent, and possibly by as much as 10 percent, for the 2007-08 fiscal year.
Beyond that directive, we do not know very much from the state perspective. We don’t know, for example, whether the higher education system will be treated any differently from the prisons or the roads or the rest of the state agencies. Until August, we will not know the state’s revenue outlook going into the next academic year and whether the full 4 percent will be required – or whether more than a 4 percent reduction will be necessary. And we don’t know with any certainty whether this will be a one-year bump in the highway or a detour down a back road that stretches over two years or more.
What we do know is that 4 percent of all state-appropriated funds at the University of Florida could represent as much as $30-35 million. At the Health Science Center, 4 percent of state-appropriated funds amounts to approximately $6 million. Obviously, that is not a trivial sum, especially for an organization whose operating costs are so substantially devoted to personnel. In response, President Machen has judiciously called for a hiring freeze on positions funded by state appropriations and the Health Science Center is participating fully in that freeze. Extremely few exceptions will be granted and those that are will only be for positions deemed critical to accomplishing the core teaching, research or service missions of our colleges. On the positive side, we do not intend to freeze positions funded by grants, contracts, clinical practice or other non-state funds.
If a 4 percent reduction were applied uniformly to HSC colleges, the relative impact would vary significantly, as state funds make up a far greater proportion of overall revenue in some colleges than in others. In the College of Medicine, for example, a $1.87 million cut in state appropriations seems like a big number – and it is – but state funds represent only 6 percent of Medicine’s nearly $700 million budget. At the other end of the spectrum, state appropriations make up 65 percent of the College of Nursing’s $12 million budget, and so the impact on Nursing of a state funding cut packs a bigger wallop. The rest of our health center colleges fall somewhere between these two extremes (35-45 percent of operating budget from state funds).
In addition to the hiring freeze, the President’s initial plan to deal with the deficit contains other elements: a systematic emphasis on cost-cutting organized around a campus task force, shifting costs of activities supported by state funds to non-state revenue sources where possible and appropriate, and exploration of new sources of revenue.
Adjusting to a shortfall in state funding has to occur in the context of preserving the essential integrity of our core mission. As far as I know, you cannot teach students, conduct research or serve patients without faculty. Preserving opportunities to recruit the best faculty, retaining the best faculty, and rewarding and promoting the best faculty is perhaps the essential element of our core mission. That’s why we are committed to preserving pay increases for faculty who were promoted in the year that just ended. With that said, I encourage all of you to contribute your best ideas for cutting or containing costs in areas that are less essential to our core missions.
There’s also opportunity to shift some expenses to non-state revenue sources. The euphemism is: move it from “hard money to soft money.” But the current directive from Tallahassee ought to serve as a stark reminder that there is no such thing as hard money. Meanwhile, unrestricted endowment earnings and residual funds from indirect research costs can sometimes sit idly in accounts, awaiting a rainy day. Well, the rain has arrived. But these relatively unrestricted, flexible, malleable funds shouldn’t just be used to “tide us over” or shifted in a reflexive way to cover costs that no longer add value. Rather, they should be prudently invested in areas that will allow us to grow our core missions and enhance our productive capacity.
Finally, as I said in an earlier column, all of the Health Science Center Colleges, Centers and Institutes must continue to strive to diversify the sources of revenue that support our work. We’re fortunate that we are able to offer health-care services that patients and other consumers need and value. We’re fortunate that we have the brainpower and facilities to be competitive for research grants and contracts. And we’re blessed with more than our share of creative and entrepreneurial faculty and staff who can develop and commercialize their inventions. So at a time when we’re constrained by state resources, we ought to be ever more focusing on those innovative, entrepreneurial, marketable activities that result in generating new extramural resources.
All of these activities – and I’ve barely touched on them here – need to be diligently considered and the best options aggressively pursued. And with all deliberate speed. Because in a larger sense, this is not just a 4 percent funding cut, as bad as that will be. This can be seen as part of our university’s transition from a largely state-supported enterprise to one that is increasingly and primarily supported by non-state revenue sources. There are a number of factors underlying this view – the state government’s lack of revenue diversity, huge competing needs for what few tax dollars there are (think water, homeowner’s insurance, health care), and prevailing views of legislators on the role of higher education in Florida. Over the long term, what this means is that state support for our work may well continue to shrink. So we’ll need to find other ways to grow in size and pursue excellence, relying on our ingenuity, our hustle and our passion for the great work we do.
So I encourage you to think of this as more than a 4 percent budget cut. This is a wake-up call and a harbinger of things to come. The sooner we accept that reality and let it guide and motivate us, the better off we’ll be.
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