Current Budget Issues - FY 2003-04 & 2004-05 Budget Reduction Process


Regarding Current Budget Issues
JANUARY 21, 2003

Harvey Perlman, Chancellor
University of Nebraska-Lincoln

Chancellor Perlman has invited inquiries regarding current budget issues from the campus community (email), to which he will respond periodically.

Dear Colleagues:

Well, here we go again, I'm afraid. Last week the Governor released his budget recommendation for the next biennium. The Legislature will now consider that proposal along with its own ideas and will not reach a final decision until May. The only thing we know for sure is that the state has a large revenue shortfall that will have to be addressed and it is most likely we will incur additional budget reductions in the next two years.

Here is what the Governor proposed: He proposed a 10 percent reduction in the base budget of the University for 2003-2004. Our current tax funded budget, system-wide, for the year we are in is $412 million. The Governor proposes to reduce that for 2003-2004 to $371 million. For the second year of the biennium, 2004-2005, he proposes a flat budget. Thus under his proposal the University would receive in general funds $371 million in each of the next two years. In more dramatic terms, this means we would need to reduce the system budget by approximately $41 million, which means for UNL a reduction of approximately $20 million. Other factors need to be considered: (1) we will have rising fixed costs over which we have no control; (2) these numbers do not include whatever additional revenue we would receive from a tuition increase, and (3) these numbers do not include a salary increase.

President Smith has stated that he intends to surface some of our proposed cuts before the Legislature approves a final budget so that no one will be surprised at what may flow from their decisions. Identifying reductions before we know with absolute certainty that they will be required runs some risks. However, I support President Smith's decision to do so.

Unfortunately, we are all too familiar with the procedures this campus uses for arriving at budget reductions. But let me describe some general time frames. I hope to have most of my recommendations for reductions finalized by at least April 1. I may decide to depart from my practice of announcing them all at once but announce them in stages. We have already asked deans and directors to begin planning for a 10 percent reduction. I intend to continue to believe that vertical reductions are required to sustain a viable University into the future. For example, a 10 percent horizontal reduction would decimate most departments of graduate students, untenured faculty, and operating dollars. The APC will then be in a position to hold hearings and arrive at their own recommendations. Whether they can begin their work yet this semester remains to be seen.

I don't need to tell you that this round of reductions will be very difficult. I wish there were words that could relieve your anxiety (or mine). My advice, for whatever its worth, is that reading the headlines over the next three months will be hazardous to your mental health as the Legislature considers a variety of different options. Just remember that we have a long way to go before we know what will actually be required and I can assure you many of us will be working hard to let the Governor and the Legislature know the consequences of further budget reductions to the University.

I am very proud of this campus in the way it has handled the reductions to this point. These decisions have not been easy and I know some of you disagree strongly with one or more of my decisions. But I think there is broad support for the proposition that we must preserve the central core of this University and its strengths for better times. We all know that almost every other state university, and many private universities, are facing similar issues. I take no comfort from "being in this together" because I know that there will still be winners and losers depending on the nature of the decisions that are made. As difficult as I know this will be, I ask your commitment to continue to move the University forward and your advice and counsel on how to do so in this context.

Again, you are free to e-mail me your thoughts, your concerns, and your suggestions. I will do my best to answer them in a thoughtful way.