Regents Approve FY11 Budget Request, FY10 Reduction Plans

The Board of Regents yesterday approved the Fiscal Year (FY) 2011 budget request for the University System of Georgia (USG) that includes dollars to support new students as well as the regents’ strategic thrust to expand medical education. The budget request totals $2.2 billion, a 6.8 percent increase, or $140.7 million, over the original FY 2010 base budget of $2.08 billion. Separately from the request for new dollars, the board also took action to approve measures to meet ongoing budget reductions, including employee furloughs and changes to employee health benefit plans.

The regents also approved a FY11 capital budget request of $275.6 million, which includes $19.7 million in equipment for six new facilities, $6.5 million in infrastructure needs for two facilities, $157.9 million in new construction or renovation for 10 projects designed and ready to be built, $68.9 million in both design and construction funds for seven projects, and $22.6 million for the design only of 11 projects.

The capital request also includes $75 million in funds for major repair and rehabilitation of existing System facilities.

“We are working to serve a significant and ongoing increase in student enrollment with a financial resource base that is certainly not keeping up with the growth in our student population,” said Chancellor Erroll B. Davis Jr. “Our challenge is premised on the fact that Georgia will need all of the college graduates we can produce – and more. Georgia will need everyone it can find with the education to move this state forward and continue its economic vitality and growth.”

The board’s approval of changes in employee health benefit programs and mandatory employee furloughs were necessary, according to USG officials, to help meet a five percent withholding by the Governor’s Office of Planning and Budget (OPB) of the System’s FY10 state cash allotments, which totals $115 million.

Along with all other state agencies, the USG was instructed by OPB to include with its budget request three reduction plans of four, six and eight percent. The three reduction plans, which include the three mandatory furlough days, total $94 million at the four percent level, $134 million at the six percent level and $176 million at the eight percent level.

Looking in detail at the FY11 budget request, the regents approved a request for $140.7 million in new dollars. This includes $107.8 million for student enrollment increases in fall 2008, $5.7 million in funds for the operation of new building space in the system, $21.3 million for increases in the employer share of health insurance premiums, $4.4 million in benefit costs for USG retirees, $900,000 to continue the Regents’ continued two-year-old effort to expand medical education, and $625,000 in new dollars for the Georgia Public Library Service.

Vice Chancellor for Fiscal Affairs Usha Ramachandran said that the increase of $107.8 million in the request is a function of the System’s funding formula, a mathematical formula that factors in student credit hours to arrive at needed state funding to support student instruction. “For the new budget request, the formula increase is based upon an enrollment increase of 5.6 percent, which generated an increase of 398,000 in the number of credit hours students took,” she said.

The new dollars, if recommended by the Governor and approved by the General Assembly, would provide critical state support for these new students. However the new funds are based on fall 2008 enrollment, not the students enrolled in fall 2010, when the funds will be available. “We appreciate the support of the Governor and the General Assembly for the formula funding, and recognize how important it is for us as stewards to be extremely efficient in the use of these dollars,” Ramachandran said.

The System-level reduction plans approved today by the regents spell out how reductions will be accomplished at each of the percentage levels requested by the Governor. While these three plans were approved in concept, the reality of the current five percent withholding of state funds required the board to approve today actions that will take place in the coming months to meet what is a new $115 million reduction in the USG’s FY10 state appropriation.

Therefore, the board approved six mandatory furlough days for faculty and staff. This will affect all 40,000 USG employees, except the lowest paid (annual salary of $23,660 or lower), and is the equivalent of up to a three percent pay cut. These six furlough days will be implemented over the remainder of the FY10 fiscal year, but will, according to Davis, not affect classes or employee retirement plans.

The board also approved changes in health insurance programs affecting almost 5,000 employees enrolled in the USG’s indemnity plan, which will be eliminated. Other changes will encourage retirees to move to Medicare Plan B, seed the high deductible PPO plan to encourage more employees to switch to this plan and make other structural changes in the System’s health insurance plans. These will go into effect this fiscal year.

These two changes – furloughs and health care plans – will generate $43.5 million of the $115 million currently being withheld and are part of the four, six and eight percent reduction plans that will be submitted to OPB. The remaining $71 million of the current $115 million being withheld from the USG will be generated at the institutional level and could include layoffs and new employee furloughs, internal reorganizations, an increased focus on energy conservation and the elimination of low-enrollment programs.

These actions at the system and institutional level will meet the $94 million four percent reduction plan amount.

To reach a six percent reduction level ($134 million) the System will:
Look to institutions to impose additional furloughs, new layoffs of employees, the elimination of positions and other actions institutions can identify to generate savings.

To reach the eight percent reduction level ($175 million) the System will:
In the spring semester of 2010 increase the institutional mandatory fee first implemented in January 2009 by $150 at the four research universities and some comprehensive institutions; by $100 at all other comprehensive four-year institutions; and by $75 at the state and two-year colleges. The changes to the mandatory fees will result in a cumulative total of $250, $175, and $125.
Place a moratorium on other institutional mandatory student fee increases with the exception of public-private venture projects for FY11.

“These are difficult reductions for all,” said Davis. “We are spreading the pain among our employees and withholding the direct financial pain to our students as an absolute, last resort. But we are committed to serving our students – all of our students – with continued high academic quality.”

Ramachandran was joined in presenting the budget recommendations by Linda Daniels, vice chancellor for Facilities, Wayne Guthrie, vice chancellor for Human Resources and Tom Scheer, associate vice chancellor for Life and Health Benefits.

Yesterday’s actions on the FY11 operating and capital budget requests now go to OPB for incorporation into the overall state budget recommendations the Governor will present to the General Assembly in January 2010. Any action regarding reductions at the four, six and eight percent levels will depend upon the final decisions by the Governor and General Assembly.

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