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Memorandum

Date: October 2, 2002
To: Members of the University Community
Re: Implementation of Budget Reduction Plans

The news media have been reporting that the State's financial condition continues to deteriorate. The Governor requested and the University and all other state agencies submitted plans on September 20 for new budget cuts (in addition to the reductions already built into the current year's operating budget) of 7%, 11%, and 15%. At the full 15% level, these new cuts may amount to a $39 million budget reduction during 2002-2004. When added to previous general fund reductions, the total reduction over two years may amount to as much as $97 million–a historic level of insufficiency in State support. The State required plans for these cuts in hope of addressing the previously projected $1.5 billion shortfall. Last week, the Governor announced that the new estimate is certain to be "considerably" more than $1.5 billion.

This new financial projection forces us to take steps now to effect substantial reductions in our reliance on General Fund (i.e., tax) appropriations in addition to the constraints implemented already. Seeking ways to create the least possible difficulty for students, faculty, and staff, I have come to believe that it would be unwise and imprudent to delay taking inevitable steps to meet the level of these further reductions. Cuts in expenditures now can protect against the most damaging effects of possibly larger future cuts as the State moves to close a budget gap that the best sources available to us believe can only grow larger as time passes.

Accordingly, I am asking Messrs. Block and Sandridge to act now to approve or disapprove specific elements of the previously prepared 15% budget reduction plans with the exception of any proposal that may involve layoffs, furloughs, or some program of enforced early retirements. I will recommend to the Board of Visitors on Friday that it authorize reasonable tuition surcharges at mid-year as a means to generate the dollars to protect faculty and other positions as the Governor moves forward with the steps he is required by law to take to prevent a year's-end deficit. Students seem generally to support surcharges, as they have repeatedly supported tuition increases to protect the University's core quality at times when the State could not manage its affairs. The Cavalier Daily endorsed them yesterday. I believe that the longer-term damage that will inevitably be done by cutting beyond what is absolutely necessary into essential and excellent academic programs is in neither the University's nor the public's enlightened self interest.

Until we know where we are after the Governor imposes additional cuts in about two weeks, we will continue the hiring freeze. As positions become vacant, they must remain vacant, unless they are absolutely critical to our core programs and have undergone a complete process of appeal. The vice presidents have authority to act when deans and other appropriate officials propose special hiring actions, but generally speaking exceptions will be few, far-between, and uncommonly well justified. We will take other steps as the true extent of the State's problems comes to be known.

We will use other resources, including $4 million authorized by the Board from the unrestricted endowment and $2 million from other sources, to address threats to academic quality as we are able to. As one example, I should let you know that Ms. Wittenborg and her staff are now working with students to identify the best way to remedy the short-term problem of reduced hours of operation in the Alderman Library and perhaps other core library facilities. We are prepared to supply funds sufficient to maintain library hours consistent with graduate students' needs for access to the collections, and to do so as soon as suitable plans are in place.

The Medical Center (i.e., the Hospital and the Clinics) is not directly affected by state budget cuts, but it faces its own unique budget constraints. Reductions in federal and state funding for Medicare and indigent care have left financial gaps that must be covered. Our response has been to slow down hiring, undergo a thoughtful strategy of employee reassignments and contain costs in a variety of ways. As of yesterday, the Medical Center had reduced its staffing by 181 full-time-equivalent employees through reassignments and hiring controls with no layoffs. We will continue to monitor this situation very closely.

I wish I could tell you now that these measures will be sufficient to solve the problems that we now face. In truth, I cannot. Virginia's policies toward its public colleges and universities, and in recent times its financial strategies, have moved well beyond the point at which thoughtful people will be merely concerned. The State has funded and allowed to be paid to faculty average salaries consistent with its published and lawful benchmarks for these salaries in only one of the last twelve years. By the legislature's own calculation, the aggregate shortfall (operating and maintenance funds together) for all of higher education is now no less than $300 million per year. By and large, the political values that gave rise to this scandal are now history. Yet the damage remains and must be acknowledged as a fundamental and untenable failure of political leadership–even as the ongoing recession compounds the problems that both we and leaders in Richmond face.

I ask you to join with me in understanding the problems faced by the current Governor and legislative leaders in both houses of the General Assembly and from both political parties. I ask also for your support as the Governor and our legislators seek to unravel and to reconstruct the state financial apparatus that was recognized, as recently as a long decade ago, the finest in the nation. Working together with the state's leaders, we can rebuild over time the excellence that government in this state once had. Here within the University, your patience and forbearance as we have begun to work through these issues together, combined with the excellence of what you have created and what you do, persuade me that we can succeed as we have succeeded in the past. For these gifts, I thank you.

At the same time, let me make this promise to you: We found ways in the 1990s to refinance and strengthen the University despite the State's financial disaster. We will again, and this work has already begun. Bob Sweeney, senior vice president for development and public affairs, and his colleagues are well along in work on the necessary next capital campaign whose goal is to move the University yet another step closer to self-sufficiency. I will have the bittersweet pleasure of announcing to the Board on Friday that the late David Harrison's final gifts amount at this point to about $64 million, of which all but $6 million is explicitly restricted to the academic enterprise. The women and men who will take David's place in the next era are already identifying themselves. So also are the faculty leaders and others who have assumed leadership in building greater resources from non-State providers to guarantee the future viability of the entire University.

The next couple of years will not be easy–not for you, not for me or for your deans or division heads, not for Governor Warner or for Speaker Howell or for Chairman Vince Callahan of House Appropriations or for Senator Chichester, who chairs Senate Finance. We need one another at this time. Messrs. Block, Sandridge, and I invite your suggestions, ideas, and criticisms as we move forward. I myself thank you for your determination, for the quality of what you accomplish, for your compassion and decency in serving those who need us most.