The following letter is from President Charles W. Steger to the Virginia Tech community.
In October, I reported to that our state appropriations for this fiscal year have been reduced by 5 percent – the University Division lost $8.9 million, and the Virginia Cooperative Extension and Agricultural Experiment Station (229) Division lost $2.3 million. For 2008-09, we are minimizing this impact by absorbing some costs centrally. The remaining reduction is being addressed through reductions in operating budgets at the dean and vice-president level.
Unfortunately, as I also discussed in October, the FY 09-10 outlook includes further reductions. Governor Kaine released his budget for FY 09-10 on December 17. His proposed budget includes an incremental 10 percent reduction, or $ 18.1 million, for Virginia Tech’s University Division. Combined with the 5 percent reduction in the current fiscal year, the University Division will have to absorb a cumulative 15 percent reduction ($27 million) in General Fund support during 2009-10.
This is a significant reduction and — on top of the two reductions in state support already incurred over the last two years — will present major challenges. The 5 percent reduction for Agency 229 will be continued in 2009-10 as a permanent reduction to its General Fund support. The deans and vice presidents have already begun the difficult work of developing permanent budget reduction proposals for the University Division and for the CE/AES Division, and we can now compare those proposals to the actual reduction targets in the governor’s proposed budget.
We are still in the process of analyzing the materials in the governor’s budget. Sadly, the governor also has eliminated all salary increases for FY 09-10. We will provide additional information to the University community after our analysis of the proposed budget amendments is complete.
This recession may be a modern-era record for scale and scope. Belt-tightening, across the board cuts, and temporary savings measures will not provide an effective enough strategy to deal with the reductions contained in the governor’s proposed budget. The scale of these reductions will require that we dig deeper and it will be difficult. Although we must take a close look at how we go about our core business – educating and researching – we must also ensure that we maintain the quality of that core.
We likely will be evaluating permanent structural changes for the longer term. As part of the natural introspection necessary for cost cutting, we want to position the university for the next stage of growth and development. Moreover, while we will always be dependent on state funding, we will be looking for financial initiatives that can better buffer the university from the inevitable swings in the state budget.
We fully intend to seek the involvement of the university community in how we go about implementing the necessary budget reductions. Provost McNamee and I will, among other avenues, be seeking input through town meetings with various stakeholder groups across the university. All proposals for addressing the budget challenge will be considered and all sectors of the university, including auxiliaries and affiliated corporations, will be asked to share in reduction strategies.
Human capital, all of you, represents about 80 percent of the university’s instructional and research costs. Our people are the university’s most important asset in fulfilling our mission. Yet, with this huge, and appropriate, investment in human capital, other areas where we can achieve significant reductions are very limited. We will reduce, and in some cases eliminate, discretionary items, such as printing costs, travel, and outside training. We will make a thorough review and evaluation of administrative costs to achieve savings where possible, but administrative costs will not be sufficient to address these budget reductions. We are also looking at operational savings wherever appropriate. However, we do not expect to be able to meet the governor’s targets without eliminating some positions, and possibly affecting whole programs, within the university.
We will be very attentive to both the short-term and long-term consequences of any decisions affecting staffing. While the budget cuts most likely will affect positions, we will do everything we can to minimize the impact on people. We will look first, for example, to possible organizational restructuring to maximize administrative efficiencies and to not filling open positions. Layoffs will be a last resort. We have successfully managed through similar difficulties with minimal impact on people. But, should we need to take that action, Human Resources will work with individual departments to work toward re-placements.
While the budget cuts will be severe, the university has weathered similar cuts in the past – most recently in the early part of this decade, as well as in the early part of the preceding decade. Our faculty and staff have always performed better than we could expect. With your help, we will weather this also. And, as we do so, we will remain focused on our priorities.
Charles W. Steger