PRESIDENT KOCH ADDRESSES STATE BUDGET CUTS WITH LETTER TO EMPLOYEES

Old Dominion University President James V. Koch sent an open letter to all university faculty and staff addressing the effect state budget cuts may have on Old Dominion. Below is the text of his letter.

28 February 2001

Dear Colleague:

By now, most of you have heard the bad fiscal news. Governor Gilmore has informed us that he will reduce our general fund budget by as much as $2.77 million this fiscal year (which ends on June 30th) and by as much as $5.61 million for the next fiscal year (which begins on July 1st). Boyd Marcus, the Governor's Chief of Staff, told us yesterday that these numbers represent the maximum amount of money we will have to revert. In percentage terms, it's 3.2 percent of this year's budget and about 6.5 percent of next year's budget. As the Governor determines the amount of money he is able to remove from the capital projects he has frozen, the funds freed up via this process will be used to reduce the operating budget reversions.

The Commonwealth's colleges and universities have been given a deadline of noon on Friday to send the Governor our institutional plans for reducing our budgets. I'll talk more about this process in a moment.

As a part of his executive order, the Governor froze the following:

-- All ongoing and planned general fund capital projects, including our ongoing $12.55 million renovation and expansion of Constant Hall; the $13 million Computational Sciences and Engineering Building that currently is in the final stages of planning; and, about $4 million in maintenance reserve projects such as replacing the roof on Kaufman Hall and replacing the windows in Rollins Hall. Using Commonwealth terminology, the funds for these projects have been "unalloted," that is, removed from our budget. Unaffected are non-general fund projects such as the Convocation Center and parking facilities. We hope that the freeze will be removed from Constant Hall, as it has been under construction for several months.

-- All "discretionary" expenditures, for example those relating to travel and equipment.

-- All new hiring of faculty and staff. Offers that already have been made will be honored.

-- There are no salary increase funds in the budget for the next fiscal year, though the Governor may propose such raises during the special legislative session that he has called for late March. If so, we will in effect have paid for our own raises by means of the budget reductions that have been mandated.

The blunt fiscal facts are these. First, our fiscal year already is two-thirds completed. We have spent or obligated nearly all of our funds. Second, almost 80 percent of our budget is devoted to personnel. Faculty are under contract and almost one-half of the semester is over. Thus, we do not have much fiscal flexibility. However, personnel is where our money is and this means that it will be almost impossible to avoid layoffs, significant reductions in working hours, etc. Third, because utility costs have been rising so rapidly, even the remaining portion of our budget (the approximate 20 percent that is not devoted to personnel) has been under great stress this year. We are spending lots more in this area, not less. Fourth, it will be necessary for us literally to confiscate all budget dollars that have not been formally obligated. In the main, these will consist of non-personal services funds that support the purchase of supplies, telephone, etc. But, we will also have to suspend nearly all travel and equipment purchases supported by the general fund. For example, we are unlikely to purchase any new microcomputers for the remainder of this fiscal year. Fifth, I am canceling all Presidential entertainment, receptions and dinners for which invitations have not already been issued. Sixth, we are canceling our financial support for a variety of community endeavors, including the Urban League.

The reduction plan that we must submit to the Governor's Office by noon Friday does not require that we list program or individual specific-reductions. Rather, we must list our reductions in major expenditure categories such as personnel, equipment, travel, etc. Because we have so little time to prepare our plan, it will be necessary for us to make some estimates of reductions in each category. Behind that aggregated information, however, we will be working diligently over the next few weeks to assemble an internal plan that contains specifics. In the meantime, per the Governor's directions, we will freeze the activities noted above.

I must also point out that we are mystified with respect to the nature of the formula or criteria the Governor's Office used in allocating reductions. For example, the current fiscal year reduction for Old Dominion is $2.77 million, but only $2.4 million for the University of Virginia and $2.91 million for Virginia Tech. It appears that Old Dominion has been penalized because a large proportion of our students receives some form of financial aid from the general fund. When financial aid is taken into account, Old Dominion's total reduction (including this year and next) is 4.51 percent of its general fund budget; this is exceeded statewide only by George Mason University at 4.57 percent. The average reduction among the doctoral institutions is only 3.35 percent. And, as you may have read, the Commonwealth's two HBCUs have not received any reductions.

The Governor has called a special legislative session for the end of March. At that time, he will present budget amendments designed to deal with the fiscal situation as he sees it. Between now and then, of course, there will be lots of negotiating and jockeying.

While I do not intend to get involved in the debate over the reduction in the car tax, I will point out the devastating effects that this reduction will have upon Old Dominion University. It has always been my policy to avoid criticizing individual political leaders and especially Virginia's governors. I'll continue on that path, even while it is my duty to point out the impact of these budget cuts on my (and your) institution.

I'll be in touch. Please contact me should you have any questions.

Sincerely,

James V. Koch
President