University assessing expenditure options limited by tight budget

UT Office of Public Affairs
August 28, 2003

AUSTIN, Texas—The budget for The University of Texas at Austin this academic year is facing numerous challenges that have compelled administrators and staff to seek creative ways to continue providing essential needs of the university and its community.

Kevin Hegarty, the university’s chief financial officer and vice president for financial affairs, said important decisions will be made in the near future that will affect how much money will be allocated in the budget for programs such as repair and renovation, employee compensation and other items.

Hegarty said it is essential for the university to now put back into the budget at least $10 million for repairs and renovations on campus, although $30 million is really needed.

“As we communicated to the university community last year in public hearings over the infrastructure charge, the university’s budget is short more than $20 million per year on funds to pay for critical maintenance, repair and renovations,” Hegarty said. “We are beginning this new budget year having to cut spending in this area by yet another $10 million simply to balance the budget.”

He said taking that $10 million away delayed the university’s plans for repair and renovation projects on campus. Now it is time for the $10 million to be returned to the budget so those projects can move forward. Ignoring or delaying needed repairs only makes them much more expensive later, he said.

“Eventually, at its most extreme, if we don’t repair some of these buildings, we’ll eventually have to shut some of these buildings down,” Hegarty said. “Will that happen this year? Probably not, although we do have surprises that happen where something will go out in a building, and it just has to be fixed. Period.

“What we are most concerned about is that the longer you put off the repair, the more expensive it becomes.”

Hegarty said an unrepaired small hole in a roof could lead to water damage, mold problems and other costly problems that could have been avoided by an early repair.

He said there are a number of ways money could be made available to provide the $10 million needed in the budget for repairs and renovations. He said he is waiting to see if the university’s Tuition Policy Committee that meets this fall recommends a tuition increase that would add money to the university budget this fiscal year.

Funds also might be made available in the budget for repairs and renovations if the university decides not to implement a proposed mid-year employee compensation program in January, Hegarty said.

“This is not a good option, given that the university must already figure out how it will fund a competitive compensation program longer-term,” he said.

Hegarty noted that although there have been discussions about the possibility of a merit-based compensation program this year, it is uncertain at this time if such a program will be financially possible. Administrators will make a decision by mid-December, he said, adding that no funds will be available for an across-the-board raise in January.

“The budget includes the possibility of some sort of mid-year compensation program based on merit,” Hegarty said. “However, there continue to be significant uncertainties in our budget, principally in the areas of maintenance and repair spending, that prevent us from saying with surety at this point that that program will survive the final balancing of the budget.”

Hegarty said it is because of these uncertainties in the budget that President Larry R. Faulkner indicated in a university-wide message in June that he could not commit to a mid-year compensation program.

“That’s why, at this point, we are not sure if we can have such a program,” Hegarty said. “It is our hope that a compensation program of some sort will survive. We recognize that this is a people business and, if we’re going to attract and retain the best and the brightest, then we also must continue to have competitive compensation programs.”

Hegarty said to meet its budget this year, the university found it necessary to reduce its expenditures by $40 million. It accomplished this by:

  • Cutting $10 million from the budget that had been planned for repairs and renovations.
  • Eliminating $2.5 million in costs by changing its credit card policy and transferring transaction charges to cardholders.
  • Saving about $2.5 million by leveraging spending and buying office supplies through one source—Office Depot/Hurricane Office Supply.
  • Saving $25 million through budget cuts by the various deans and other offices on campus. Those budget-cutting actions included the elimination of about 500 jobs. This included more than 200 employees who accepted retirement incentives and 140 who were laid off. The balance of the job reductions was accomplished by not filling unoccupied positions.
  • Imposing travel restrictions, implementing more efficient office equipment processes, introducing a paper-reduction initiative and reducing energy costs.

Hegarty said the university during the next academic year would continue to explore opportunities to increase the efficiency of its operations while reducing costs.