Oct. 3, 2007 -- The University of Virginia's budget-cutting plan, submitted to the state on Monday, is as notable for what it does not include as for what it does: there are no layoffs, and contrary to at least one published report, no cuts in employee health insurance benefits.
Slower-than-expected economic growth left a $641 million gap in the state's expected revenues, forcing Gov. Tim Kaine to ask state agencies — including the University — to make reductions in their budgets for the current fiscal year, which runs through June 30, 2008. U.Va. was ultimately directed to return 6.25 percent of its state funding, or just over $9.5 million. Initial announcements had pegged the percentage at 7.5 percent and then later 7 percent, but Kaine granted a late reprieve in order to preserve some deferred-maintenance funds, said Colette Sheehy, U.Va.'s vice president for management and budget.
In formulating the University's budget reduction plan, Sheehy had three directives: "No layoffs, try to protect direct services to students, and use whatever contingency funds are available to us," she said.
"In this case, our long history speaks for itself," said Leonard W. Sandridge, the University's executive vice president and chief operating officer. "The University of Virginia has always maintained that our employees are the source of our strength and our greatest asset. Over several decades of budget cuts, U.Va. has been able to manage budget cuts without letting people go."
The Richmond Times-Dispatch erroneously reported this week that Virginia's top universities — U.Va., William & Mary and Virginia Tech — would generate budget savings by "clamping down on health benefits." Not true, Sheehy asserted.
The University is indeed using $2 million from its self-managed health plan to offset some of the state cuts, but the money is not coming from any changes in benefits, Sheehy explained. "In fact, when we begin open enrollment [in November], we're going to expand benefits," she said.
Instead, the money is coming from lower-than-projected payouts, she said.
The largest single item in the University's 12-point budget-reduction plan will come from a $2.2 million draw-down in the University's contingency reserve, usually earmarked for one-time needs and unexpected costs.
Other savings in U.Va.’s plan:
• Elimination of some vacant administrative positions: $600,000.
• One-time savings from unexpected vacancies in three dean positions: $600,000.
• Reductions in deferred maintenance funding: $353,075 (down from $1.5 million before Kaine's intervention.)
• Reductions in library acquisitions of print and digital content: $600,000.
• Reductions in the technology budget, including less-costly work stations, extending the replacement cycle for hardware, reducing technology improvements in classrooms and eliminating the purchase of non-essential software: $600,000.
• Reductions in non-personal services costs in administrative units, including travel reductions, periodical and publication budgets and office supplies: $600,000.
• Deferred purchases of computer hardware: $550,000.
• Reductions in funding for courses, seminars and other academic offerings, as recommended after careful study by deans: $350,000.
• A 7 percent reduction in state higher education research initiative funds, which had not yet been allocated: $400,750.
• The application of $700,000 in unplanned interest earnings on tuition balances to the budget cuts. The University had not yet fully allocated the earnings — being realized for the first time this year under the state higher-education restructuring legislation — in formulating the current budget, Sheehy explained.
Compared to past lean years, the cuts are "relatively mild," Sheehy said, though she cautioned that further budget reductions may be on the way in both the short and long terms.
Kaine's statewide plan calls for drawing $303 million from the state's "rainy day" fund, but legislators must agree to that measure when the General Assembly convenes in January. Some legislators have expressed concern with the notion of using those funds at a time when the state economy is still growing, albeit more slowly than expected. Should they veto Kaine's use of rainy-day funds, the Governor may have to ask state agencies for further reductions before the end of the fiscal year, Sheehy said.
If the reduced appropriations continue into the 2008-2010 budget cycle, the University must find additional, more permanent cuts to replace the one-time items in the current budget reduction plan, she noted.