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President's message on the Governor's proposed budget

President Taylor Reveley sent the following message to faculty and staff on December 22, 2011 - Ed.

Dear William and Mary Community,

Attached is Sam Jones’s analysis of the Governor’s recent budget proposals as they relate to William & Mary.  Though short, Sam’s memo reflects a good bit of research and discussion. 

 As will be apparent from Sam’s memo, there are helpful elements for W&M in the Governor’s proposals as well as unhelpful elements.  On balance, it is grand that the Chief Executive of the Commonwealth has gone to bat for higher education during a time of real austerity.  The Governor understands the centrality of educated citizens to the Commonwealth’s success. 

Even were the Governor’s proposals to survive the General Assembly largely intact, however, the funds provided to W&M, coupled with the funds provided this fiscal year, would restore only a small slice of the overall state support cut since 2008.  It would be about 14% of what has been lost.  While we are always very grateful for any state support that comes our way, it remains for W&M to secure its own financial future.  We are hard at work doing just that.

A wonderful holiday to everyone!

Cordially,

Taylor Reveley

 

MEMORANDUM

TO:                 President Reveley

                        Provost Halleran

FROM:           Sam Jones

Subject:           Governor’s Budget Recommendations—2012-14 Biennium

 

On December 19 Governor Bob McDonnell released his operating and capital budget recommendations for the 2012-14 biennium.  In his recommendations, higher education is given the highest priority in the budget among those items considered discretionary.  Using resources generated by a combination of revenue growth and budget reductions in other areas of state support, the Governor recommends an additional $100 million annually for base operating support, enrollment growth, student financial aid, and to address objectives included in the Higher Education Opportunity Act (TJ21) passed last session.

Background—Colleges and universities and state government in general experienced significant reductions in state support during the recent recession with the College seeing funds for operations decline $17.1 million.  Governor McDonnell and the General Assembly began to reverse this trend in the FY 2012 budget, adding $90 million across higher education ($900,000 at the College).  The passage of the Higher Education Opportunity Act established specific objectives for higher education including development of institution-specific six-year plans.  Our plan as approved by the Board established spending priorities supported by a combination of state, College and reallocated revenues and provides a framework to review the Governor’s funding actions.

Highlights of the Governor’s recommendations follow:

Current Year Reversion—The Governor proposes to eliminate the $10 million FY 2012 higher education base budget reversion that had not yet been allocated among the colleges and universities.  We estimated the College’s share of this reversion at $400,000; if the reversion had been implemented, it would have then carried forward into the 2012-14 biennium.

Faculty and Staff Salaries—There is no state funding provided for base salary increases in the Governor’s plan.  But he does proposes a 3% bonus in FY 2013 if agencies and institutions produce enough savings in FY 2012.  Thus, agencies and institutions must generate unspent discretionary funds in FY 2012 equal to at least two times the general fund cost to fund the 3% bonus.  A rough calculation is that the College would have to identify $2 million in savings over the next six months to meet this objective.  A basic question is then what happens to the $1 million in savings generated above the amount required to support the proposed bonus.  It is not clear if the College would retain the full $2 million or just the portion necessary to support the bonus.  In any event, the College would also have to raise its non-general fund match to support the bonus (roughly $2 million, or a 2% increase in tuition if funded that way).

You will recall that the College’s six-year plan includes a 5% base salary increase for faculty and a 4% base salary increase for staff for both FY 2013 and 2014.

In a related matter, Virginia Retirement System (VRS) rates will increase from 6.58% to 8.76% as part of the Governor’s effort to strength the overall VRS system.   The College will be expected to raise its share ($800,000) of this increase.  As we interpret this part of the Governor’s budget, individuals would not have to contribute any additional funds, just the university.

Eminent Scholars—State funding in support of this program has declined over the past few years.  The Governor’s budget as introduced eliminates all funding for the program.  The effect is a $1.7 million reduction in higher education support ($339,000 at the College).

Tuition and Financial Aid—Language is included in the recommended budget that limits the use of in-state student tuition for financial aid purposes.  Specifically, the language limits the use of these funds to the amounts included in the budget (current FY 2012 levels).  There do not appear to be any other limits placed on the Board’s authority to set tuition and fees going forward.

Operating Support—The Governor recommends a $1,457,842 increase in operating support.  This allocation includes $529,371 in base operating support, $625,911 in degree incentive funding, $250,000 to expand student research opportunities, and $52,560 in student financial aid.  Base operating funds can be used to meet the College’s highest priority non-personnel needs.  Degree incentive funding would be used to support TJ21 objectives within the parameters of our six-year plan.

Budget Reallocations—The Governor’s budget requires the College to reallocate approximately $1.4 million (3%) in FY 2013, increasing to $2.4 million (5%) in FY 2014 to support programs and strategies that advance TJ21 objectives.  Currently the College’s six-year plan assumes reallocations of $617,000 in FY 2013 increasing to $1.8 million in 2014.  The proposed uses for these funds must be approved by the Secretary of Education and included in an update to the College’s six-year plan.

Higher Education Equipment Trust Fund—Statewide the Governor recommends $56 million annually to support instructional and research equipment purchases through the higher education equipment trust fund.  The College’s share is $2.1 million per year.  An additional $435,000 annually is recommended for VIMS.

Capital Projects—The Governor recommends the College receive $2.9 million in FY 2013 and $6.3 million in FY 2014 in maintenance reserve funding.  These allocations support small-scale maintenance projects in academic buildings across campus.  The second-year allocation also includes funding for accessibility and storm water infrastructure improvements.

Preplanning funds are also included for the Tyler Hall renovation and Phase IV of the on-going utilities project.

VIMS—Like the College, VIMS experienced a significant reduction in state support ($6 million) over the past several years.  Actions recommended by the Governor begin to restore a portion of these funds.  Beyond the equipment trust fund allocation noted above, the Governor recommends that VIMS receive $525,000 to support the hiring of four additional faculty, $250,000 for preplanning of a marine research facility, and $193,000 per year in maintenance reserve funding.  The Governor also recommends a special $8 million capital equipment allocation to support the purchase of a replacement for the Bay Eagle, VIMS’s most heavily used vessel for monitoring and research.  This venerable boat has reached the absolute end of its useful life.

There is no expectation in the Governor’s proposals that VIMS reallocate funds to support TJ21 objectives.

The Governor’s budget recommendations are the first step in development of the Commonwealth’s 2012-14 operating and capital budgets.  His recommendations will now be considered by the House and Senate respectively.  We should expect House and Senate action by the end of February 2012.

We will continue to review the Governor’s recommendations for other items of note.  Please contact me if you have any questions on this summary.