William & Mary

Sam Jones memoradum from Samuel Jones (text)

Following is the text of a memorandum dated Oct. 9 from Samuel Jones, vice president for finance, regarding state financial outlook.  —Ed.

TO:        W. Taylor Reveley, III
                P. Geoffrey Feiss

FROM:    Samuel E. Jones

SUBJECT:    State Budget Reductions

This morning Governor Timothy Kaine confirmed that he now projects a biennial revenue shortfall of $2.5 billion for the Commonwealth.  More specifically, the Governor estimates a current year revenue shortfall of $974 million, increasing to $1.54 billion in fiscal year 2010, reflecting the trickledown effect of the national economic downturn.

State Impact

At this time, the Governor is taking action to deal with only the current year’s approximately $1 billion shortfall.  Key elements of the plan announced today include the following:

•    $400 million will be taken from the Commonwealth’s so called “rainy day fund.” Currently this fund has a balance of approximately $1 billion so the Governor will be using 40% of the rainy day fund at this time.
•    The 2% salary increase scheduled to go into effect in late November will be deferred until July 1, 2009.  FY 2009 general fund savings associated with this action total $44.7 million.
•    Bond funding will be provided for those capital projects currently supported with general funds.  General fund savings from this action total approximately $250 million.
•    $279 million will be saved as a result of budget reductions required of state agencies and institutions across the Commonwealth.  Program and staff reductions, including some layoffs, are expected as agencies and institutions implement their respective budget reduction actions.

In total, actions proposed by Governor Kaine result in just over $1.1 billion in savings.  I would note that actions such as the draw on the rainy day fund and the shift of capital projects from general fund support to bonds are one-time budget relieving actions.  Permanent savings will have to be found once the Commonwealth turns its attention to fiscal year 2010.

College Impact

Relative to the College, we have now been notified that we are required to absorb a 7%, or $3.4 million, reduction in state support in the current year.  VIMS is also required to take a 7%, or $1.48 million, reduction.  It appears that budget reductions across higher education range from 5% to 7% depending on where institutions fall in the state’s base adequacy calculations and on each institution’s percentage of students with demonstrated financial need.  It is also likely that we will see reductions that occur at other state agencies be passed through to the College and the Institute where possible.

Note that no information is available regarding the level of base reduction the College will have to absorb in FY 2010.  At this point, we should assume that the College’s FY 2010 reduction will be at least equal to the current year amount.

Governor’s guidance regarding implementation of this reduction includes that the College impose no mid-year tuition increase and there be no reduction in student financial assistance.  We expect that we will have to submit a 7% budget reduction plan to the Governor shortly.  At this time the date for this submission has not been confirmed.

The College has already taken action to reduce operating expenses by $1.2 million, or roughly a third of our required reduction.  As we move to finalize our budget reduction plans, I recommend that the College place a hold on all hiring other than positions supported by grant funds or where offers are outstanding until the final plan is in place.  Our plan should recognize that the FY 2009 reduction is not a one-time action but may become a base reduction once the Governor turns his attention to FY 2010.

I will keep you informed as additional information becomes available regarding the Governor’s actions.  Thank you for your support as we address this matter.