M E M O R A N D U M
TO: Campus Community
FROM: President Robert N. Shelton
SUBJECT: Federal Stimulus Funding and the UA Budget
DATE: April 3, 2009
Recent news reports regarding the federal stimulus funds for education in Arizona have generated considerable and justifiable confusion across campus. With the intent of clarifying how the federal stimulus funds will impact FY2010 budget planning for The University of Arizona, I write to share what we currently know and the steps we are taking to manage the very challenging budget imbroglio that we face.
New and modified proposals for addressing the state's deficit are coming out of the Capitol on a daily (if not hourly) basis, so the landscape changes rapidly. On March 5, 2009, Governor Brewer submitted her letter of certification to President Obama, indicating her intent to use funds from the American Recovery and Reinvestment Act. Governor Brewer has said that her administration is committed to "utilizing stimulus funds received from the Act to create jobs, to protect our most vulnerable and grow Arizona's future; but also, do so without further increasing the state budget deficit."
Governor Brewer has also expressed her desire to protect education, both K-12 and higher education, as much as possible from future devastating cuts. We appreciate her steadfast approach to work toward long-term solutions for fiscal stability and to identify the bridging mechanisms needed to reach the long-term goals. This is most welcome news.
As I describe below our University's path toward greater fiscal stability, let me emphasize three essential points. First, we ground our approach in sustaining the quality of our institution. Our students, our faculty and our appointed professionals and staff daily strive to make sure that The University of Arizona will embody excellence in the future as well as today.
Second, to sustain our hard-won quality, we must seek balance in how we plan for the future. That balance requires a combination of reducing those activities that are no longer core to how we will advance in the future, maximizing our efficiencies and growing our revenues. Our Transformation Plan restructuring is the underpinning for making sure that we are future-focused, and that we do not succumb to a "business as usual" mindset. And, in order to sustain the signature education our students and the people of our state have come to expect, the University uses multiple sources of funding: state funds, gift-giving to scholarships and fellowships, research funds garnered through competitive grants and contracts, and tuition. We must be positioned to grow all these multiple sources, albeit at different rates of increase.
Third, in order for us to be successful in the years ahead, we must adhere to a consistent plan of action. Our plan certainly is designed to embrace dynamic variables, but consistency of purpose is critical.
Having set forth how we are approaching our budget challenges, it is critically important to understand that the federal money would be temporary, one-time funding. The $77 million in cuts that we have had to take to our state appropriation this year are permanent and we expect additional permanent cuts for the FY2010 budget year that starts in July. From an operational perspective, there is a huge difference between permanent and temporary funds.
For example, we can hire people on permanent funds because the money is built into our base budget and we will (barring cuts to the appropriation) have those funds available in future years. Temporary funds are non-recurring, limiting their use, in practical terms, to one-time expenses (e.g., renovating a building).
The federal funds would give us important flexibility this year, and we greatly appreciate the commitment that the Obama administration has made to try to mitigate the damage that has resulted from cuts in state funding to public higher education. These temporary funds cannot be used to replace cuts that have been taken this year from our permanent state appropriation. As we get clarity from the governor's office and from the Arizona Board of Regents about the differential distribution of any federal funds, we will be better positioned to determine which projects we can undertake to modernize facilities and improve our operational and educational infrastructure.
Importantly, the federal government has put specific restrictions on state eligibility for applying for these funds. For example, to receive the federal stimulus funds the state cannot cut higher education or K-12 below the FY2006 funding levels. The ABOR system budget is currently about $80 million above the 2006 level, although the UA is a mere $5 million over our 2006 funding. The federal money would then be used to bring the total funding level back to the higher of the 2008 or 2009 budget years on a temporary, one-time basis. For us the higher year is 2008.
Even with the federal stimulus one-time funds, the University will still have significant permanent gaps in its funding that must be addressed to ensure the continued operation of our institution. To address this gap, the Board of Regents has asked all three Regent Universities to develop funding models that would allow for increased surcharges in tuition and fees to cover the gap in operational revenue.
The Board of Regents will address the request for these fee increases at its April 30 meeting here in Tucson. Even if the regents support these tuition/fee surcharges, our permanent operating budget will still be significantly lower than what it was at the start of the 2008 fiscal year, so we will need to continue our efforts to streamline costs and look for additional revenue opportunities.
Finally, the UA, along with Arizona State University and Northern Arizona University, has asked the regents to suspend the current limit on tuition and fees for the university system as being restricted to the bottom one-third of the 50 senior public universities. The board has approved a new, more relevant set of peers for the UA, and our hope is that they will incorporate peer benchmarking across a broad range of categories, from rates of student engagement and success to research productivity measures to tuition setting.
In closing, I come back to our "mantra" of quality. The UA is one of the premier research universities in the world. The people of Arizona deserve access to the educational opportunities we provide, the quality of life enhancements that result from our research and community outreach, and the economic gains that our federal research funding fuels.
Through our ongoing Transformation Plan, we will continue to look for ways to make the UA better and stronger. The temporary federal money will help us through this year as we work toward our strategic goals and priorities, but there are still great challenges ahead. I appreciate the dedication of everyone in the UA family in helping us through this historic time.
