March 4, 2009

C.U. Develops Multi-Pronged Plan to Alleviate Budget Strain

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This article is part two in a series examining the University’s current financial plan.

Lessons learned by Cornell in these trying economic times have catalyzed a transition toward a tri-faceted approach in dealing with the financial strain imposed on the University, President David Skorton said in an interview with The Sun.
Just a few days before members of the Board of Trustees gather at Cornell for meetings, The Sun met with Skorton, Provost Kent Fuchs and Vice President for Human Resources Mary Opperman on Monday to discuss the University’s strategies in the current economic turmoil.
The University’s “conscientious, strategic and communal” approach has attempted to minimize layoffs and preserve the quality of education, according to Skorton. This has resulted in the recent “hardship fund” initiative for let-go employees, the Staff Retirement Incentive Program and Staff Phased Retirement Program, both announced Friday. Both SRI and SRP programs aim to reduce the pressure of payroll, a significant weight on the budget.
The budget shortfall that has resulted from the economic crisis is 10 percent of the total operating budget. The cost of salary and benefits for faculty and staff combined represents 60 percent of the budget, which is approximately $1.2 billion.

Conscientious Approach

The recent retirement initiatives are largely directed toward staff rather than faculty. According to Opperman, approximately 20 percent of staff are at retirement age, while 40 percent of tenure and tenure-track faculty are at, or are typically older than, the retirement age of 55.
“Faculty don’t have that same direct correlation with their finances [as staff],” she said. “They seem to stay for a more complicated set of reasons. So while finances are a factor … [they aren’t] the only, … evidenced by the fact that we have a much larger percentage of our faculty in the retirement-eligible category than staff.”
According to the University’s Academic Titles and Appointment Policy, a phased retirement program for both endowed and contract college faculty was initiated in July 2000. Faculty members who are between the ages of 55 and 70 and have held full-time appointments at the University for at least ten years are eligible for the program.
The Board of Trustees “creates and regulates” the University’s academic titles. Faculty are the only academic employees without specified end dates.
The policy states that the University has the right to terminate appointment for “failure to perform duties required of the position.”
Although about 31 percent of the total payroll is spent on tenure and tenure-track faculty, due to the indefinite nature of faculty employment, the University has few ways to reduce this cost outside of “attrition” through voluntary retirement. This places pressure not only on daily operations but also on other areas of the budget.
These measures reflect the administration’s desire to simultaneously cut costs while being aware of its effects on employees. But budgetary limitations on faculty salary

and the initial immediacy of the actions to balance the budget have also contributed to recent strategic planning initiative that Fuchs announced on Feb. 20.

Strategic Planning

“The second [strand of the approach, a strategic approach],” Skorton said, “is all of the actions that the provost and the vice provosts have already taken to strategically deal with the immediate financial problems on campus that we’re all suffering.”
“We’re focusing on the process right now,” Fuchs said. “It will be heavily influenced by faculty, but it will include staff, and I hope to include some students as well. It will focus on academic priorities [and] on the institution.”
Fuchs described these actions as part of the University-wide institutional planning process to be initiated this month as a way to “establish priorities and to develop strategies for enhancing excellence even as expenditures decline.”
Fuchs and Executive Vice President Stephen Golding will present the process to the Board of Trustees at the end of this week. According to Fuchs, they will create a far-reaching, five-year strategy that will “tie together goals for the institution, academics and the budget,” and engage a wide variety of faculty and staff. It will also include cost-cutting through “attrition and mergers and elimination of academic units and programs,” but, at the same time, invest in “high-priority” areas to increase “efficiency, visibility, and impact on ranking.”
The first task force for the process, co-chaired by Susan Murphy ’73, vice president for student and academic services, and David Harris, deputy provost, will focus on future undergraduate and graduate enrollments — keeping in mind a condensed faculty and staff and the increase of 100 freshmen in Fall 2009.
Also as part of this process, the provost’s office has for the first time distributed the budget of each unit across the University to all presidents and deans to help create understanding of “the cuts and investments in the larger context of the University.”
Each vice president and dean of the colleges were also required to have budget plans on Fuchs’ desk yesterday.
“We actually hope to change how we create the budget every year,” Fuchs said. “So that it’s more transparent both within and out … to the leaders of the University — the deans and the vice presidents — and also actually in how it’s allocated already determines how much each of the colleges is given. How it’s been based in the past will use some metrics that drive how we allocate the budget in the future.”
“[The strategic planning initiative is] another layer of protection not only for the students,” Skorton said. “But for the overall quality of a place, to think very carefully about re-imagining what Cornell will look like in the future … this is going to be something different for the University and that is the leadership seriously looking at a planning environment for the University.”

Maintaining a Community

“The third [strand to the process] … is looking forward in a way as a community … and that third strand is really critically important,” Skorton said.
Skorton cited the retirement initiatives and the strategic planning initiative as examples of greater transparency and a wider, united contribution to managing the economic crisis. But he also noted what he sees as a significant shift in higher education from an emphasis on revenue to expenditures.
“The very first things that on the budget side … have not been strategic, [they] were things that we’ve just had to go and take money out of the system,” Skorton said. “We’ve managed for a long time on the revenue side by always being able to bring more money in … and now what’s different is that all schools (you’ve seen it in the other Ivies and here at Cornell right in front of your eyes) all of a sudden we’re talking a lot more about the expenditures side of the equation.”
According to Skorton, during the Board of Trustees’ meetings later this week, trustees and senior leadership members will “carefully examine and decide on [the] next steps for managing the University during this crisis.” He will update the community on the state of the University following the meetings.
Skorton concluded, “A lot of the things we’re going to be talking about are leading and managing a University in the most efficient way possible … [It] just remains to be seen, but I think … it is a watershed moment.”