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Monday, May 05, 2014

Spending Reallocations at University of Louisville

A few days ago,  University of Louisville President James Ramsey sent the following message to the campus community:
It was another disappointing legislative session given the cut in our recurring state appropriation, but we appreciate the funding in FY15 for the new classroom building for the Belknap Campus.

You are aware that we as a campus community have been discussing the 2014-15 University of Louisville operating budget for several months.  I appreciate deeply Susan Ingram Howarth’s efforts on behalf of our campus.  Susan has had meetings with Faculty Senate, Staff Senate, Student Government, deans, vice presidents and other campus groups.  Susan conducted several forums, particularly on proposed tuition increases.  A week ago I conducted a campus-wide budget forum.

Any way we slice it, it’s another bad budget – a $2.2 million cut in state appropriation; the need to again increase tuition; and lack of funds that we need for critical investment in faculty, staff and students.

After a month of deliberations and feedback we will recommend to the Board of Trustees of the University of Louisville at its May 8th meeting a budget that provides a 2% salary increase for both faculty and staff; a 5% tuition  increase for in-state undergraduates (other proposed tuition increases are attached); and a .65 percent unit budget cut.  We worked hard to not pass on the entire state budget cut to the units and understand the pressure the unit budget cut places on the campus.

I have appreciated your input and, more importantly, your efforts to keep the University of Louisville moving forward in these continued difficult fiscal times. 
Jim Ramsey
I attended a briefing offered by Susan Howarth some months ago. At the time, the information I received showed that a 5% tuition increase would generate $11.1 million. Financial aid increases with tuition, so some of this is returned (reallocated) to students. Unfortunately, the spreadsheet I was provided only lists new spending like that in the catch-all category "strategic initiatives." Salary increases are in that pool too, as are health care cost increases.

Still, because different tuition and salary options were presented, I can make educated guesses about how this breaks down. It appears that each 1% increase in salary costs just over $2.4 million. So a 2% increase is roughly $4.9 million in new expenses.

It appears the new financial aid amounts to roughly $500,000 per 1% increase in tuition. Thus, a 5% increase in tuition costs $2.5 million in new financial aid.

Total those together and that adds up to about $7.5 million of new spending from the $11.1 million in tuition revenue. 

The 0.65% unit cut is out of a 1.5% overall cut in state funding to the University of Louisville. Put differently, units are being asked to finance 43.3% of the total cut even as their personnel will enjoy a 2% salary increase. They'll need to find $950,000 in cuts to earn $4.9 million in salary. 

If the salary increase was only about 1.63%, no new spending cuts would be needed.

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