Budget Freeze
Henderson is going to have to keep an eye on it’s pocket book for the remainder of the fiscal year, with a spending freeze effective immediately.
President Welch issued a memo the first Monday in March alerting all faculty and staff to the freeze. Speaking with Welch in a recent interview put the information in the perspective of the students. “If we continue spending like we’ve been, we would have a deficit at the end of the year,” said Welch.
Welch called the situation “almost the perfect storm,” stating that it was a series of events that combined to form the financial mess.
Most Arkansas universities experienced a cut in state appropriations this year, including Henderson. This cut of over 500,000 happened just before the start of the fiscal year, July 1, 2008. “This is a national problem, this is not just a Henderson issue,” said Welch.
When planning for this year’s budget, Henderson’s planners knew they were going to get hit with this cut from the state. However, Henderson has been growing in enrollment in the last few years, so the committee assumed this growth would elevate. To cover this half a million dollar cut from the state, the committee predicted 100 new students for this academic year. The university did grow in enrollment, but not by an extra 100 students. This left money missing, for a budget that way built to rely on these funds.
This small bump in enrollment should have single-handedly resolved the issue from the state, but it was shy by a fraction of the projected amount. This problem and solution scenario would be enough to deal with, trying to find the extra cash to fill in these holes, but another issue added a whole new level of complications.
Henderson has been paying off an early-retirement package for the last 18 months. Henderson offered this package to it’s faculty and staff in December 2007, allowing employees to leave the university with benefits and partial salary for three years after they retired. Over thirty employees took the option. This left Henderson room to hire fresh employees, but left them paying a portion of the leaving employees’ salary, as well as the salary of the new staff members. The goals of programs such as this are long-term. By paying out extra for three years, they will save in the long run by eliminating the expense of the veteran employees’ benefits. But in the short run, it is an extremely heavy load all at once. Henderson offered this without realizing the storm brewing on the horizon. This adds up now to over 800,000.
Summing it up, there was $500,000 missing from the state, plus $800,000 going to retired employees. Throwing in other operating budget deficits, adds up to almost 1.5 million dollars.
Finding 1.5 million dollars lying around can be a bit difficult. Dr. Welch is now working diligently with Henderson’s accounting team to keep him from hitting the beach with a metal detector. To find this money, the staff hopes to cut a little from a few departments to avoid the deficit.
Some expenses can not be compromised. Paychecks have to go out, and the light bill has to get paid. After eliminating some salary savings and unfilled positions savings, the financial team managed to get our losses down to a relative low figure of $874,994.
Fortunately, unlike other colleges and institutions around the state, Henderson is not discussing personnel reductions, or program closures. The university plans to pull the money from places having minimal affect on students.
“We’re going to be realistic about it,” said Welch, “it’s not going to be 100% absolutely no spending.” Some events may just not be as elaborate as planned. For instance, the nursing building will still have it’s grand opening, it just won’t be quite as grand. It is through small pulls like this that Henderson’s financial team will assemble the funds needed to keep us out of the red for the fiscal year.
The policies go into effect immediately. All spending will be frozen, outsides of monthly recurring expenses, such as copier leases and telephone services. Out-of-state travel is also suspended, with few exceptions. Finally, in-state mileage reimbursement will be reduced from $0.42 to $0.30 per mile.
Most major student trips during the remainder of the semester have already been planned, and will not be affected by the spending freeze. With the freeze only beginning in March, any events already scheduled are clear from the freezing blast.
We’re doing all this to ensure that we don’t have to close programs, fire people or cut benefits. Students may not even notice the spending freeze, as the frozen areas mainly affect faculty and staff.
It would have been impossible to predict this storm a few years ago, but Henderson is learning from it’s mistakes. For next year, instead of relying on an increase of students, the university is actually budgeting for a decrease. It’s a strange-sounding method, but Welch has seen this trick work before, and plans to implement it in the budget. The numbers say that we will experience a 103% growth in students for next year. However, instead of repeating the past and embracing these predictions, the budget will be built around a 97% loss.
This is a “low expectations are the key to happiness” strategy. If the optimistic predictions are correct, and we get a growth of 103%, the university budget will be flourishing with an extra 6% cushion. If the prediction is wrong we experience something like a 95% decrease, we will only have suffered a 2% loss from 97%, as opposed to an 8% loss with the 103% plan.
The Henderson staff is taking the freeze calmly, and openly. “I have been very pleased with the understanding of our faculty and staff,” said Welch. “Everyone has been very understanding,” he said, “they understand how difficult these times are.”
Welch hopes that as the economy rebounds our state money will be restored. He also hopes that current improvements happening on campus will attract additional students, who’s tuition money would also assist with the budget.
“We’re just going to have to weather the storm,” said Welch. The university was hit hard with a series of economic problems, but with a little tighter grip on spending, the staff is looking to end the year without a deficit. Welch said, “the picture for the future is a little brighter, but it’s just everything all at once.”
