Q&A with Al Diaz, Executive Vice President for Business and Finance, Treasurer (03/02/10)
Over the next several weeks, Purdue Today, the University’s daily email newsletter, will interview senior administrators about various Sustaining New Synergies (SNS) initiatives that will help meet the University’s budget challenge.
Purdue Today: What is the current budget challenge?
A.V. Diaz: The chart below shows the budget challenge graphically. It includes a cash deficit of $35.8 million for the West Lafayette campus and a $67 million recurring deficit by FY 2013.
PT: How did we get into this budget situation?
AVD: As a direct result of the current economic downturn and resulting lower than anticipated income tax and sales tax revenues collected by the State, the Governor cut $150 million from the public higher education institutions in Indiana in December 2009. That cut resulted in the cash portion of Purdue’s deficit ($35.8 M for the West Lafayette campus) and included the rescission of the economic stimulus money.
The recurring deficit of $67 million by FY 2013 is a result of the University looking ahead and planning a general fund budget positioned to ensure a healthy fiscal position in the face an uncertain economic future. We are continuing our history of good stewardship by addressing our budget with a longer term focus. We are not waiting for the crisis to be upon us. Instead, we are being proactive and making provisions now in anticipation of tougher times ahead.
This tradition of conservative fiscal management has proved effective, most recently when we developed the FY 2010 budget. In June 2009, when the General Assembly appropriated economic stimulus funds to backfill the cut in operating appropriations, we chose to not treat that money as recurring (permanent) in our operating budget. Instead, we chose to budget it for temporary, one time, repair and rehabilitation uses and make the appropriate adjustments to reduce our budget. Our foresight proved to be beneficial, because those stimulus funds were taken back, and the permanent budget changes that we made lessened the impact of our present financial challenges.
PT: What makes up the recurring $67 million budget deficit?
AVD: There are a number of factors, both revenue and expenditures, that contribute to a recurring $67 million budget deficit by FY 2013. This deficit is the result of our projections about the State appropriation level, the expected rise in unavoidable expenses like health care and utilities, the desire to give salary increases to all employees, and maintain progress on the strategic plan. The budget plan also assumes no increases in student fees for FY 2012 and FY 2013.
PT: So, what is the plan to address the budget challenge?
AVD: As we explained at the Jan. 21 SNS Forum, there are two components of the budget challenge. First, there is a cash deficit caused by the rescission of the state appropriated American Recovery and Reinvestment Act (ARRA) funding (economic stimulus money) of $35.8 million (for the West Lafayette campus). Second, there is the recurring deficit of $67 million. The proposed initiatives address both.
For the short-term cash deficit, proposed plan elements include energy conservation, a hiring/salary approval process (strategically constrained hiring, salary freeze and suspension of special merit pay), and deferral of non-critical repair and rehabilitation (R&R).
For the $67 million recurring budget deficit, proposed plan elements include:
• $10 million – IT governance structure changes
• $5 million – Energy conservation, strategic sourcing and other initiatives
• $25 million – Exploring additional ways to bring about administrative efficiencies
• $27 million – A rebalancing of total compensation
PT: Can you give a status update on each of the initiatives?
AVD: Yes, and I want to point out that the SNS Web site has pages dedicated to progress on our initiatives, which we will continue to update.
Many of the actions that will address our cash challenge ($35.8 million for the West Lafayette campus) are already being implemented. For example, we instituted a hiring/salary approval process, and Randy Woodson and I have completed reviews of hiring plans. Additionally, on Feb. 2 we announced several energy initiatives, including adjustments to building control systems and a campus-wide “Lights Out” campaign that is focused on reduction of energy consumption. Those activities will be ramping up over the next few weeks and months. Energy conservation is everyone’s responsibility and we ask everyone to do what they can.
For the initiatives that address our recurring budget deficit ($67 million by FY 2013), the Sustaining New Synergies Task Force has been working diligently to assess possible cost-savings and revenue-generating opportunities from strategic sourcing, compensation and benefits, and administrative efficiencies. The team is also working very closely with Gerry McCartney, vice president for information technology and chief information officer, and his project lead Connie Lapinskas, on the IT initiative.
These are large and complex initiatives that extend campus- and system-wide, so the team is currently focused on evaluating data and feedback in order to develop implementable plans. As plans are developed, we will communicate them.
PT: Who decides what actions will be implemented?
AVD: The Provost and Treasurer will make recommendations to the President based on guidance from the Sustaining New Synergies (SNS) Steering Committee and recommendations from the SNS Task Force. The President will determine the priority of solutions and whether to proceed with implementation. The Board of Trustees will approve the solutions, which will be submitted in May.
PT: How can I help the Sustaining New Synergies effort?
AVD: There are a lot of things that you – and everyone on campus – can do to make a significant impact. In fact, our success is dependent on the active participation of the campus community.
First, everyone can play a role in our energy savings initiatives. The Physical Facilities team will be rolling out adjustments to building control systems, but you can also do your part by minimizing your electricity consumption.
Second, the Task Force will be reviewing options for savings and new revenue opportunities to help identify where we can be more efficient, reduce costs or generate new revenue. That means that in the coming months, they will contact staff, hold focus group discussions, gather data and seek input. I ask that you share openly and assist in the process.
Third, be more conscious of how you spend University funds. For example, rethink whether you need to serve refreshments at meetings, print only when you need to or use double-sided printing, reduce your supply purchases and reduce travel.
Finally, I ask that you encourage others to stay informed and engage in this process. Small actions will contribute more than you realize. By changing how we do business – not just temporarily, but fundamentally – we can position this University for a bright future.
PT: How can I provide feedback?
AVD: You can email your appropriate Steering Committee member to provide feedback or suggestions. A list of names is posted on the SNS Web site.
PT: Thank you for your time.
AVD: Thank you!