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Budget update: Nov. 6

November 6, 2019

Tori Tragis

— by Dan White, chancellor

This week we will be welcoming the Board of Regents to Fairbanks for their meeting on November 7 and 8. Thursday is reserved for a BOR workshop on roles and responsibilities. The workshop has a specific participant list, but is an open meeting and all are invited to attend. The morning will be presentations about higher education governance and the afternoon will be a facilitated discussion about the roles of the BOR, President, Chancellors, and Governance.

On Friday, public testimony will be held from 8:00am-9:00 am.  are brief presentations on Research and Athletics, and the BOR’s approval of the FY21 budget request for submission to the Governor’s office.  The meetings will be held in Room 109 Butrovich Building. We expect that in line with the compact, which includes a $25 million reduction to state general fund support in FY21

While there is not new budget news to share since my budget column last Friday, I do want to take this opportunity to share some of my thinking about the budget in advance of the November 21 Budget Forum.

First, we talk a lot about vertical and horizontal reductions. For those not familiar with the terms, in a general sense, horizontal reductions spread a cut out across a unit, while vertical cuts eliminate a specific part of a unit. Horizontal cuts can be applied in many ways. For example, as has been my practice, Vice Chancellors have been asked to meet a specific percentage reduction but have the freedom to allocate the cuts within their divisions in horizontal, vertical or some combination of ways. In this way, Vice Chancellors could make vertical reductions or give similar targets to Deans and Directors, who may choose to pass the same percentage targets on to each of their departments, or to make vertical cuts within their areas. A general reduction of 10-15 percent, at this stage, does not mean that each and every department will take the same cut. Instead, the intent is that units have something to begin building scenarios around, while maintaining flexibility and allowing room for shared development of strategy.

While it seems like a clear distinction, vertical and horizontal cuts tend to overlap. For example, if a college is looking at a 10 percent horizontal reduction and learns that one of their programs is selected for a vertical reduction, the clear position of the dean would be to count that program elimination towards their 10 percent target. I know that when similar questions come up at the system level, I advocate for the same position as a university. As an example, when the system office consolidated human resources to the system office, my request was that the reductions they took be counted towards ����Ӱ��’s horizontal (or “pro rata” as it is called) cut.

The horizontal/vertical question also speaks to the balance between empowering our unit leadership to make decisions where they are most knowledgeable and best equipped to navigate concerns, while recognizing that some decisions should and must be made at an executive leadership level. I realize that there are tipping points and that horizontal reductions reach a point where they are not sustainable. The expression, “we must do less with less” turns from doing less as a department (horizontally) to doing less as a university (vertically). At that point, the question becomes what is it that we do as a University that we cannot do any longer. It is my belief that there is nothing that we do anymore that does not have a direct benefit for ����Ӱ��, serve ����Ӱ��’s students, and have a significant community constituency. A few examples of decisions that I made this year that were vertical cuts (because they were made at the executive level) but for which the savings were allowed to count horizontally were the reduction of two large animal handling facilities (no more reindeer at the farm), consolidation of facilities so that we could eliminate expensive temporary structures, and demolition of structures.

We have also been talking about one-time actions. One-time actions are decisions that can be taken for this year, such as spending from savings, selling property, or using furloughs, that generate revenue or reduce costs for this year alone. When we met some of the budget gap this year with reserves, those reserves went away. The gap will still be there next year, when there are fewer reserves on hand. At first glance, that does not seem very strategic. What it does, however, is provide time for better decision-making processes. With an FY20 budget that was not final until several months into the fiscal year, the one-time actions provided a bridge for this year and the opportunity to plan ahead with analysis and input.

I wrote last week that we will be pursuing shared services as part of the overall strategy for meeting the cumulative FY20-21 reductions. As a starting point, the ����Ӱ�� Guide to Shared Service Models (2014) (PDF) on the Office of Management and Budget process improvement webpage< includes a table comparing different models. Questions I would like to explore are:  Is it better to organize by function (proposals, travel, purchasing, etc.) or by area (West Ridge business office, for example), or a hybrid with some functions in each type? Which approach might provide the best service and the best experience for our employees, while reducing costs? The models we use are up for discussion, and I hope to hear your perspectives on the best structures to meet your units’ needs during the November 21 Budget Forum.

The forum will be held at 1:00pm in the Wood Center Ballroom, and will be available to join online. I look forward to seeing you there and hearing your thoughts, questions, and suggestions.

Thank you for choosing ����Ӱ��.