President Outlines Budget Issues

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Contact: Shirley Melikian Armbruster

Jan. 21, 2004

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Full text of President Welty's Address

President Welty Outlines Budget Prospects at Fresno State

California State University, Fresno President John D. Welty informed the faculty and staff today (Jan. 21) that a mid-year reduction in the current state budget and Gov. Schwarzenegger’s proposed budget for 2004-05 will require the university to face “painful decisions” as it copes with the state fiscal crisis.

In his annual Spring Assembly address, Welty said the Fresno State’s steps over the last several years to prepare for belt-tightening have served it well. “But,” he added, “this year will require hard work, creativity and maximum accountability from all of us.”

On a positive note, Welty pointed with pride to the new Science II building under construction and scheduled for occupancy in January 2005.

And he highlighted the importance of passage of Proposition 55 on the March ballot. That statewide bond issue includes $91 million for expansion and renovation of the Madden Library at Fresno State.

Looking at 2004-05, the situation is serious, Welty said. Based on Gov. Schwarzenegger’s proposal to cut $250 million or 9 percent from the California State University system, Fresno State would have to reduce its base budget in 2004-05 by $12 million. That would come after a 13 percent reduction last year, defrayed in part by increased student fees. The Governor’s proposal also would mean Fresno State would serve 1,500 fewer students, and students who do attend would pay 10 percent (undergraduate) or 40 percent (graduate students) more. If enacted, that fee increase would be on top of two hikes last year that pushed fees up 30 percent.

Though the situation may change as the Governor’s proposed budget moves through the Legislature toward its final form, planning must start immediately, Welty said. He said he has instructed each school, college and division at Fresno State to prepare a plan to meet the reductions with 7.5 cutbacks. The plans will be reviewed by the University budget committee and implemented in April.

“We will continue our efforts to avoid laying off employees,” Welty said. “However, given the severity of the reductions we face, I cannot promise you at this time that layoffs will not be necessary.”

Welty also discussed the importance of the university’s just-started multi-year “Comprehensive Campaign” to raise millions for academic and other uses on the campus.

Welty started his speech by paying tribute to “our colleague and dear friend” President Harold H. Haak, who died Dec. 26. He praised Haak as a compassionate and strong leader who had “enormous impact on higher education in Central California.”

Faculty/Staff Spring Assembly

January 21, 2004

Welcome back to the spring semester! Before I begin my remarks today, I first want to honor our colleague and dear friend President Harold Haak, who passed away the day after Christmas. I was honored to follow Harold as president of Fresno State. Every day of my tenure here I have seen the results of his good works and his generosity of spirit. Harold was a brilliant man, a true scholar. He was committed to improving the university experience at Fresno State, at Fresno Pacific University and the University of Colorado - institutions where he served as President or Chancellor for twenty years. Dr. Haak has had an enormous impact on higher education in Central California.

Harold was certainly the “rainbow in the storms of life.” His leadership at Fresno State was both compassionate and strong. His vision for the future inspired both the faculty and students of this campus. Thousands of lives were touched by this great man. Join me now as we observe a moment of silence to honor Dr. Harold H. Haak, husband and father, professor, scholar and president of California State University, Fresno.

Thank you…

You all have been reading and watching the news about Governor Schwarzenegger’s proposed state budget. I know you also are wondering about the impact here at Fresno State. You’re probably feeling some nervousness about the future. Let me say…these are anxious times for university presidents, too. We have begun to feel the impact at Fresno State and across the California State University. Over the next several months we will be making painful decisions as we cope with a very serious fiscal crisis in the state of California. Today, I’m going to describe for you exactly how we will be dealing with the budget and the principles we will be following as we make those decisions.

This university has been taking steps over the past several years that will enable us to persevere…and to respond in these tough budgetary times. Fortunately, with the leadership of many of you in the faculty, our friends and supporters in the community, and our staff, we are in a good position to deal with the budget cuts. Your fiscal restraint over these past several months will make a difference as we address the future. Like a dancer who for years has practiced gaining strength, endurance and skill – this university now can perform at the highest level. Our processes and commitment to work together will make a difference. But this year will require hard work, creativity, and maximum accountability from all of us.

I promise to keep you informed about the budget as it progresses through the Legislature this spring. The debate about how best to resolve the budget deficit in California is attracting international attention. Few things are certain at this point, but let me give you the facts as they stand now:

In an effort to reduce state spending to reduce the deficit, Governor Arnold Schwarzenegger has proposed cutting $240 million or 9 percent from the California State University system for the 2004-05 fiscal year. That cut potentially limits student access by approximately 20,000 students in the CSU if the cuts are implemented as proposed. For us it means that 1500 qualified students will not be served in 2004-05. Of course, the governor’s proposal is just the start of the budget process, and the legislature will be considering its reaction to the proposed budget over the next few months. However, the seriousness of the state’s fiscal condition means that it is very unlikely we will receive support at a higher level than what the Governor has proposed.

The proposed cut, together with the 2003-04 General Fund budget cut of $531 million, brings the total two-year General Fund cut to the CSU to $771 million dollars. That is a 28.8 percent reduction in student support in just two years. The CSU will be faced with the prospect of accepting fewer students. In his first public statement about the proposed budget, Chancellor Reed strongly asserted that the CSU will not compromise quality.

I AGREE. QUALITY CANNOT BE SACRIFICED ANY FURTHER.

As Chancellor Reed said, admitting fewer students means fewer educated citizens entering the workforce to stimulate the economy and provide the jobs that the governor stressed in his State of the State address. Not investing in higher education will have a devastating impact on the state’s economic future. This impact is even more dramatic in Central California where we must increase the educational level of our workforce. The choice California seems to be facing is more taxpayers or more people will be dependent upon government support for survival.

Fresno State has been working, and will continue to work, with the California State University Office of the Chancellor to advocate for the students of Central California with the Governor, the Legislature and the CSU Board of Trustees. We will make the case that Fresno State plays a unique role in Central California…the section of the state that is struggling most in the current economy. The needs here…in unemployment, poverty, poor health care, and infrastructure…are intense. Fresno State is the economic and cultural engine for the Central California—“The New California.” We need the state’s continuing investment and involvement in our campus and this region. I know the faculty, students, and friends of this great university will help us make that case.

So what are the policy directions proposed by the new administration?

· Fees to California colleges and universities will go up. The Governor is proposing a new approach to fees which results in a more predictable fee policy and sharply differentiates fees at the undergraduate and graduate level. Specifically, he proposes that undergraduate fees increase by ten percent for 2004-05 and graduate in-state fees increase by forty percent. Non-resident fees would increase by an additional twenty per cent at both the undergraduate and graduate levels. Future fee increases would be linked to per capita income increases. This action would bring California’s student fees more in line with the higher fees in place in other states. We will need to move swiftly to help needy students as these fee increases are approved in order to ensure that every means of additional private, foundation, federal, and state support is in place and available. While I approve the direction of developing a long-term predictable fee policy, we must also defend the importance of access for all segments of society to a high quality education. That has always been central to the economy and overall success of our state.

· Since it costs less to educate a student in a community college than it does in a four-year institution, there will be a great emphasis in encouraging, or perhaps even requiring, some students to complete their first two years of a college degree at a community college. We will need to expand and enhance our relationships with our community college colleagues to coordinate curricula and ensure smooth transfers. We will also need to assert the importance of pursuing a four-year degree at our institution, and that many students are better served seeking all of their four-years of study here.

· There will be greater scrutiny of our programs by the community. The Legislature, the governor, our donors, and the public at large will have high expectations for our performance. We’re certainly up to that, but this will be critical time to effectively communicate our many contributions to the economy and culture of Central California.

· The use of technology for instruction will come into even more focus as policymakers and educators look for new ways to educate more students in a shorter time.

· There will be much more competition for private giving, grants and contracts as universities across the state struggle to make-up their budget shortfalls. Fresno State already is one of the highest performing CSU campuses in attracting donor support and winning grants and contracts, but those efforts will need to expand rapidly in an ever more competitive environment. We will need to invest the time and talent needed to sustain our excellent record of growth in this area.

So how do we cope with the immediate budget cuts? For the past two and a half years, our university has taken active steps to reduce the impact of budget cuts. The University Budget Committee has worked to carefully consider where cuts would be made with the least impact on the educational services of the university.

As a result of those careful deliberations, we took several difficult steps to cope with the shortfall that resulted from a 13 percent cut in funding this year. This year we have managed a $21.1 million cut to this university’s state funding, or about 12 and a half percent of our prior year base budget. Fees were increased by 30 percent by the CSU system to mitigate part of the impact of those the impact of those reductions. That fee increase offset our campus reduction by approximately $9.2 million. We received $7.5 million in new enrollment growth funding. That left us with a $4.4 million net budget shortfall. In addition to these budget reductions, we have absorbed unfunded increases of $3 million for some salary increases, higher health care premiums and risk pool insurance.

We closed applications at an earlier time for the fall 2003 semester and pushed ahead the application deadlines for this spring. We chose not to accept applications from first-time freshmen or lower-division transfer students for the spring semester. We moved to larger and fewer classes. We reduced staff and faculty positions and reduced the number of temporary employees. There have been no salary increases for employees.

I eliminated 10 management positions, including positions in my own office, which resulted in re-assignment, a reduction in time base, or termination for those employees. These actions saved $1 million dollars.

These cuts were not easy, but now we will have to do even more. Specifically, for next year we will have to reduce our base budget by $12 million and serve 1,500 fewer students. This is the net figure after we calculate the proposed fee increases.

I am now asking each school, college, and division to prepare a plan to meet the reductions. Each school, college and division will be asked to prepare these plans assuming that they will receive 7.5 percent fewer dollars next year as we serve 1,500 fewer students. These plans will need to be completed and submitted to the Vice Presidents by February 27. The plans will be reviewed with the University Budget Committee in March. In early April we will begin implementing these plans.

During February, I also plan to convene a budget summit on the campus which will involve the leadership of the Academic Senate, Associated students, our bargaining units, senior administrative leadership, deans and other key campus leaders to further solicit ideas which should be considered as we develop our budget plan in response to the Governor’s proposed budget. I will invite the entire campus community to submit ideas for consideration at the summit.

Our situation may change as the Governor’s proposed budget moves through the Legislature and heads to the “May Revise” of the budget…and on to ultimate approval. But we can’t count on any possible positive adjustments to the budget…we need to plan for the worst and hope for the best. Further, the Governor’s budget proposal assumes the passage of Proposition 57 - the $15 billion debt reduction bond.

As we consider preparing budget plans with the reductions I have mentioned above, I am asking each school, college and division to be guided by these principles:

Priority should be given to making courses available for students who have been admitted in order to ensure a timely completion of their degrees.

Consider the possibility of consolidating or restructuring departments, programs, or offices which would allow for the reduction of administrative costs and other overhead and reduce duplication of services or programs.

Examine processes and procedures which could be eliminated, suspended, or performed in a different way which would contribute to cost savings.

Increase and identify new opportunities for revenue where possible and eliminate subsidies provided to some services and programs.
There steps have been taken to provide support for grant and contract growth, seek to minimize the level of reduction or propose an alternative approach to maintaining progress which has been made.
Maintain essential services at an adequate level and reduce or eliminate non-essential services.
Propose reductions consistent with the priorities which are identified in the University's Plan for Excellence.

Give consideration to expenditures which can be delayed or deferred for a period of time.

Do not compromise the safety and health of the campus community and its members and seek to address the welfare of our students and employees during a very difficult time.

In the past there has been the question of reductions of our workforce or lay-offs when we face very difficult fiscal times. Last year we were able to limit reductions in the workforce to the elimination of ten management positions and to limiting the filling of staff positions which became vacant. In some cases, the staff position was filled as a temporary appointment lasting only until funding ended. We have also held a number of positions open which has required many of you to accept additional responsibility. We will continue these practices to restrict the filling of staff positions.

As the schools, colleges, and divisions begin to restructure their programs in an effort to achieve efficiencies per the principles I mentioned earlier, we will reassign employees in areas where positions may be eliminated to vacancies in areas of critical need.

We will continue our efforts to avoid laying off employees. However, given the severity of the reductions we face, I cannot promise you at this time that layoffs will not be necessary. Should we find it necessary to take this step, we will follow the appropriate contractual requirements that provide for notification of bargaining units and employees. I understand the unease that this situation brings to many members of our workforce and I am sensitive to your need for information. Please be assured that we are doing as much as we can to avoid layoffs. I do not contemplate that we will be faced with layoffs of tenure track faculty in the immediate future.

I do plan to complete the search for a new Provost and Vice President for Academic Affairs. Campus interviews of the five finalists will begin this week. I urge you to participate in the interviews according to the schedule which has been distributed. As we move ahead on any budget actions, and as we learn more from Sacramento, I will keep you informed via email, FresnoStateNews.com, and meetings across the campus.

There is better news on the capital budget front. Previously approved bond issues will allow us to move ahead on our work to improve the technology infrastructure on campus. This $18 million dollar project, funded by the voters in a previous state education bond, will bring our campus to a 21^st Century level of telecommunications and computer networking. Those improvements will be fundamental to keeping pace with the exponential growth of the use of technology on this campus. Work on the Science II building…also supported by educational bonds…is progressing right on schedule and we should open the building in January, 2005. I know we’re all looking forward to having that handsome new academic building available on campus. As soon as we occupy this building we will begin the process to demolish the San Ramons!

There is one more bond item that I need to highlight for you. Proposition 55, the latest educational bond, will be on the March 2nd ballot. This bond is extremely important for our campus. Of all the CSU projects, Fresno State has the largest single project on the bond – an $91 million dollar expansion and improvement of the Madden Library. The bond will authorize the demolition of the older sections of the library—built way back in the 1950s—and will construct a major new replacement and addition to the library. There is one man here today who certainly understands the importance of the bond – Dean Gorman. Dean Gorman…could you please stand. If you think of nothing else when you enter the polls this March…I want you to remember Dean Gorman. He’s counting on you…and so are the faculty and students of this university who need the finest library possible.

Please support this bond measure -- and encourage friends, family, and colleagues to vote for it, too. In fact, I have a request--Everyday that you wake up between now and March 2, REMIND YOURSELF HOW CENTRAL A GREAT LIBRARY CAN BE IN THE LIFE OF THE UNIVERSITY AND ASK YOURSELF WHAT CAN I DO TODAY TO HELP PASS PROPOSITION 55?

As you know, we completed our first phase in the WASC accreditation process as a team visited our campus in November. The team indicated that we were a “national model for institutions interested in becoming generators of social mobility, economic development, and student success.” Further, the team acknowledged the outstanding work of our faculty staff and administrators. I am very pleased that your work was reaffirmed.

I am also pleased that the California State University and CFA have reached a tentative agreement on a contract through June 30, 2005. You will be hearing more about this from Bob Merrill, CFA President.

Finally, Fresno State is about to begin the largest fund-raising campaign in its history. The campaign is a multi-year fund-raising effort to improve the overall excellence of the university as Fresno State approaches its centennial in 2011.

Work on the fund-raising campaign has been under way for almost two years. Faculty members have been identifying major academic goals for the campaign and university administrators have been conducting meetings with community leaders to begin to rally support for the effort.

Fresno State anticipated the trends in state funding and the need to expand private giving and other sources of support. Work on the comprehensive campaign began before the current crisis in California’s budget. As a result of that foresight, Fresno State is poised to achieve meteoric success, rather than mediocrity imposed by diminishing state resources.

The comprehensive campaign is self-supporting and does not use any state funds. This funding structure was developed jointly by university faculty, administration, and the Foundation as the best way to provide adequate funding to mount a successful campaign without harming the overall university budget.

Downturns in the state and national economy are certainly part of the environment the university will operate in over the next few years. The comprehensive campaign, however, will continue over a period of many years. During the next several years the economy will likely rise and fall, both in California and nationally. Economic conditions need to be considered, but will not preclude our fundraising efforts.

For example, if the university had started a comprehensive campaign during California’s last major economic downturn, the campaign would have begun in 1991 and concluded in 1998 – during the height of one of the most prosperous periods in California history. Major universities have always seen the need to take a long-term view when it comes to building philanthropic support.

California State University, Fresno now enjoys the benefits of the largest and most successful development and fund-raising program in Central California, but it must actively seek to maintain and improve its position.

For over a year the university has been engaged in a careful and methodical study of the specific fund raising goals of the comprehensive campaign. As the early concept of the comprehensive campaign was discussed, a central tenet was to encourage faculty involvement with the development of the campaign and its goals. As a result, faculty members have been guiding the process from the beginning, with the provost of the university chairing the effort and faculty members serving as chairs of all committees engaged in planning.

Interim Provost Jeri Echeverria is leading us through a process that is bringing focus to those goals, and creating a vision for the future. Over the course of this semester I will be providing a series of “white papers” tracing the development of the campaign goals and the key next steps in the campaign.

One of the nation’s top fund-raising strategists will be joining us next month to help coordinate the campaign. Mary Anna Dunn, Fresno State’s first campaign director, will work within Fresno State’s Division of University Advancement, headed by Vice President Peter Smits.

Dunn was the chief strategist and leader of the recent billion-dollar campaign for the University of Colorado, a four-campus system. The campaign was successfully completed in June 2003. She was also a key player in Colorado’s first comprehensive campaign, which raised more than $270 million dollars.

The comprehensive campaign will enable Fresno State to put greater substance behind its role as the region’s major university. The campaign will do that by generating private and corporate giving to support excellence in teaching and research and to fund initiatives that enable the university to better serve this region. We don’t have to depend only on the state for our success. We can chart our own course.

Our university community can create a new Fresno State for a New California. That’s the future I see as we head toward our centennial in 2011. Together we can make it happen.

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