President David Hodge sent an e-mail Tuesday, Dec. 9, to the university community addressing Miami's financial situation.
As we are all aware, the financial crisis that has hit the US and global economies has continued to worsen and it now appears that the economy will struggle for some time. This will have negative implications for almost all sectors of the economy in the US and abroad, including higher education. The vast majority of colleges and universities have, like Miami, taken pre-emptive actions to deal with significant budget shortfalls brought about by sharp drops in investment income, large shortfalls in state budgets, and increased economic stress for the families of students.
Last week, Governor Strickland appeared at several press conferences to outline what now appears to be a $7 billion shortfall in the state's next biennial budget. Other sources have estimated that 49 states are in recession or at risk of sliding into recession. Information from the Governor's office and other Miami University budget documents can be viewed on a new Web site www.muohio.edu/fiscal_update. We will be placing additional material on this site to help keep everyone as informed as possible.
While we know that the economic news is not good, economic conditions are dynamic and many key factors remain very uncertain, making it extremely difficult to plan for the fiscal year that begins July 1. However, to make the best possible decisions for Miami, we cannot wait for definitive budget information before initiating planning for targeted cuts. Thus, we are using all the information we have now to estimate the cuts we will need to make in order to balance our budget for the future, recognizing that we may be asked to cut more if conditions continue to deteriorate. At this point, we believe that the economic downturn will not be reversed quickly and cost consciousness must therefore infuse everything we do.
Currently, we estimate a permanent budget shortfall for the Oxford Campus for the 2010 fiscal year (starting July 1, 2009) of about $22 million, or approximately 6.3 percent of our core budget of $347 million. While substantial, the size of this shortfall mirrors many other colleges and universities across the country. Of the core $347 million budget, $67 million is dedicated to student scholarships and aid, which we will not cut, and to bond obligations that we cannot cut. This means that the $22 million cut will come from a reduced core budget of $280 million, or a cut of about 7.8 percent. To make up this shortfall, we plan to eliminate $6.2 million from centrally controlled funds (like capital renovation), leaving $16 million (5.5 percent) to be distributed across the university.
Consistent with our strategic goals, we will make cuts using criteria that protect our core educational priorities and further sharpen our commitment to student success. After consultation with the University Senate Committee on Fiscal Priorities and the Council of Academic Deans, we have set budget reduction targets of 3.5 percent for Academic Affairs ($6.6m), 6.5 percent for Student Affairs ($571k) and University Advancement ($545k), and 11 percent for all remaining areas, including the President's Office, ($690k), Information Technology Services ($2.3m), and Finance and Business Services ($5m).
We have asked each division to develop a preliminary plan to meet these targets, using our strategic goals as a guide, by the middle of January. Once all of the plans have been submitted, they will be reviewed together in order to minimize unforeseen impacts on other parts of the university. Cuts of this magnitude will be very challenging and will require more than trimming around the edges. Previous one-time budget cuts, and the hiring freeze and other actions we instituted in October have provided important immediate relief, but they will not be enough to make up the shortfall that we anticipate, and some additional reduction in support budgets and positions will be necessary. It is essential that we approach the budget reduction process strategically, by looking carefully at activities that can be reduced or eliminated, or at reorganizing activities and services, in a way that best serves the university's long-term excellence.
Above all, we must remain focused on student success, which is at the heart of our mission and is the key to our long-term viability. As we face an uncertain future, this is a time when we must not only continue to provide our students with the opportunities for a first-class education, we must also challenge them to use their energy and creativity during these difficult times to improve the communities in which they live and work. Indeed, through a focus on others, our students will deepen their own personal growth.
I want to thank each of you for your efforts to help Miami work through this challenging time. By working together, we will not only weather the current difficulties, we will, as with previous generations of Miamians, emerge even stronger. It will not be easy, but it is what we can and what we must do.