By Elena Watts

On Jan. 21, The University of Texas’ Staff Council met in the Avaya Auditorium in the ACES Building from 2 p.m. to 3:30 p.m. as it does every third Thursday during the academic year. However, business was anything but usual.

Guest speaker, Kevin Hegarty, the University’s vice president and chief financial officer, whose presence at the meeting was announced in an early-morning email the day of the meeting, addressed the council about a potential budget cut resulting from a letter UT President William Powers received from Texas Gov. Rick Perry on Jan. 15.

The letter from Perry, signed by the Lt. Gov. David Dewhurst and House Speaker Joe Strauss, read essentially that sales tax revenues, which fund the state’s budget, have not been meeting forecasted expectations, and that all state agencies, including the UT System, might be required to make 5-percent cuts in their budgets.  The letter requested that the University submit a prioritized plan for such cuts by Feb. 15.

A 5-percent cut in the System’s budget constitutes $200 million, $29 million of which is the University’s share. Hegarty said there are two critical issues not addressed in the letter: the nature of the cut and the size of the cut.

Kevin Hegarty

“If it’s recurring … we’re talking about some fundamental changes to our budget,” Hegarty said. “That’s very different than if they view the tax shortfall as temporary, and they’re just trying to figure out how to fill this trough that has a finite duration.” 

The University can consider writing a check if it is a one-time cut to the budget, Hegarty said. The other important consideration brought to the attention of UT System Chancellor Francisco Cigarroa concerns the size of the cut.

“When the University is vying for funding from the legislature, it is every campus for themselves,” Hegarty said. On the upside “we’re all different, we’re all unique, we’re all on our own.” But on the downside,  “we’re all in the same boat together and have to cut five percent.”

Hegarty posed the question: If this University received two percent in terms of an increase, why is it being asked to cut five percent when other campuses that received increases of more than five percent are also being asked to cut five percent?

“Powers asked that the Chancellor and the Board of Regents think strategically about the cuts,” Hegarty said. “This is a big campus that brings huge resources not only to the System, but this campus brings in $500 million a year to Texas.”

The comments from the UT System, Hegarty said, were encouraging. “When we had to do this several years back,” he said, “the System came up with a lot of the money, they have reserves, they have things they can cut.”

Hegarty also commended the state’s leadership saying they were “wise and prudent for taking action.”

“It takes some political courage to fess up and say this is what the numbers look like so we need to prepare,” he said. “They could run along and play like life’s great and at the end of the biennium say surprise it’s not.”

Ben Rodriguez, library assistant, asked how the University plans to retain its employees without pay increases when the economy improves and jobs open up.  

“It’s a challenge,” Hegarty said.  “Right now it’s part of the plan,  it’s a hope and a plan that we definitely intend to pursue.” The president has made it a priority. He instructed the vice presidents to find the two percent.

Discussion about the prior evening’s tuition hearing started Hegarty’s presentation. The Tuition Policy Advisory Committee recommended a 3.95-percent increase in tuition for the coming year and the following year based on a non-binding House resolution passed by the Texas legislature in the last hour of the session.

The resolution suggests that all campuses not exceed a 3.95-percent tuition increase. At the University, funding has grown less than the inflation rate for more than a decade.

“What happens when inflation eats up what you have — you have to make it up and that’s why the tuition increases have been higher than the inflation rate,” he said.

Tough decisions between funding the University at a higher rate and providing health care for children of indigent families are the kinds of choices being made by Texas legislators, Hegarty said.

The state subsidizes the average UT student’s tuition, which is about $24,000 a year.  Students pay about $8,500. 

“So its heavily subsidized by the state, but the increment of subsidy is declining which is pushing more of the costs onto the users,” Hegarty said. “When I was here in the early ‘70s, the state and benefactors paid about 85 cents on the dollar of my education. My two sons who are here now— benefactors pay about 35 cents on the dollar. That difference is largely made up by parents and students.”

The logic behind the 3.95-percent increase, said Hegarty, was not to exhaust the limit recommended by the House, but rather to look at the six-year forecast and know that to balance the budget — before any letter from the governor — we will lose $17.1 million next year and the following year, $14.1 million.

“The income flows we depend on, the Permanent University Fund, for example, the flow that we get is based on market investments and the markets are down,” he explained. “If you look at your 401K, your earnings are dramatically different than two years ago, it’s no different with the University.”

The 3.95-percent increase almost satisfies the $17.1 million next year and generates another $17.1 million the following year, he explained. So there will actually be an excess the second year.

Powers is holding a town hall meeting Feb. 2 from 4 p.m. to 6 p.m. in the Avaya Auditorium, room 2.320 in the ACES Building.  Students, faculty and staff are invited to participate in the discussions about budget reallocations in the colleges and units, the tuition increase proposal and the 5-percent budget reduction request from the governor.