I write to welcome you all back to a new semester and to update you on a budget outlook that may not seem so welcoming. While it is common for UNH to deal with financial challenges, this year will be more difficult than most. The reason is that in the teeth of the current economic gale each of our key revenue streams is being unusually buffeted:
- State Appropriation – The state is facing at least a $500 million deficit in the next biennium. Increases to USNH’s appropriations are consequently unlikely. We can probably expect little more than level funding over the next two years—a functional cut given the escalation in many of our costs.
- Undergraduate net tuition – Although net tuition represents nearly two thirds of our general fund revenue, it is a revenue source in this economic environment that is not particularly elastic. Many of our students and their families are financially stressed. Financial aid investments will likely need to increase. We also have to take care not to price ourselves out of an increasingly competitive market, especially with respect to non-resident students, who already pay rates that are quite high by public university standards. We also know that the demographic bulge that has produced record numbers of college-bound students is about to pass through the python.
- Research – Extramurally funded research activity has continued to decline, as measured by both expenditures and awards. We do not expect significant growth in this area over the next two years despite an increase in proposal submissions.
- Endowment income – The overall value of the UNH endowment has declined by approximately 25%. This means less available money for UNH operations overall—and potentially crippling pressure on those operations directly tied to restricted endowments in particular. Even if markets begin to recover later this year, endowment income will remain depressed for the foreseeable future.
Against this background, we must pursue both revenue enhancements and further cost savings. A central challenge will be salary and benefits, the largest drivers of our budget. We need to maintain our competitive position as an employer of choice. But we also need to be realistic about changes in the cost of living. The latest U.S. Consumer Price Index for our area from November 2007 to November 2008 shows only a 0.7% increase in the cost of living. Some economists even project a slight deflation in the months ahead. In light of these factors and the stress on our revenue sources, I expect any increase in salaries will be modest at best. Dick Cannon and I are working with the Board of Trustees now to establish salary guidelines for non-contract faculty and staff. These are negotiable matters, of course, for our colleagues covered by collective bargaining agreements.
These economic realities will put even greater pressure on the RCM budget model, as units will be affected in differential and unpredictable ways. In the circumstances, we will likely need greater sensitivity to institution-wide needs in the budgeting process, and I will work with the Central Budget Committee to assure this occurs.
Finally, we also need to redouble our efforts to address the chronic structural budget deficit issues that I outlined in my May, 2008 letter to the campus community (pdf).
In particular, I will be calling on the campus community to:
• increase enrollment in income-producing graduate and professional programs wherever possible;
• expand summer and other off-calendar programs aggressively; and
• restrict new hires except in the most revenue-sensitive and mission-critical areas
In the months ahead, I will communicate with you on a regular basis, keeping you up to date on our budget mitigation efforts, on state budget discussions, and on other matters that may affect university finances. I hope to be able to report soon on how we are seeking to position ourselves vis-à-vis federal stimulus initiatives. In the meantime, I thank all of you for your continued hard work, ingenuity and determination. I know these are difficult and uncertain times. I am confident, however, that we will surmount our challenges, and, indeed, emerge even stronger for having encountered them.
Mark W. Huddleston
University of New Hampshire