I write to provide you with an update on two topics: the ongoing development of the University’s budget for next year, and the status of our initial progress in implementing the University’s new strategic plan.
As I shared with you in February, the Governor’s proposed budget had mixed news for the University. It included: $97 million in capital funding for the design and construction of our health innovations center; 50% of our state pension (KERS) expense increase; and a 2.5% budget cut for all public universities and KCTCS. Two weeks ago, the House of Representatives passed its version of the budget, which endorsed the Governor’s recommendation for postsecondary education.
The total anticipated annual increase in our KERS pension contribution will be nearly $5 million. While it is good that the state might fund 50% of that cost, the University will still have to cover the remainder of this mandated expense. The 2.5% cut in our appropriation is approximately $1.2 million.
Earlier this week, the Senate passed its proposed budget. The Senate’s proposal removed all of the capital projects for the state universities, including NKU’s health innovations center. The good news is that the Senate restored the 2.5% cut to our state appropriation and kept the 50% KERS funding intact.
The House and the Senate have now established a “free conference” committee to negotiate a budget that both chambers can support. That work is expected to be completed over the next week or two.
The negotiations will be very dynamic. I remain cautiously optimistic, though, that funding for the health innovations center will be included in the final state budget. We are working very hard to produce that result, and we will also continue to advocate for full funding for the KERS increase and the elimination of the 2.5% cut.
In the meantime, we must continue to develop plans to reduce costs and increase revenues so that we have a balanced budget next fiscal year. To do so, I have asked each vice president to develop plans to reduce expenses by 5%. In turn, the vice presidents have asked for proposals from the units in their divisions. Although the preliminary target for each division is identical, I anticipate that the actual budget reductions will not be across-the-board; rather, there will be differentiated decisions based on our strategic priorities.
As the external legislative and internal budget development processes continue into the Spring, we must also focus on the implementation of our strategic plan, Fuel the Flame. I hope you have taken advantage of the opportunities provided by the nine implementation teams to offer input on the tactics we need to undertake over the next five years to implement our strategic goals and objectives.
It may seem incongruous that we are making plans to reduce our budget at the same time that we are developing strategies that require new investments vital to the University’s future success. It is unfortunate that these reductions have come at a time when the University is taking steps to align its resources with our core aspirations and with activities and initiatives that are central to our mission and vision, primarily the success of our students and the vitality of the communities we serve. But we must embrace both of these tasks at the same time. Indeed, when we successfully implement our new strategic plan, our budget situation will improve.
These are difficult challenges, but I am convinced we can meet them in a way that will advance us along the five-year course we set for ourselves a few short months ago. It is precisely at times like these, when state resources are constrained and increasing retention and enrollments are vital to revenue growth, that we need the discipline and determination to implement a well-conceived plan—one that will help us focus our time, talents, and attention on the good things we need to do.
I will keep you apprised as decisions in Frankfort are made. And I will be in a good position to provide a comprehensive report about our budget at the April 30 University Budget Presentation in the Student Union Ballroom at 10:00 a.m.
Thank you for your support and your sustained efforts.
Geoffrey S. Mearns
Northern Kentucky University
800 Lucas Administrative Center
Highland Heights, KY 41099