We Must Work Together to Solve Our Budget Crisis

April 15, 2009

Members of the Rutgers Community:

Like countless other institutions, Rutgers is being severely affected by the global economic crisis. Across New Jersey and the nation, people have lost their jobs, hard-earned savings have been decimated, housing values have fallen, and businesses have found it impossible to obtain credit. According to the nonpartisan Office of Legislative Services, New Jersey is suffering its worst revenue downturn in modern history, thus crippling the state’s ability to make badly needed investments in higher education and other priorities.

As a result, the university’s budgetary picture is deeply troubling—and all the more so because the current downturn follows many years of declining state support. I have shared most of the basic facts with you before, but they are worth repeating.

For the current year, the state’s 12 senior public colleges and universities have been informed by Trenton that the promised third-quarter payment of salary funding will not be forthcoming and that the fourth-quarter payment is also at risk. For Rutgers that translates into a mid-year loss of $4 to $8 million in state support. All of our units had made contingency plans to absorb such painful rescissions and have now implemented them.  

Looking ahead to the 2009–10 fiscal year, the financial picture is even worse. Governor Corzine has proposed another reduction to Rutgers’ base budget, this time a cut of 5 percent or $15.5 million. If adopted, the proposed budget will bring the university’s direct state operating support (excluding fringe benefits) back to the level at which it stood in 1997–98, 12 years ago.

The governor has also proposed a wage freeze and furloughs for state workers, and his budget provides no funding for salary increases in higher education. Because Rutgers’ contracts with faculty and staff—contracts that were negotiated in 2007 when the economic outlook was far different—call for approximately $30 million in salary improvements to be paid starting in July, the lack of state support for those increases drives the university’s budgetary shortfall to $45.5 million. Other unavoidable increases for such expenditures as debt service and utilities bring the total budgetary shortfall to nearly $60 million.  

In prior years, a substantial tuition increase might have been a viable option to mitigate the dire effects of such cuts. However, in today’s economic climate, such an increase would have very damaging effects on our students and their families, many of whom already have obtained the maximum amount of grants and loans to which they are entitled. The university’s financial aid offices are being inundated with requests for emergency assistance from students whose families have experienced drastic losses of income.

To deal with the anticipated $60 million shortfall, last week Executive Vice President Philip Furmanski informed chancellors, deans, and vice presidents of their units’ budget reduction targets for the coming year, and he asked to receive their plans later this month for dealing with the reductions. Even now, however, we can be certain that budget reductions of this magnitude, following the deep cuts in recent years, will mean that searches for critical positions will be cancelled; courses and sections will be eliminated; important services provided to our students, staff, and faculty will be reduced; maintenance of our facilities will be scaled back; and major projects will be delayed. For my own part, among other difficult cuts, I am already imposing severe restrictions on administrative travel and meetings and will cancel this and next year’s Faculty Traveling Seminars, which have served us extremely well in raising the university’s visibility among our constituencies.  

The most painful cuts will be layoffs. Dedicated men and women whose work is important to Rutgers will, unfortunately, lose their jobs in an extraordinarily difficult job market. The unemployment rate in our state has risen above 8 percent, and Rutgers Professor Joseph Seneca forecasts that “New Jersey will end the decade with fewer private-sector jobs than when the decade began—something that has not happened since the 1930s.” In this circumstance, layoffs will have life-changing consequences for many because it will be difficult, if not impossible, for them to find employment elsewhere. This is not a course I want for Rutgers; it would be far preferable to avoid layoffs, especially because we are so thinly staffed in many of our service areas and the job market is so poor. But if the shortfall remains this steep, layoffs will be unavoidable.  

While many other peer universities have announced salary freezes or furloughs to help deal with their budget cuts and to help avoid layoffs, Rutgers, as a result of contractual agreements reached through collective negotiations two years ago, is scheduled to pay salary increases averaging above 5 percent. In the current economic climate, and with deep sensitivity for those in our own community who will lose their jobs, we must consider the propriety of such disparities and seek appropriate solutions.

I have appointed a budget advisory group, chaired by Vice President Furmanski and representing all segments of the university community, to explore the widest range of options for responding to this dire situation. The committee will recommend a course of action spreading fairly the institution’s financial pain while protecting the university’s core missions and, to the greatest extent possible, the members of our community.  

At the same time, we will continue to work with officials in Trenton and Washington, D.C., to ensure that state and federal policymakers appreciate the economic and social benefits of supporting universities like Rutgers. Later this month, I will be appearing before the state senate and assembly budget committees to discuss the governor’s funding proposal and to seek improved support for Rutgers.   

It is inevitable, however, that even with some restoration there will be budget cuts for the year ahead, and so we have asked chancellors, deans, and vice presidents to implement the first tier of these cuts as soon as possible. Regrettably, unless we come together as a community to identify innovative options, layoff procedures must begin immediately so that the associated savings can take effect on July 1.

The unique challenges of the current economic crisis cry out for creative solutions and for shared sacrifice. More than ever, we must work together as a university community to preserve jobs, protect our core missions, and maintain access to a rich academic experience for a diverse student population. We have been meeting with constituency groups from throughout the university, including the leaders of our unions, to discuss our shared responsibility for assuring that Rutgers will surmount this economic crisis.

In the coming weeks, I will keep you informed about our budgetary situation and will welcome your ideas and suggestions for solving the problems we face. While the immediate prospects are truly serious, I believe we can and will work together toward strategic, purposeful, and humane solutions that reflect the best spirit of an academic community and the finest traditions of Rutgers.

Our university, steeped in rich heritage and legacy, blessed with outstanding faculty, dedicated and productive staff, talented and energetic students, and loyal supporters throughout the world, will weather these challenges. I am determined that we will emerge from these times on course, united, and with a renewed focus on excellence. Our mission demands it; our history proves that it can be done.

Richard L. McCormick
President
Rutgers, The State University of New Jersey