January 24, 2001

Law School Auditorium

PRESIDENT JOHN M. PALMS - We will wait a few minutes because people are still arriving.

I. Called to Order.


Good afternoon, ladies and gentlemen, and thank you for coming to this Specially Called General Faculty meeting. We had a great celebration here last week, and I want to commend you for your participation in the Bicentennial kickoff. More than 350 faculty attended, and as you saw, from the participation of state officials who love the University to the presence of Secretary Riley and Jary Pelikan, it was a grand affair. I appreciate all the work that you are doing to mark this year of celebration. I hope it will remain a year of celebration for us.

I called this meeting to share with you what has been happening regarding the financial and budget aspects of the University. This all started last summer when we closed the Universityís books. The Universityís budget officer had left and, as usual, when such a key person leaves, we review the budget and the responsibilities of that individual. Some entries were incorrectly ledgered, and we corrected that. There were some fringe benefits not properly allocated to various colleges. I thought it would be a good time to go ahead and do an audit for more than just one year, so I asked the help of a good friend, Allan Barber. Allan had just retired from the University of Georgia, where he was the chief financial officer for many, many years, and he had been on the SACS accreditation committee numerous times. He came in to help us and brought with him Bob Bugbee. With their help, we balanced the budget. We made the appropriate changes in the kind of documentation that we needed, charged fringe benefits to the right accounts, and examined and corrected when needed the carry-overs in colleges. Some of these carry-overs represented commitments made and they really should have been treated as such. I appreciate the cooperation of the deans who have worked with us to set straight some of these misallocations in their budgets.

We also did a financial review on our indebtedness in regard to construction, and the Universityís capital position is clear and sound. That report along with the budget report was completed in November, and shortly thereafter we had an all-day meeting of the Board of Trustees and reviewed thoroughly all aspects of the budget.

This yearís budget is balanced, and we are hoping it remains balanced. Rumors aside, we have had no formal indication that the budget for this year will be cut at all. We are expecting to operate with the budget that we have.

The state budget, however, is of greater concern. As you have read in the newspapers, the University was asked by the Ways and Means Committee to respond to a "what if" scenarios of 5-, 10-, or 15-percent cuts. Now, this inquiry came in December, just after we had announced in Spartanburg and here the tremendous economic impact that this University has on the state. The Division of Research prepared a study, a very thorough study, about the economic impact of USC. The study showed that the entire University, with all of its campuses, incremental effects, and alumni, has about a $3.8 billion impact on this state and is responsible for 54,000 jobs. Then, we were told of the likely revenue shortfall in the state and that we needed to go through a "what if" exercises. Our immediate response was that cuts would be catastrophic for the University. We are already operating at about 80-percent funding as determined by the stateís funding formula. In the last ten years, allocations for our operating budgets have been far less than the states surrounding us. So, in a sense, we have already absorbed a 20-percent cut.

If you look at an annual study by the University of Tennessee, USC consistently ranks the highest among its regional peers on the portion of the budget dedicated to academic instruction and services. And, we are already operating with a 20-percent deficiency. Adding a 15-percent cut is really more than we know how to respond to without almost declaring financial exigency.

We are in strong opposition to the cuts. You have received a copy of our response to the Ways and Means Committee, and I also shared the letter with all of our Board of Trustees members and the board members for all of our foundations. We will also include our budget position and the effect of cuts in our USC-in-Brief, which goes to 2,300 people. I also met with Bobby Harrell, chairman of the Ways and Means Committee, and with David Wilkins, Speaker of the House. The stateís budget process is now being initiated, and every agency will be examined. As you have heard, the initial plan was to exempt K-12, not K-16, from budget cuts. We have asked that all the agencies be examined. I think legislators will do that, especially to see what is absolutely essential as far as annualizing expenditures.

The newer faculty here should know about the budgeting in the state. Along with your teaching and research, you should be actively involved in the budgeting process. There is an appropriation bill that funds the University and other special allocations that are given to the University. You cannot mix those. From the outside, you see a new science building, you see renovations of Sloan, you see a new Wellness Center, and a new arena. We have plans for a new dormitory. We must generate the operating monies for those. The 15-percent budget cut would affect our operating budget. During the years that we had minimal appropriations, we also absorbed a lot of costs. We had to pay fringe benefits when the state mandated a raise for all state employees. We received funds for those raises only for people whose salaries came directly from the state.

I think the University is one of the most efficiently run institutions in the country. So, we are going to do all we can to continue to fight this and hopefully come away with zero cuts. Even with that, we would have to do some belt tightening.

Tomorrow, I will make a presentation to the Higher Education Subcommittee of the House Ways and Means Committee. President Barker from Clemson made his presentation today. The tech schools and the Commission on Higher Education did theirs last week. I am going to talk about the momentum at the University, which throughout the fall was building, even before this economic impact study was completed. You can see that momentum in the improvement in admissions, the rising quality of our student population, the ranking of our library, and the tremendous job that you, the faculty, have done in competing for outside funding. We had over $122 million in research funding last year. We have had some extraordinary young people join us, and they have performed magnificently. The faculty that are now being promoted are the best that I have seen in the years that I have been here. It is just wonderful to see what attracted these young people to this campus. It is just as important for us to keep that momentum going so that we can adequately fund scholarships and our graduate students.

Within the University, we have been working with the Faculty Budget Committee throughout this process. We are making no major decisions yet as to what might be cut. It is very, very difficult to do that. Even thinking about the process would indicate that somehow we are going to be able to absorb that. I donít want to think about that problem. The Provost has asked the deans to look at their strategic plans and do the same thing we are doing. If you had to cut 5 percent, what would you do? If you had to cut 10 percent, what would you do? If you had to cut 15 percent, God forbid, what would you do? We will need to be ready.

The next step is the revenue prediction that comes in the middle of February. Hopefully, it will show that we are not as bad off as far as the shortfall evidence indicates. For the newer people here, one of the problems has been that we have often been funded through surpluses that resulted at the end of the year. Now, those surpluses are no longer available. But the recurring mandates are there, and the expectations are, at least from the first indications, that there would not be revenues to cover those. Hopefully there will be some relief in the prediction. The economic forecasting for the state certainly indicates that unemployment is still very low and that the economy is strong, although it is leveling off. Hopefully there will be some positive numbers.

What I really ask for you to do is first to understand what we are doing. I understand that some faculty want to write op-ed pieces; thatís fine. As faculty members, you ought to contact your legislators to indicate your strong objections to the possibility of cutting higher education. I know the students are going to do this on their own. They are worried that a 15-percent decrease in appropriations might mean a 30- to 35- percent increase in tuition. That would be very, very difficult, if not impossible, and our position in a budget-cut scenario gets more difficult if there is a state-required cap on tuition increases.

I welcome actions by you and by our students, but I know there is very little on a day-to-day basis that we can do about this budget crisis. You have your obligations. The best thing you can do really is to continue teaching well. You can continue doing research and competing for grants. There seems to be more money in the federal government than in a long time, and it will continue to be there. We need to be competitive and muster all the resources that we can.

We will continue our active fundraising. We had a good December. It does not mean that the money is in my pocket, and I can substitute it for what the state is not giving USC. This money has been given to us under the assumption that the state adequately supports us, that there is a partnership with the state to supplement those resources to make us a better institution. This partnership helps us raise funds for scholarships and endowed chairs and for some partnerships in instruction needed on this campus. We will continue fundraising very, very actively. It will get more difficult because people may not give if they think that the state is not playing their part in supporting higher education.

We know the economy is changing, and our plea to protect higher education and the University applies to all of the campuses. The economic impact study shows that every single USC campus has an economic and cultural impact on this state. With evidence such as the Wilson Plant shutting down outside of Greenville and Converse closing all its American manufacturing plants and going overseas, we must recognize the shift in our economic base. The economy of the future depends upon knowledge, and the future of creating that economy lies with the University of South Carolina and its partner institutions throughout the state. That is the message. To cut the source of enlightenment, the very source of the new economy, is just not something that we are going to accept without putting up a fight.

Our distinguished Provost would also like to make a few comments and then we both will take questions or hear comments. Oh, I would like to introduce Allan Barber and Bob Bugbee. Would you both stand for just a minute? I want to acknowledge the great help you gave us in the last several months in doing our five-year review. Allan and Bob are also available to answer any questions. We have other members of the administration here as well.


Thank you very much. I want to be very brief but I did want to tell you that almost four years ago I stood before this body when John announced me as provost. I said it was a great honor then because I felt like I was one of you. I want you to know that four years later it is a greater honor being provost of this institution. I still feel that I am one of you - a member of the faculty. As a member of this faculty what I would like to ask you to do is for us to be very positive. We donít need to whine. We donít need to pout. We donít need to be confrontational either with the governor or the legislature. Two years ago, we had good times and I recommended to the President - in fact for two years running - that we increase faculty salaries more than the state would give us. He was very enthusiastic about concurring with that recommendation and we did that. The times right now are not as good and we clearly have some decisions that we have to make - not decisions that we want to make but decisions we will have to make. What I am asking of this faculty is letís continue to be a team. Letís walk together. Letís continue the momentum that we had built. Letís be positive. We can do what we have to do to be a great university.

The other thing I want to make very clear as the President said "there have been no decisions made about how we will proceed". Clearly there are discussions going on about various possibilities but I wanted to thank Martin McWilliams and the Faculty Budget Committee. I have tried to keep them informed. They have been very helpful to me in letting me bounce ideas off them and in giving me their input. I would urge you to make them the conduit between you and the administration. They are the Faculty Budget Committee. We have people on that committee that are thoughtful, very creative. They have the perspective of the entire university in their minds. Some of them have been almost as long as I have and they are thoughtful individuals. I have appreciated working with them thus far and I will continue to work very closely with the Faculty Budget Committee. So the take home message - letís be positive. Letís walk hand-in-hand through this difficulty. In this room right now is probably the greatest concentration of creative minds in this state. We can decide our future and letís do it in a positive way. Thank you.

PRESIDENT PALMS - Thank you, Jerry. I just want to add two other elements. One is the tremendous support that we have had from the press. Have you read the editorials in the newspaper about our bicentennial, our economic impact, and our response to this budget situation? We have had great support from the press.

Secondly, you know this is not a partisan issue. This is a state that is collecting revenue and trying to decide what to do with the potential shortfall. It is going to take a bipartisan concentration and effort to balance this state budget and support education.

I will be glad to answer any questions or hear your comments.

PROFESSOR TIMIR DATTA (PHYSICS) - I have a question for Provost Odom. Jerry, you said that in the good times you recommended to the administration that all raises for faculty be higher than the state formula raises for faculty. Likewise it may be reasoned that in difficult times that faculty raises may be lower than the state formula, is that also true?

PROVOST ODOM - Timir, as I told the deans this morning everything is on the table. We will consider all options. I think we just have to. So that you have some idea of the magnitude of what we are talking about, a 5% cut to us now is $8,000,000 from our budget. A 15% cut is $24,000,000. Iím like the president, I donít where we will find that kind of money.

PRESIDENT PALMS - In the budget discussions, there has been no indication of a salary freeze or of not having salary increases. We are talking about the operating budget for the University. Even though this meeting has been called for the faculty, obviously we are communicating also with the staff. I am sure there is a lot of anxiety among the staff as well. It is just too difficult to call them all together, but we will be sending a letter after this meeting in the next day or so to bring them up-to-date on what has been done. The same is true for our Board of Trustees. The trustees obviously are anticipating what might happen, how to respond to these cuts, and what we might do. Any other questions or comments?

PROFESSOR CHARLES MACK (ART) - I would just like to thank you for your immediate and forceful responses in the press and other places. Itís been very good to have that kind of leadership.

PRESIDENT PALMS - Thank you very much. (A round of applause.)

PROFESSOR HARRY HANSEN (ART) - I am curious what the thinking is long term on the hiring freeze. What is the administrationís view of this? Is this something that is going to happen or is this being done in the interim until we see how this is going to work out?

PRESIDENT PALMS - The freeze, I believe, was an appropriate responsible action to take in this uncertain time. As Jerry has said, everything is on the table. As soon as we can give some, we will. The freeze does not mean we will not be hiring. Obviously there are clauses and special exceptions we will make for areas with critical needs. In the meantime, you can make your plea about your critical need both to Jerry and me. We know people are retiring, we know we will need some replacements. We will just take it on a college by college case.

PROFESSOR HANSEN - Is there a timetable for this?

PRESIDENT PALMS - There has been a change in leadership in both the House and the Senate. Republicans now control both the House and the Senate, contrary to previous years when the Republicans had a majority in the House and the Democrats in the Senate. You always had the Governorís budget, a House budget, and a Senate budget. Then, the budget went into conference committee, which meant we did not know what the budget was going to be until the first couple of days in June. This year, the Ways and Means Committee hopes to have a budget out of their committee by the 22nd of February, go to the House floor, and have the budget out of the House pretty quick. Hopefully there will be preliminary agreements taking care of most of the budgets, and it will move to the Senate rather quickly. The legislature has more on its plate than just the budget of the state. They have reapportionment. We will probably get some indications earlier about how well the economy is doing and how the state budget will come out. We are hoping to work as expediently as possible and make some decisions here.

PROFESSOR ROBERT HERZSTEIN (HISTORY) - I was wondering how our aspirations in regard to the AAU play into this. The research areas and graduate programs, it seems to me, would be rather essential if this goal is to be met. I was wondering what your thoughts in regard to are of possible cuts?

PRESIDENT PALMS - I don't think our views are any different from yours. As I said we have made tremendous progress in the last 15 or more years. You even see support of our movement towards AAU from the newspaper. We are on our way. We are already Research I with a new definition. We don't want to stop any of our momentum.

UNIDENTIFIED FACULTY MEMBER - Biology is losing its network manager at the end of February as a critical need. Should we go ahead and plan on not having anybody servicing our computers or what can we do? Is the time line on that kind of response something that you can envision is going to be in the next week or so with those kinds of positions?

PRESIDENT PALMS - I can not speak to all the priorities and diversities, but we cannot operate without our servers, access to the World Wide Web, without digitizing what we have. I understand access to the Web was cut out yesterday for four hours and this place stood still.

Thank you. I am gratified by the turn out, and I appreciate your continued hard work. Thank you very much. (Applause)

Adjourned at 3:27 p.m.

This page created 28 February 2001 by the Office of the Faculty Senate and Computer Services.
Copyright 1999-2000, The Board of Trustees of the University of South Carolina
URL http://www.sc.edu/faculty/general/01/minutes/0124.budget.html