Earlier this week the Governor’s Office released a statement regarding the Commonwealth of Virginia’s budget. Because the state’s revenue shortfall impacts higher education, I want to update you on the most-recent developments.
In July, the state announced a revenue shortfall that resulted in the elimination of the state-supported compensation program and raised concerns about the viability of the state budget. Subsequently, actions by the state have confirmed that they will have to reduce the budgets of state agencies, including higher education, for the current fiscal year as well as the following fiscal year. As a result, Virginia Tech was asked to give back $5.1 million, on a one-time basis, for fiscal year (FY) 2017, our current budget year.
We recognize the difficulties that our colleges and support units encounter when asked to adjust budgets in the midst of the academic year. Because we plan and manage our budget carefully and proactively, we were able to manage this revenue reduction centrally; thus, we will not require any unit on campus to reduce its FY 2017 budget.
We do not expect any changes to our FY 2017 operational budgets, and I anticipate that the activities of our academic and support programs will continue to move forward in accordance with our planned levels during the current academic year.
Further, recognizing the critical nature of our compensation programs to the campus community, we took steps to establish a 2 percent merit-based pay increase for all faculty and university staff employees. We are pleased to share that, pending approval of the Board of Visitors on Nov. 7, the resulting salary increases will be effective on Nov. 10, 2016.
The memorandum from the Governor’s Office this week indicated that the projected revenue shortfall for this biennium is severe enough that higher-education institutions will have to participate, along with other state agencies, in ongoing budget reductions, effective with the upcoming fiscal year, which begins on July 1, 2017. Each Virginia college and university must plan for a 7.5 percent cut in state General Fund support.
Further, the one-time budget reductions strategies assigned to higher education institutions in FY 2017 will be continued in FY 2018, resulting in the return of an additional $3.8 million in one-time funds.
If fully implemented on July 1, 2017, the 7.5 percent reduction will translate to a $12.9 million reduction in General Fund revenues for our University Division, primarily our instructional and support programs. Likewise, the 7.5 percent reduction equates to a $5.2 million reduction for our programs supported by our Cooperative Extension/Agricultural Experiment Station Division.
It is important to note that the state contribution to our overall university budget is 18 percent. This means that if the state shortfall remains the projected figure of 7.5 percent, it does not translate into a similar-percentage reduction in average unit budgets. That moderated impact will vary by unit based on a unit’s dependence on state funds.
We recognize and are very concerned about the adverse impact on our programs of ongoing reductions in state support that could total $18.1 million. However, it is important to recognize that the while the administration has to assess the budget environment and propose an amended budget, the governor’s budget proposals will be submitted in January 2017 to the General Assembly for their consideration.
I can assure you that my office, along with support from Government Relations and Finance, will do everything we can to convey to the General Assembly the significant impacts that will result from reductions of this magnitude, and we will ask for actions to mitigate the level of the proposed reductions.
While we will work hard to reduce the impact on Virginia Tech, we nevertheless must also begin the planning efforts to absorb a reduction in state support in FY 2018 if our efforts in Richmond are not successful. The university has considerable prior experience in addressing reductions in state support, and I believe that experience will assist us in shaping budget plans that will protect the integrity and quality of our academic programs.
Further, we are confident that with our new Participatory Incentive Based Budget model, academic units will have the opportunity to participate in securing new revenue and reallocating resources internally as needed. Additional factors, such as our recent enrollment and philanthropic growth, add to our financial resilience.
Virginia Tech’s commitment to improving our academic and research programs, providing access to students, and being the very best steward of state resources possible will not change as a result of the state’s budget requirements. Fulfilling that promise is more challenging when key sources of revenue are reduced, but we are grateful for the support we do receive, and we will continue to work with campus leadership and our Board of Visitors to inform and guide our process.
I call on all of members of the Virginia Tech community to join in looking for both efficiencies and revenue growth opportunities, including those that engage industry partners, in the spirit of Beyond Boundaries.
As we have further details and information on our current and future budget we will share updates to campus.
President, Virginia Tech