Dear Colleagues,

Last month the governor submitted his FY 2010-12 Executive Budget to the General Assembly. The state’s fiscal situation remains bleak and while cuts to our budget are not as severe as the past two years and most of the governor’s budget plans have already been reported in the media, I highlight for you several important aspects that affect the university generally and you personally.

First, some perspective…the administration’s introduced budget is based upon several key revenue assumptions. For example, the Executive Budget proposes that the state will eliminate the payment of car tax rebates to localities, thus freeing up General Fund resources to cover other expenses in the state budget. Further, the Governor will submit a separate legislative proposal for the creation of a one percent income tax surcharge, which would generate revenues that could be distributed to localities. The incoming governor and key legislators have publicly expressed opposition to those features. Thus, we likely will see a very different state budget two months from now. Regardless, I want to share with you highlights of the introduced budget to give you some sense of concepts currently in play.

Because the Executive Budget restores a portion ($20M) of the General Fund reduction proposed in September 2009 and retains a portion of the federal stimulus finding, the university’s appropriation for FY 2010-11 is about equivalent to our funding in the introduced budget. This means that under the Executive Budget proposal, Virginia Tech would not incur another reduction in 2010-11. However, in the current year, agency 208 will still lose $21.9 million of its base General Fund budget and agency 229 will lose a corresponding $4.5 million in General Fund support. Moreover, we will receive additional federal stimulus dollars in FY 2011 over and above the stimulus funds received in the current year. That is the good news.

The bad news is that in FY 2011-12, we will lose all stimulus funding for agency 208 and 229 as well as the $20M in General Fund support that was temporarily restored for 2009-10 and 2010-11. Thus, our total support from the state would look like this if the Commonwealth makes no further adjustments….Agency 208 Budget in FY 2009-10 will be $158.8 million; in FY 2010-11, $165.7 million; and in FY 2011-12, $128.1 million. Agency 229 Budget in FY 2009-10 will be $63.5 million; in FY 2010-11, $67.3 million; and in FY 2011-12, $59.0 million.

Obviously, we have our work cut out for us. Tuition increases and budget reductions have and will offset much of these losses.

I am sorry to say that none of these budgets include salary increases. The governor’s budget continues to call for a one-day furlough in May 2010. How this will be implemented in the complex university fiscal environment is problematic. We have argued that implementing such a scheme is extremely difficult and likely not worth the effort.

The governor’s budget also requires all state employees to contribute one percent of one’s salary to VRS or the ORP in FY 2010-11 and 2 percent in FY 2011-12. Currently, the state/university contributes your entire share.

The introduced budget also suspends the $20 per pay period deferred compensation cash match for the last five pay periods of the current fiscal year and the next biennium.

There are a series of other adjustments to our operating and capital budgets and other items of interest. I refer you to the Analysis of Executive Budget Bill for the 2010-12 Biennium for further detail in Vice President Shelton’s memo of December 23, 2009 to deans and vice presidents.

I realize that many of you are going the proverbial extra mile. It is not a pleasant picture. Yet, we have been able with judicious management and contingency planning to avoid significant disruptions in program delivery or major layoffs.

Charles W. Steger

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