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Inside Iowa State
December 8, 2000

Shortfall means belt tightening for many

by Anne Krapfl
Iowa State units and departments are coming up with half of $1.5 million needed to cover higher-than-anticipated increases in health insurance premiums this year. The other half ($739,540) of the shortfall will be covered by a central allocation from the president.

The provost and vice president units are bearing pieces of the reallocation in proportion to the size of their operating budgets. That translates to about $560,000 to units within the provost's umbrella, $98,000 to business and finance units, $48,000 to student affairs, $16,000 to external affairs and almost $18,000 to units within the president's office.

Rab Mukerjea, assistant to the president for budget planning and analysis, said there is some variation from unit to unit in how the shortfall is being handled. Details of each reallocation proposal were sent to him last week; he and interim president Richard Seagrave are reviewing those plans this week. In most cases, budget cuts will result in frozen searches on vacant positions and a noticeable loss in equipment and supply funds and general budget flexibility. In some cases, it will mean program or service reductions or, possibly, eliminated positions. Mukerjea said it's "not in- conceivable" that any of these types of reductions could become permanent.

The Ag Experiment Station and Cooperative Extension Service, were required to reallocate significant amounts (about $81,000 and $61,000, respectively).

The shortfall is a result of higher health insurance premiums for all employees, including the university's obligation, in the state employment contract, to fully cover insurance premium increases for merit employees. Insurance plans for all employee groups saw double-digit cost increases this summer; when it was developed last spring, the university's tight budget had room for about a 4 percent increase in the employer portion of premiums.

Next year
Mukerjea said the provost and vice presidents also have been asked to begin planning for the year that begins July 1. The carryover cost to the university in FY2002 for health insurance premium increases will be somewhere near $2.6 million. This excludes any additional increase in insurance premiums during FY2002.

"We haven't developed a plan yet for addressing the carryover cost in FY2002," Mukerjea said. "The provost and vice presidents are studying the implications if we have to reallocate again."

Another option, diverting some tuition revenues to help meet the health care costs, as was done this year to cover salary and benefits increases, might have to be studied again, he said. FY2002 budget discussions begin in late January.

Mukerjea said the Board of Regents, State of Iowa, has indicated that its top priority in the 2001 legislative session will be fully funded salary increases from state appropriations for regents university employees. "Fully funded," however, would not include the shortfall from this year's health insurance premium increases.

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