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April 13, 2001

Employee preferences sought on cost-saving-strategies

by Inside Iowa Statestaff
As the university community waits for Iowa legislators to approve a budget for the fiscal year that begins July 1, interim President Richard Seagrave is asking for input on several scenarios that could address a probable ISU budget reduction of $16 million to $20 million.

The actual budget number will be clearer as April 27 approaches -- the final "paid" day of the 2001 legislative session -- but Seagrave told the Faculty Senate April 10 it appears likely the university will face about a $20 million reduction in its operating budget. In addition, Seagrave said he is not confident that salary and benefit increases will be fully funded.

Iowa State may not be hit as hard by budget cuts as some state agencies, he said. "I am still optimistic that our students will continue to get an excellent education."

Under the budget proposed by the governor, the university's operating budget would be reduced by 6 percent, or about $16 million, but salary increases would be fully funded. Because health benefits increases were underfunded this year, the university will start the next fiscal year $2 million behind, which would raise the total budget reduction to
$18 million, Seagrave said.

It is unclear whether the Legislature's budget, which differs from the governor's, would reduce the university's operating budget more. Seagrave said it seems clear that the Legislature does not favor fully funding salary and benefit increases, and may even provide funding sufficient only to cover merit staff increases.

"We're therefore looking for ways to cut about $20 million from our operating funds," Seagrave said, "and we may have to make a decision about how much more to take (from the operating budget) for salary increases for faculty and P&S staff."

Seagrave said the administration will do as much as it can to cover the reduction centrally. But once central cuts are made, "Every unit will have a target it will have to meet."

Employee surveys
During the last few weeks, a team of ISU central administrators has developed lists of both short-term and long-term strategies that, collectively, could produce the needed savings.

Short-term solutions include employee furloughs (mandatory days off without pay), delaying or halting major program initiatives and maintenance projects, employee layoffs, implementing a vigorous energy conservation program (for example, shorter AC and heating seasons), enforcing a one-year hiring freeze, using tuition increases to reduce the shortfall, and decreasing employee benefits.

Possible long-term solutions include steps like eliminating programs, implementing deeper employee layoffs and seeking significant tuition increases in the future to offset the funding shortfall.

Last week, the Faculty Senate conducted an online survey to gather faculty reaction to one list of scenarios. This week, Professional and Scientific staff members were polled online by the P&S Council on a similar list of scenarios.

Survey results from the senate survey showed the faculty's favored methods for reducing the budget were delaying major projects and initiatives, energy conservation, using tuition increases and deferring program reviews. Least favored methods among the 298 respondents were decreased employee benefits and furloughs. The results of the faculty survey are online at

Each of the surveys also asked for opinions on two key budget issues: salary increases in relation to salary funding levels and increased costs for health care benefits.

Salaries. Each year, the Board of Regents, State of Iowa, asks the Legislature to fully fund salary and benefit increases. (Based on the regents' recent contract with the faculty union at the University of Northern Iowa, increases this year could be between 5 and 6 percent.) Several times recently, the Legislature has under-funded the awarded increases. If this is the case this year, the surveys asked, should Iowa State reallocate funds to fully cover the increases or limit salary increases to the amount of legislative funding? Other strategies might be to delay the promised salary increases until Jan. 1, 2002, or impose furloughs, at a savings to the university of about $900,000 per day. A five-day furlough would reduce each employee's salary by an estimated 2 percent.

However, at the senate meeting Seagrave said he thinks the idea of furloughs is unlikely unless salaries are fully funded.

Health care benefits. Again, if the Legislature underfunds health care cost increases, ISU administrators want to know what employees prefer: reduce health care benefits to the level of state funding, maintain health benefits but pass any unfunded increase on to employees, reallocate university funds to cover any unfunded cost increases, or use some combination of reallocation, employee cost-sharing and benefits reduction to solve any underfunded cost increases.

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