November 14, 2008 Budget

TO: All Faculty and Staff
FROM: Stephen L. Weber, SDSU President
Nov. 14, 2008

Budget Message #13

It does not take an economist to realize that our national, state and, perhaps, our world economies are in trouble. The coming difficulties will mean different things for each of us on a personal level, but there can be no doubt that there will be difficulties ahead for San Diego State.

Vice President Sally Roush has been sending, and will continue to send, regular budget briefings as information becomes available about the impact of these challenges on SDSU. All budget updates and links to other information sites are located on the Budget Central Web page at www.sdsu.edu/budgetcentral. The point of this letter is to urge caution and frugality in the months ahead.

First, some background: The governor's budget proposal in January 2008 called for a $99.3 million reduction to the CSU (and unfunded mandatory cost increases of $114.5 million), of which approximately $18 million would have fallen on San Diego State. The May Revision, however, was more encouraging with the proposed restoration of $97 million to the CSU. Moreover, the CSU Trustees approved a 10 percent tuition increase that also helped fill the budget gap. Our minus $18 million became minus $12.3 million with the tuition increase. When the May Revision was (essentially) voted into law in September, SDSU's cut dropped to $4.4 million.

We reluctantly dealt with the projected shortfall by drastically reducing new hires and reducing enrollment. Enter our magnificent Presidential Budget Advisory Committee (PBAC). Given the uncertainty of California's budget outlook, they wisely recommended, and I approved, planning for the original $12.3 million cut to SDSU, rather than the seductive (but illusory) $4.4 million. In effect, that gave us a "cushion" of $7.9 million against the (then) potential cuts. Subsequently, in October the CSU was cut another $31.3 million, using up approximately $2.5 million of our "reserve." Now the governor has called a special session and proposed further cuts of $66.3 million to the CSU. Our pro rata share of that cut, were it to be enacted by the legislature, would be approximately $5.2 million, thereby exhausting the "cushion" so wisely created by PBAC.

What does this mean for SDSU? Assuming the governor's proposed mid-year cuts are enacted (we will surely argue that they should not be) and that greater cuts are not voted, we should be covered (i.e., not need to distribute pro rata cuts to departments) for the current year. It is next year that concerns me and that should concern us all.

There is little reason to believe we have seen the bottom of California's economic decline. The Department of Finance and Legislative Analyst's Office are projecting a deficit of $27.8 billion over the next 20 months. Your guess is as good as mine as to where this recession will take us, but I fear it is not a pretty destination. Some levers remain within our control, though we take no pleasure in their use. We will surely be considering a further enrollment reduction for 2009-2010. Hiring will be severely curtailed again.

My concern is that next year we will not have the serendipitous opportunity of building a university-wide reserve. Consequently, I write to urge us all to do whatever we can to build reserves within the current fiscal year (not because I believe this year's budget is in further jeopardy, but because we would be foolhardy not to recognize that there are more difficulties ahead). Any monies we can carry over at the end of this year ("one time" though they may be) will help us lessen the trauma of the coming year.

Without intending to forecast future actions of the governor or the legislature, I suspect that, if faced with further cuts, the Presidential Budget Advisory Committee will have little recourse but to recommend sharing those cuts across the campus. That means the cuts will ultimately fall on each of our units with little in the way of an institutional "cushion" to buffer the blow. What your department or unit can save now can help reduce the negative consequences of future cuts.

I do not have to remind any of you that these are very short-sighted cuts that our state is contemplating. When California recovers from this recession, there will be fewer graduates from the CSU and from San Diego State to fuel the eventual recovery. Fewer graduates for the re-emerging job market will inevitably translate into a slower recovery.

San Diego State has faced and weathered such challenges before; we will do so again. But in an environment in which it is unlikely that the state of California can/will help us in the near future, it is incumbent upon us all to do what we can to save resources against future cuts.