Budget-Planning Process Starts Earlier; Additional Cost Reductions Sought

Chief financial officer Mary Jo Maydew distributed a budget planning memo to administrative department heads this week. Below is information for the entire campus community about budget planning and its likely effects. Updates will be issued as the budget process progresses.

CSJ: Your memo asks each administrative department manager to envision how her or his operation would run with a 10 percent budget reduction over three years, cutting at least 5 percent in fiscal year 1998-99. Does that mean that all departments' budgets will be cut 10 percent?

MJM: No. This planning effort is designed to provide information that can be used in discussions with managers during the budget process. For planning purposes, we're using 10 percent over a three-year period. Actual budget reduction targets will be set in late November, when the departmental budget packages are distributed. We're taking a new approach this year by asking managers to do extensive analysis of their operations before budget discussions begin.

CSJ: Will reductions be made across the board, as they were last year?

MJM: No. This year reductions will vary from area to area. This year, unlike last, we have the Plan for MHC 2003, which provides a framework for our thinking about how we allocate our resources. Our task is to match our use of resources to the College's mission and the priorities established in the plan.

As administrative managers, we need to think about which programs and services support and supplement the academic program in important ways, and where there are lower-priority tasks that could be reduced or eliminated.

CSJ: So some departments may be asked to reduce their budgets by more than 10 percent over three years? If so, who decides what's most important?

MJM: It's possible that some areas will need to cut more than 10 percent. President Creighton ultimately makes these decisions, but she won't make choices in a vacuum. She'll consult extensively with me and other members of the senior staff, and we will talk with department managers and with one another about the relative priority of the functions each area provides.

CSJ: Can these reductions be made without laying off staff?

MJM: The College reduced staff by twenty-two positions last year without layoffs, but we can't promise layoffs will never happen. Salaries and benefits are about 65 percent of the College's budget, so staffing has to be considered as we think about cost reductions. We will continue to do all we can to minimize the impact of budget reductions on individuals. Having managers prepare a three-year cost-reduction scenario will give us time to plan for any staff reductions and try to find other jobs at MHC for those who would otherwise be laid off.

The goal is not to stretch staff farther and farther, but to look at the work and see what we can do less of. We're not only going to look at how to reduce costs; we're also going to look at what we do and how we do it, and will let that analysis drive the cost-reduction process.

CSJ: Will faculty positions also be reviewed?

MJM: Faculty positions are reviewed by a different process, which involves the faculty's committees and the dean of faculty/ provost. The Plan for Mount Holyoke 2003 anticipates that during the next few years some reduction will be necessary in the overall number of faculty positions in order to reach financial equilibrium. Eight senior full professors have decided to retire under the incentive program announced last spring; their retirement will have the effect of reducing faculty salary expenditures because the beginning faculty who may replace them will start at the assistant professor rank. Costs in academic departments and programs other than faculty salaries will be reviewed this year as part of the regular budget process, and with the same goals I've described for other parts of the College.

CSJ: Is reduced spending the only way to reach our financial goals?

MJM: It is an important component but by no means the only aspect of reaching financial equilibrium. We will be working to increase net tuition revenue, and the upcoming fundraising campaign will have as a primary goal increasing the College's endowment, which will increase revenue over time.

CSJ: What's the time line for the budget process?

MJM: Department heads will complete their budget-planning work by mid-November. In December, budget discussions begin. Final budget requests are due in January and February; and the entire College's budget will be completed by early April.

CSJ: Last year we achieved the $2 million cost-reduction goal; this year we expect to have to cut at least $1.6 million more. Why are we expecting to make significant expense reductions again this year? Will that be the end of budget reductions?

MJM: The financial part of the Plan for Mount Holyoke 2003 includes cost reductions in the early years, so there has been an expectation from the beginning that the major work on expense reduction would be a more than one-year project.

The need to find ways to reduce costs and be more productive will be ongoing; resources will always need to be reallocated to match our spending with our goals and priorities and to provide funding to do new things. This is not unique to Mount Holyoke or even to higher education; it's a regular part of our work. We do expect that as revenue growth increases in the later years of the plan, the pressure for significant annual expense reduction will ease.