III.
COMMUNICATION WITH THE PRESIDENT.

A. Comments by the President.

President Powers welcomed everyone back to the new semester. He said the coming year would be a challenging one, but he felt the University was well positioned with regard to planning because budgetary issues had already been under discussion with the deans and student representatives for about eighteen months. Since House Bill 1 has been published, he said he wanted to add some context as to how budgetary issues were handled by the legislature. He said the House initiates the budget process after the comptroller certifies tax revenues without making assumptions regarding rainy day funds or other sources of revenue. During the session, the comptroller will continue to look at revenues, but the initial budget is a starting point from which legislative work can begin. He added that the beginning was “typically the worst moment in every budget.”

President Powers announced that the Senate budget bill had been reported out earlier in the day and was considerably better as far as education was concerned than the House bill. He said there were many people at the Capitol, including the leadership, who understand the importance of higher education to the state. He added that there were many items that the legislature does not have a great deal of control over, such as matching funds for Medicaid. However, he said he wanted to assure the Council and the University that the funding situation would be “job one” for him and for many other individuals on campus during the coming months as it had been this past fall.

With regard to talking points, he said only about 14% of UT Austin’s $2.1 to $2.3 billion budget comes from general revenue. Over the past twenty year period, the formula has generated on average about a 1.9% increase annually in the University’s allocation from general revenue, which had not kept up with inflation or the general increase the state has allocated overall to higher education. He explained that this situation was largely due to UT Austin’s constant rate of enrollment in comparison to the overall enrollment growth in higher education at other colleges and universities across Texas. He said the competitive knowledge fund, which was initiated in 2007 to fund research, was intended to rectify the imbalance in allocation rates to some extent. However, President Powers emphasized that additional work needs to be done in the way higher education is funded by the state here in Texas. In addition, he indicated that the funding level provided UT Austin from general revenue is less than that provided to other universities across the state because of the considerable amount of funding generated by UT Austin through external research grants and philanthropy. He said our University generated about $640 million this year of new external research funding and about $300 million in philanthropy last year. Additionally, he explained that UT Austin’s auxiliaries generate funds as well. The good news for Texas is that the state gets a $2.2 billion University for about $350 million minus these cuts in general revenue, which President Powers called “a tremendous investment or return on investment for the state.” He added that a message that the University needs to get out to legislators and the public is the return Texas receives on its investment in UT Austin “can be threatened if you start that cycle on the way down.” Another important message is there are some cost reductions that can be done across campus in the short run that can be turned back on after a year or two, such as cutting library or recreation sports hours, without permanently eroding the quality of the overall institution. However, he added, “What you cannot turn back on is the quality of the faculty that we’ve built in the departments.” He assured the Council that the administration was working very hard to protect that underlying foundation of institutional quality. He emphasized the importance of faculty sharing the following message with people throughout the state of Texas: “Quality is built in thimbleful, and it can be spent in buckets—you can’t always just turn that back on and keep things going.”

President Powers said there is another concern to be considered about funding differentials for various institutions. When general revenue increases occur, UT Austin receives 1.9 percent increases annually and other institutions might receive 7-8 percent each year over a period of time; on the other hand, when funding decreases occur, he said there is a tendency for all institutions to get equivalent percentage cuts across the board. He explained that this sort of pattern over time can erode funding disproportionately for UT Austin and Texas A&M. He suggested that this shared problem needed to be addressed at the joint meeting our Faculty Council will be having with the Texas A&M Senate. President Powers said he and Texas A&M President Bowen Loftin have been jointly visiting areas of the state to discuss the flagships’ critical roles in contributing to the prosperity and welfare of the state. However, he said they were both aware that all institutions, from public education to community colleges and four-year regional colleges, were important and faced with challenging financial problems.

President Powers said there was a tremendous amount of technical work that needs to be done on this budget, especially involving areas of the budget referred to as “hold harmlesses.” When the funding formula doesn’t accomplish what the state leadership has wanted done, especially at UT Austin and Texas A&M, where enrollment growth is not being encouraged, the legislative leadership has in the past provided supplements to adjust and hold harmless certain budget levels. Back in 2007, however, in the last hour of budget negotiations, a hold harmless provision for UT Austin of $10 million was dropped from the budget. He said that a number of influential legislators, including the state leadership, immediately noticed the omission and assured UT Austin that the funds would be put back into the budget in an emergency action in 2008 or certainly in 2009. President Powers said the leadership followed through and the funds came back in 2009 but in a different portion of the budget. He said the question now being faced is whether the funds will be returned into the University’s base budget from which the cuts were originally made. President Powers indicated that at present these funds were not included in House Bill 1, and this would be a considerable loss to UT Austin; however, he noted that the Senate’s version of the budget reported out today appeared to have the hold harmless amount included for UT Austin. He said technicalities such as this go beyond the philosophical issues of the extent to which the state is willing to support higher education, and particularly the flagship institutions, but they are important and require effort, attention, and time in dealing with the legislature and state leadership. He again repeated that he expected the current legislative session to be challenging, but he thought the planning processes that have been occurring both within the central administration and within colleges/schools across campus were important in decision-making that would lead to good choices. He said the overall effort would be to protect the quality of UT Austin, and he thought the legislators understood that the budget was “a work in progress as we go forward.”

With regard to the introduction of the UT Austin television network, President Powers said the work leading up to the recent announcement had been extremely competitive and could not be done in public view. He said the non-athletics programming was being taken very seriously and would present “considerable opportunity to project the image of the academic side of the campus from musical concerts to what our scientists are doing to what the humanities are doing in very high production value venues.” He said there would be the ability to project “what the University is about, what we’re doing, what our students are doing, what our faculty is doing, as we’re going forward.” He said ESPN was enthusiastic about its participation in adding high production value, but the network would not choose what is to be produced. He explained there was a small, campus-based steering committee, including Dean Dempster from the College of Fine Arts, Dean Hart from the College of Communication, and some of our University’s consulting media people, who will start the process of getting ideas for possible productions. President Powers said that several deans had already talked with their faculties about generating ideas, and he thought this type of input would be welcome as the project unfolds.

President Powers said the press conference announcement indicating that the network was a $300 million twenty-year deal did not make it clear that IMG, as marketing partner for all our licensing products, was entitled to a cut of these funds. At the beginning, he said the University would receive about $10 million a year, with half of that amount earmarked for academics. President Powers said the wording, that half would come to academics over the next five years, might have left the impression that the split was $25 million for academics and $275 million for athletics. He said the impression that academic funding would just cease after the first five years is not correct. He clarified the funding situation by saying the following: ”Over the life of this twenty-year contract, there will be a very substantial contribution to academics along the lines, maybe not exactly, but along the lines that will go in the first five years.” He explained that he and others did not think they were currently in the position to make decisions for presidents, deans, or other people over the next fifteen and twenty years. President Powers added: “I didn’t want to leave it with the impression that somehow that would just stop after the five years. The idea is that there will be, through the life of this contract, a very substantial contribution to the academic side of the campus.” He pointed out he had initiated the academic funding by announcing the chairs in physics and philosophy. When asked why he had chosen those two departments, he said his response had been that it seemed like a good way to start with two core departments, one in sciences and one in humanities and liberal arts. He said that this was not the end of the money, and discussions with the department chairs in those two areas had nothing to do with the choices he had made. He added the two departments were facing bottlenecks in planning faculty endowments that had been underway for some time, and he thought this money should be used, as he mentioned before, to protect the quality of our faculty as we encounter difficult economic times. He said he did not want to use these funds just to pay the light bills. Near term, he thought it was best to “keep our powder dry for the next couple of months,” in order to see how the legislative session and budget evolve. After the budget situation is clearer, he expected further discussion could occur with the Faculty Council Executive Committee and the Faculty Budget Advisory Committee regarding the use of these funds. He again emphasized that he felt it would be a poor use of these funds to just “let this seep into the budget.” Instead, he said he thought it was important to be able to look back at the use of this asset and be able to eventually claim, “…we’ve solidified our ability to go out and compete and support and retain the very best faculty.” President Powers concluded his statement by saying he had received a number of suggestions from the deans and department chairs as to how these funds might be used in the future, and he welcomed this input.

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