Chancellor Thomas C. Meredith's Remarks to the Conference Committee
2:00 p.m., Tuesday, March 11, 2003
Room 404, State Capitol
Thank you. As always, I welcome the opportunity to discuss the budget for your University System. First, let me introduce members of our Board of Regents who are present today.
On February 27, I spoke before the Senate Appropriations Committee regarding the potential additional one percent cut to the University System's Fiscal Year '03 budget. I spoke frankly then, and I will speak frankly and plainly today.
Why? You, working hand in hand with the Governors of this state, have created the finest higher education system in this country. You have provided the resources to assist our Board of Regents in developing institutions of extraordinary quality for the citizens of Georgia. Quality in our academic offerings, quality in the research that is driving our economy and quality in the phenomenal service we are providing to schools, businesses and government agencies. We are able to do all of this because you have given us the means to hire world-class faculty and develop a world-class reputation. I know you do not want to dismantle this great System you have built in Georgia because of a brief downturn in the economy.
Please look on your tracking document, page 47. You've seen this before. Please look at lines 4 and 5. The bottom line of this means more cuts and less money for health insurance. That's a double whammy late in the game. Both are in conflict with my pleas for "no more cuts this fiscal year to the University System."
I will use the Governor's recommendations as the starting point of my remarks.
Line 4 is the austerity adjustment. Note the Governor's recommendation of $29.8 million and the Senate's version of $33 million. I want to express my deep appreciation to the Senate for reducing the potential impact of the one percent new cut. This is a difference of almost $3.2 million - or an additional cut of one-fourth of one percent. Now, this is better than a cut of one percent, but quite honestly, you will understand that I prefer the Governor's recommendation of no new cuts.
That's why I'm focused on the Governor's recommendation. It's the only way we can maintain the quality we've discussed. We have no more room for error this fiscal year.
Now look at line 5. The Regents requested $7 million for health benefit rate increases. You can see how we have moved from the Governor's recommendation of $4 million to $3.75 million to zero funding for health benefits. If you add this reduction from line 5 to the $3.2 million new cut in line 4 we just noted, we are again talking about significant cuts.
Also requested but not recommended were rate increases in our other benefit programs. These rate increases also must be paid and total just over $5 million. These rate increases have occurred in spite of our vigorous, cost-control efforts. These include: one - implementation of the PPO plan; two - restructuring of premium rates in the indemnity plan; three - a new pharmacy benefit plan that is saving us millions; four - reduction and stabilization of administrative contract costs; and five - implementation of the national provider network for the indemnity program.
There is a rumor that the University System has the Cadillac plan and the other State employees have a Chevy. That is just not the case. Previously I have provided members with an analysis of state benefit plans. Our plan is coordinated with and through the Department of Community Health - which also handles other state benefits. Both plans are extremely similar. Mr. Chairman, I would be happy at any time to make a thorough presentation to any committee of the General Assembly regarding health benefits.
Before I continue, let me point out that any cut is on top of the previous cuts totaling $184 million.
I don't mean to be dramatic. But, as I said at the beginning, I want to speak plainly and truthfully. So let's review to see where we are at this stage.
I want to put our situation in the frame of reference of an airline pilot.
In last year's General Assembly, you passed a $1.433 billion appropriation of formula funds for the University System. That's the amount we had to make our fiscal year "flight." But as we prepared to take off, - we discovered that our passenger list - our students - was not the 217,000 we were budgeted to carry, but 233,000. We added another Georgia Tech to the plane.
But, we managed. We figured out, with careful planning, how we could make it to the destination. But, once we got in the air, we were told we had less fuel than budgeted. This is the $50 million in new reductions after the start of the fiscal year. On the tracking sheet, this is represented by line 1, the May and July cuts, as well as the cuts we've already discussed on line 4. So we had to make adjustments early in the flight. We lightened the load and tossed luggage and other equipment.
Our record enrollment meant that we taught 2,200 more classes than the year before. And these classes needed professors. Because of our budget cuts, only 16 percent of those classes (350) were taught by full-time professors. That means 1,850 classes had to be taught by part-time faculty. This is not meant to besmirch our excellent part time faculty, but this is the opposite direction from where we were heading and doesn't allow the level of full time faculty involvement Georgia citizens deserve.
From July 1 through February, our presidents used $957 million of what's now $1.383 billion to teach our students. So our balance at this date - our remaining fuel - is $426 million. But, of this amount, $409 million is obligated for paying our faculty who are teaching our students, other personnel costs, benefits and fixed operating costs.
So, our margin of error to make it to our destination is only $17 million for 34 institutions, 35,000 employees, 233,000 students, and a $5 billion physical plant. This is a margin of .4 percent for a quarter of a year.
But from the $17 million, we have to fund $8 million of unfunded benefits. Our margin of error is now down to $9 million. This means for the last quarter of this fiscal year, we are operating a $4.5 billion enterprise on a margin of error of less than $2 per person per week or .2 percent of the original budget. We all know that's not practical or prudent. We are running on fumes.
The bottom line is we can make it to the landing safely only if we use the Governor's recommendation of no new cuts and by providing some money for health benefits.
We're almost at the destination. We can see the landing strip. We have just enough fuel to make it safely.
But if we have new cuts - we have to lighten the load even more or crash. All we have left to toss overboard are people. It's too late to throw faculty off the plane. And we're not throwing our students off.
Therefore, we would have to throw off more than 1,000 staff just to attempt a crash landing. And these people are our margin that separates a quality system from others. We would be throwing overboard the people - who enroll our students, counsel our students, provide financial aid information, and help students find jobs.
We would be losing the very people who make our plane ready to fly - the folks who make our campuses ready for the next semester so students can be admitted and courses taught. We would be losing the people who handle all the details that allow our professors to teach and do research and our county agents and others to serve the public.
That's why this discussion is at the critical stage. We are no longer discussing travel budgets or new computers or chalk and paper. We are talking people.
We must have a safe landing if we are going to be able to refuel for the summer semester and the all important fall semester. The passenger list for next fall will be much higher than 233,000 students and they expect the plane to be ready to fly.
We can't let them down - we can't let Georgia down. We can make it - but only if there are no new cuts this fiscal year. That's our pledge and our plea. We can make the landing, but only with your help and no new cuts.