Main Navigation

Home » Budget Presentations

Chancellor Thomas C. Meredith
FY05 Budget Presentation - Joint Appropriations Committee

10:50 a.m., Tuesday, January 20, 2004

- Remarks -

  • Thank you, Mr. Chairman.
  • This presentation marks the beginning of my third year as Chancellor of the University System of Georgia. Every year I have come before you, I have been impressed with your interest, your knowledge and your courteous response to my presentations.
  • The first time, I thought, "Well, they are just giving me a break because I'm the new guy on the block."
  • Last year I thought, "Perhaps they give long honeymoons in Georgia."
  • So this year, I will do my part to keep our relationship rolling along.
  • Seriously, I do appreciate your good partnership. It makes our joint efforts on behalf of "Creating a More Educated Georgia" much more productive.
  • We have a great University System -- we have a great Board of Regents - we have outstanding presidents at our 34 institutions. And we have dedicated and hardworking faculty and staff serving almost a quarter of a million students across the state.
  • I bring this up as an interesting statistic - we have almost 657,000 active and productive alumni from University System of Georgia institutions living in Georgia with their families and friends.
  • These alumni are a living testament to the power and good you have accomplished through the University System in the lives of Georgians.
  • A number of our Regents and presidents are here today, and I want to take just a moment to recognize them.
  • All of us within the University System the responsibility to be good stewards of Georgia's greatest asset.
  • That's why our business is your business. I pledge that we will continue to be open and responsive.
  • These factors - a strong and effective partnership with you and the Governor's office, dedicated and talented faculty and staff, a strong Board, an open and responsive attitude - all of these have been critical in the long-term creation of one of this nation's finest systems of public higher education.
  • One of Gerorgia's long term and most notable professors is the University of Georgia's Dr. Cameron Fincher. Dr. Fincher has written a history of the University System. In that book, he pays a great tribute to the wisdom of Georgia's elected leadership in the creation of the System 72 years ago.
  • Let me quote from his book: "In many respects and from many different perspectives the University System is the state of Georgia's most remarkable achievement and the finest thing that Georgians have ever done for themselves."
  • Coming from other states and other systems and having had the opportunity to observe higher education around the nation, I can say without question, that Georgia's creation of and historic commitment to the University System is a remarkable achievement. We are the envy of many states.
  • But even though the creation of the System in 1932 was a fine thing, growth in excellence and quality do not happen by standing still.
  • And in this respect, we can see a great deal has changed in this state and in the System over the years.
  • Since the 1963 System enrollment of 38,000 students we've added more than 200,000 students in the last 40 years to today's count of 247,000. And it will take us only 12 years to add the next 200,000 students.
  • In addition to those enrolled students, today we annually serve more than 1.3 million Georgians through Continuing Education. Many of you may have participated in CE programs.
  • Today more women attend college than 40 years ago.
  • And in 1963, we had fewer than 2,000 African American students - today we have more than 57,000.
  • We have grown from 19 institutions in 1963 to 34 today. And we also have management responsibilities for the state's Public Libraries under the capable leadership of Dr. Lamar Veatch.
  • The pace of change is accelerating. Meeting this challenge of meeting the higher education needs of increasing number of Georgians will pose some significant policy decisions. And crucially -- it will require a careful investment strategy that has a focus on the long-term and not just meeting the short-term situation.
  • Before I move to the tracking sheets let me first provide you with some additional data to help put the Governor's FY05 Budget recommendations for the University System in perspective.
  • This graph outlines our explosive enrollment growth since fall 1998 -- both for our fall headcount and FTE - or full time equivalent students. Headcount is up 23 percent and FTE is up 25 percent. For the record, FTE is a reflection of how many courses students are taking. We not only have more students, but they are taking more courses.
  • The quality of our students continues to rise. There is a steady increase in the average SAT scores of our first-time freshmen. The latest jump of six points from fall 2002 to fall 2003 brings the average to 1036, above the national average.
  • Another important quality indicator is the retention rate. Today we are retaining almost 81 percent of our students from the critical freshman to sophomore year.
  • In contrast, we are not pleased with our graduation rate. Today, I will announce the members of a task force to study our graduation and completion rates and recommend a plan of action.
  • Yet another indicator of overall System quality is the level of basic and applied research we carry out. Between FY 1999 and FY 2003, our external funding dollars jumped 49.7 percent - in FY03 we put $861 million into the state's economy, thanks to research grants and contracts.
  • The honors and achievements earned by our faculty and students are overwhelming!
  • But not all of the graph lines are heading in directions we want to see.
  • The University System's share of the FY04 total state budget was 11.3 percent - the lowest for the System since 1967. And if you add in this year's budget recommendations, you would see that the percentage would drop to 10.55 percent.
  • All of us are willing to do our part in tough times, but none of us want to be shown as being less of a priority.
  • These have been difficult times and we all have had to make tough decisions. You know how we have been your partners in this effort.
  • I just wanted to put our growth in numbers and in quality in perspective to our overall share of the budget. And I want to leave you with our hope that we can begin to recoup some of this lost investment. I do know that we cannot continue to maintain our quality indefinitely with this downward trend.
  • Another way of looking at the System's share of state appropriations is by FTE. Since FY01, state appropriations per FTE student have decreased 17.3 percent.
  • This is the crux of our dilemma and our biggest challenge - fewer dollars - more students. This graph shows the result of the deadly combination -- the gap between the dollars available and the students in our classrooms. That gap is widening at an ever-increasing and alarming rate.
  • Between FY99 and FY04, while enrollment increased 23 percent, formula funds increased only 7.67 percent - with a decline in FY04 formula funds.
  • The primary cause of this gap is the cumulative $253 million in budget cuts that includes the 2.5 percent for the FY04 Amended.
  • For the 5 percent cut in FY05, our instructions were that cuts could not be across the board. This means that different units would have different cuts. This is the right thing to do!
  • We have approached these cuts thoughtfully and carefully.
  • That approach has led us to develop budget principles in consultation with our presidents and Regents. These principles are in your handout. I would call to your attention that our priority in these principles is to protect the classroom. Let me repeat that: we protect the classroom first.
  • These principles provide a blueprint to guide our decision-making. These principles in and of themselves don't solve our problems - but they do provide a focused approach to dealing with these challenges and, in so doing, perhaps softening the impact as much as possible on our core instruction mission.
  • But we didn't stop with principles. We have developed an overall strategy to our budget reduction process as well as priorities.
  • The matrix we developed can be seen on this chart. We prioritize programs in terms of the number of students and Georgians served - seen here on the "X" axis against program proximity to our core instructional mission - on the "Y" axis.
  • For example, a program that is a core instructional function serving large numbers of students would be ranked as a "High Priority."
  • In addition, we consider:
  • Quality;
  • State Need;
  • Program viability and relevance; and
  • External Funds.
  • All of these are used as we make our evaluations and they have helped us set our priority order. Our priorities are:
  • First, and above all - PROTECT INSTRUCTION;
  • Then, to protect what our INSTITUTIONS need to serve STUDENTS;
  • Then, we move to the "B" UNITS;
  • Then, our PUBLIC SERVICE INSTITUTES; and
  • Finally, the SPECIAL FUNDING INITIATIVES.
  • Let me add, all of these are important and are serving Georgians well. The services provided by those being cut the most will be sorely missed.
  • With this background, let me turn to the tracking sheets. Please turn to pages 47 and 48, lines 1-16 of your tracking sheet. These are all reductions to our FY05 budget. The details of the special funding initiatives and public service institutes and cuts by institutions are included in your package.
  • You have been used to seeing the "A" and "B" units tracked separately. Note that on these tracking sheets, the "A" and "B" units are combined. I will indicate which line items are for which budget.
  • Lines 1 and 2 delete funds for the Center for Civic Renewal and Engagement and the Institute of Community Business Development.
  • Lines 3 through 9 are budget reductions in the "A" budget.
  • Of these, lines 3, 8, and 9 deal with reductions to the formula.
  • In your package, you have details related to lines 4 - the Public Service Institutes and the Center for Trade and Technology Transfer - and Line 5 - the Special Funding initiatives.
  • Overall, the cuts to the Public Service Institutes are almost 33 percent, and the overall cuts to the Special Funding Initiatives are 50 percent. These are extremely painful reductions.
  • To cut the Carl Vinson Institute by 12 percent, to reduce our P-16 initiative by 50 percent, and to eliminate funds for the Georgia Teacher Center at Kennesaw State University entirely are hard blows to take. However, in this budget climate, this is the price of protecting classroom instruction, our core mission. I hope we can find external, non-state funding to continue some of these important programs at their current levels.
  • Line 6 is a 7.5 percent reduction for the Research Consortium. Mr. Mike Cassidy is here to answer your questions.
  • Line 7 is a 7.5 percent reduction for Forestry Research, the Student Education Enrichment Program and the Office of Minority Business Enterprises.
  • Line 10 is a reduction in formula for a debt service payment for a payback project at Georgia Perimeter College.
  • Line 11 transfers funds for maintaining the Tift College Campus from the Board of Regents to the Department of Public Safety.
  • Line 12 - items "a" through "o" are reductions in the "B" units. You will see the percentage cuts to each item in your handout. In terms of these reductions let me make a few comments.
  • Are these worthwhile programs that serve Georgians? Absolutely. Do we want to keep them? No question. Is the money there to do these programs and everything else? Unfortunately no. We had to make some tough decisions. Did we want to cut these programs? In an ideal world, no.
  • We made our decisions on cuts using our Budget Principles and the matrix to make sure we keep the maximum dollars possible flowing to our classrooms, instructing our quarter of a million students.
  • I know that there is always a high degree of interest in this group regarding items that affect agriculture. So you won't have to ask the question, I am pleased to report that the recommended reductions for the Agriculture Experiment Stations and the Cooperative Extension Service are only the basic 2.5 percent in FY04 and 5.0 percent in FY05. While these cuts themselves are painful, I am very glad that the reductions for agriculture are not deeper.
  • Line 13 takes out one-time funding received in FY04 for the Georgia Formosan Termite Research program.
  • Line 14 is a reduction to the Georgia Military College. General Peter Boylan will be able to answer your questions.
  • Lines 15 and 16 are reductions to the Georgia Public Telecommunications Commission. Mr. Jim Lyle or Ms. Nancy Hall can answer your questions.
  • In total then for the "A" and "B" units, our budget reductions are $105 million for FY05 - bringing the total cumulative impact of all cuts since November 2001 to $316 million.
  • And these cuts do not even include the $15 million that has been lost in Lottery funds for our Equipment, Technology, and Construction Trust Fund (ETACT). You may remember that you established this Trust Fund to help us meet the need for high-tech equipment for our labs and classrooms. These funds were always matched by the private sector to enable us to purchase $30 million in new high-tech equipment. It will be even more difficult to keep up with technology now.
  • David Brown, the interim president at Georgia College & State University and a national leader in the use of technology in instruction, said he was amazed at what he found in Georgia. In his judgement, no state was ahead of Georgia in this regard. ETACT funds facilitated that position. Those funds are now gone in the FY05 Budget, and they were a 2 to 1 match with private dollars.
  • The cuts to date have impacted our ability to serve students in terms of having the right kind of faculty in the classroom. We have not had the dollars to hire the number of faculty needed to address the enrollment growth. We have over 1,000 vacant faculty positions in the System now!
  • With the new round of cuts, this situation worsens. Higher education is a reputation-driven industry - and much of that reputation rests on the quality of instruction in the classroom. Without adequate full time professors there is a negative impact on quality, which in turn damages our reputation.
  • What does this mean? It is more difficult to continue to attract research dollars, for example. Critically for our students, it may take them longer to graduate and they may incur greater debt earning a degree. It is more difficult to attract the stars.
  • These cumulative cuts total $52.6 million just for UGA - for our system, the cuts are the equivalent of all state appropriations for 21 of our institutions.
  • Truly, in the case of public higher education, what has taken decades to build can be undone in a very short time. And it can't be fixed overnight - it will take years to recover.
  • Now let us move to a more pleasant conversation - the Governor's recommended additions for FY05. These can be found on page 48, lines 1-8 of the tracking sheet.
  • The critical and key recommendation is the $122.7 million in new formula funds - which are outlined on lines 1 through 4.
  • These dollars help us maintain and preserve academic quality for today's students and for future generations.
  • As always with the formula, we are looking at a two-year lag. The FY05 formula funding recommendation is based on students enrolled in fall 2002 and spring 2003.
  • Line 1 is a $108 million addition for those students. We will actually have to serve about 27,000 more students than the formula calculates. We must provide for these real numbers, even if the dollars aren't there.
  • Please look at line 2. In addition to formula dollars for credit hours, we are appreciative of the Governor's recommendation for new formula Maintenance and Operation funds of $8.2 million.
  • On line 3 you will see the Governor's $1.56 million recommendation for the Optional Retirement Plan. Without these dollars, our institutions would face additional cuts, because these bills must be paid.
  • Likewise, we appreciate the Governor's $4.8 million recommendation for retirees, which is on line 4.
  • Overall, as I've said many times, the formula is our "bread and butter" and is absolutely essential.
  • Line 5 transfers funding for Georgia's Leadership Institute for School Improvement from the Professional Standards Commission to the BOR.
  • Line 6 is the Governor's recommendation for an enhancement aimed at strengthening the Medical College of Georgia.
  • We are very appreciative of this enhancement recommendation.
  • The MCG recommendation is for $5 million, although our request was for $10 million.
  • We are making great strides in strengthening MCG's research capabilities, in health, primarily through the recruitment of key faculty and researchers in strategic areas. This recommendation will enable us to continue that progress, which will have not only economic benefits for the state, bur more importantly, health benefits for Georgians.
  • All investments you make in this very important area will be worthwhile.
  • Additionally, please note the Governor's decision to transfer funding for GALILEO from the Lottery to state appropriations. This is on line 7. This action truly has helped save this important educational resource for the state.
  • Specifically, this $3.5 million includes funds to meet enrollment growth and other costs for GALILEO as well as expand or reinstate some key services needed by the Department of Education.
  • And it's important to note that the Public Libraries receive support through GALILEO, as does DTAE.
  • On line 8, please note the Governor's $1.25 million recommendation for the Public Libraries PINES project.
  • PINES connects Georgians electronically to Georgia's library services. This recommendation will provide basic operating funds for this essential public library computer service.
  • Lines 9-12 are adjustments to various units. These have no net financial impact on the Budget.
  • On page 48, under the Tobacco Funds, lines 1 and 2 are reductions and will be addressed by Mr. Bill Todd.
  • Now we will turn to the Capital recommendations, which will be found on pages 60 and 61.
  • On page 60, line 6, items "a," "b," "c," "d" and "f" are the recommendations for 5 majors projects at Georgia Perimeter College, Middle Georgia College, University of Georgia, Georgia Tech and Kennesaw State University for a total of $86 million. I want to note that all funds are for construction, except for the Georgia Tech nanotechnology recommendation, which is for design funds only.
  • Our 2005 Major Capital Request was for full funding for the top 10 projects on our list, plus design funding for one project, totaling $199.9 million.
  • Item "e" under line 6 is the Governor's recommendation for the UGA Animal Health Center at $10 million.
  • For the minors list (projects under $5 million), on page 61, line 7, items "a" through "k" and line10, the Governor has recommended funding for 12 projects at Augusta State University, Floyd College, Gainesville College, Georgia Perimeter College, Georgia State University, Clayton College and State University, Coastal Georgia Community College, Middle Georgia College, Savannah State University, Abraham Baldwin Agricultural College, and East Georgia College, for a total of $52.1 million. We requested funding for 24 projects totaling $107.7 million.
  • Funding for the payback project for Georgia Perimeter College is also included at $1.125 million.
  • On page 61, line 8, we truly appreciate the $60 million recommendation for MRR. Due to budget cuts, we have been forced to significantly scale back needed major repair and renovation projects on our campuses.
  • These dollars are critical for infrastructure maintenance
  • Most of you own property. You know that upkeep on a 25-year-old house is a never-ending process. Roofs must be replaced, plumbing repaired and air conditioning changed. That's the process we deal with year after year with our buildings, many of which were constructed in the 60's and 70's.
  • We have made significant headway in addressing regulatory requirements in areas such as the Americans With Disabilities Act, Georgia energy codes and hazardous materials disposal, but we're not finished in this area.
  • We still have a great deal of catching up to do. While the USG formula calculates MRR at 1 percent of replacement cost, the national norm is 3 percent.
  • The capital recommendations include $900,000 for the Governor's Traditional Industries Program on line 9 and $19.3 million for the Georgia Research Alliance on line 11. Again, Mr. Mike Cassidy is here to answer any questions regarding the Research Alliance.
  • There has never been a better time to build much needed facilities. It positions us for the future, it takes advantage of low interest rates and it creates jobs today when they are needed throughout Georgia.
  • Let me touch for a moment on salaries.
  • I understand the budget constraints. Among the Southern Regional Education Board states, Georgia had been third in faculty salaries, but with Virginia's salary commitment this year, we have slipped to fourth and other states are making moves to keep and attract faculty.
  • Georgia has been successful in our own efforts to keep and attract top faculty because of the state's commitment to highly competitive salaries.
  • We must be watchful. A combination of succeeding years with little or no salary increase, and our significantly increased use of part-time faculty, could make it more difficult to attract and retain top faculty in the coming years.
  • Let me reemphasize, higher education is a reputation-driven industry. And when our primary asset is people, salaries play a huge role in enhancing that reputation.
  • Again, salaries brings us back to the beginning - the need to enhance quality with a careful, long-term investment approach. As I said to the Regents last week, so far Georgia has not reacted in a fashion we've seen in other states.
  • By that I mean there are places around the country where people are panicking during the tough times. Quality is at risk, and people are just doing what they can to get through the day without thinking about the long term.
  • One of the things that attracted me to Georgia was the fact that this state thinks big and it thinks strategically. I know you share my concern that we not lose our long-term quality edge just to meet the financial needs of the moment.
  • Our enrollment growth is one warning sign that the University System needs more resources to put more Georgians on the path to a better future. This investment is needed to "Create a More Educated Georgia."
  • Georgia currently ranks 48th nationally in participation rates of 18-24 year olds in postsecondary education.
  • We must begin to explore ways to reverse the recent trend of declining investment in public higher education. I've grown concerned about these trends. I know you share this concern.
  • In the future, all Georgians will need at least a high school diploma - and then some education past high school. Otherwise, this state won't be competitive nationally and globally.
  • I've said it before - we are your partners in this process. And in that regard, we don't intend to be just "takers" but active participants, working with you to find solutions to our challenges of the moment and the needs of the future.
  • Let me conclude by telling you:
  • We're doing everything possible to protect our students in the classroom.
  • We've cut more than $9 million in a first pass at "barnacle scraping."
  • We are looking at regionalization or centralization of services and administrative functions.
  • We have a purchasing alliance task force.
  • We are looking at how technology can help us be more efficient.
  • We are looking - and finding - every dollar to save and redirect to the classroom.
  • There is no question - the budget pressures are real. But we must stop and ask ourselves: "How will the decisions we make today impact the educational access and quality of our children and grandchildren?"
  • Will they have access to one of the nation's finest systems of public higher education? Will the degree they earn from a Georgia Southern or a Columbus State have value?
  • At rock bottom, the long-term economic chances for any state rests on education. We must all work together to ensure our University System is ready and able to move this great state forward.
  • We stand ready to work with you.
  • That concludes my presentation and I stand ready for your comments and questions.