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Budget Update

Current as of April 15, 2009

Dear Colleagues:

I recall telling you soon after the beginning of the semester that I  recognized that we all wanted a greater degree of clarity and certainty in terms of our budget for both this year and next year, so each of us could plan accordingly, rather than dealing with only uncertainty and conflicting signals from Columbia.

Lest you think things have improved, let me quote from an Associated Press report distributed to state news organizations just last night, summing up the day’s events quite accurately:

COLUMBIA, S.C.  -- Senators have resumed drafting a budget without $350 million in federal stimulus cash that Gov. Mark Sanford is refusing to request, even though they warn spending cuts for education, health care and other programs will leave "blood all over the floor."

Senate Corrections Chairman Mike Fair, R-Greenville, is filing a bill this week that would release prisoners early as one cost savings. That bill would leave the decision to close three prisons and free up to 3,100 prisoners early in Sanford's hands as a way of grappling with more budget cuts.

The closures are intended to help the Corrections Department come up with $21 million in savings to address an extra 7.4 percent in budget cuts - and those are on top of a deficit rising to $50 million in the current budget year, Fair said.

"That's survival," Fair said. "Good luck to all of us."

Separately, a handful of Sanford allies were wrapping up work on a compromise budget with help from Sanford staff, but weren't ready to provide details….

[Senate Finance Committee Chairman Hugh] Leatherman told his committee that without the money Sanford can request, he would write a bare-bones budget that will leave "blood all over the floor."

Since the current fiscal year began in July, $1 billion was cut from what started as a $7 billion budget as the recession hammered consumer spending. It's taken a toll mostly on education and health care spending while most agencies have lost a fifth or more of their budgets. …

Leatherman, for instance, is planning to write a second spending bill that shows how the state will use federal stimulus cash if it becomes available. That approach keeps expected court battles over spending the stimulus money from entangling the main budget….”

As I shared with you last week, we were told the week of April 3 that without the stimulus funds, Winthrop could expect to see another appropriation reduction of at least $1.3 million for next year --  on top of all the reductions this year that would be carried over into the budget that begins July 1. That would reduce our state appropriation by over $7.1 million (34.4 percent) from its level this time last year.

Yesterday, we were told that might not be the full extent of our reductions. If some areas of the budget are held harmless from cuts for health and safety reasons, higher education’s cuts could be even deeper – as much as 42 percent below last year’s funding.

As you know, many across the state have urged Governor Sanford to accept and approve use of  $350 million in federal stimulus funds as they were intended to be used by Congress: to support K-12, higher education and public safety during a time of economic crisis and South Carolina’s skyrocketing unemployment rate will not be made even worse. But the governor insists he will do that only if state lawmakers use equivalent state funds to pay down debt. Legislators reasonably have noted there are not state revenues coming into state coffers sufficient to do that – if they were receiving that level of revenues, they would use them to fund the budget in the first place and wouldn’t even need the stimulus funds. And, they point out, South Carolina’s debt level is far less burdensome than many other states already, so directing funds to that cause makes no sense in such circumstances.

Even if a way is found to access the federal stimulus funds for the purposes intended, it is important for you to know that they would not replace our entire state reductions – indeed, only about $3.7 million of almost $6 million in reductions made so far. But those federal funds would allow two things:  Two years for state agencies and institutions to make unpressured but timely decisions about expenditures, and two years for state legislative leaders to make unpressured but timely decisions about an improved approach to taxation to fund governmental services. Winthrop’s campus community has been working throughout this year to meet the demands of the present in numerous and varied ways, while also ensuring our institution is prepared for the future. The State of South Carolina could use a two-year window to do the same.

Please know we are continuing to examine all non-personnel aspects of our budget, as we have done since October, when the first $3.4 million reduction was announced. But it is a fact of our enterprise that non-personnel spending is only 25 percent of our overall expenditures, and 58 percent of that (insurance, utilities, licenses, taxes, etc.) is not discretionary, but required spending. There is very little latitude in remaining categories, such as supplies, travel, etc., and those already are under close management.

There are only four ways to manage personnel expenditures: (1) through hiring decisions in response to vacancies, which we have administered very closely, (2) through furloughs, such as those underway, (3) permanent reductions to pay, which has some long-term implications for employees, and (4) layoffs.

Thus far, we have avoided layoffs of permanent employees, and avoided permanent reductions to pay, since such pay cuts would have both an immediate effect on daily living and a long-term effect on employee retirement earnings and future salary increases. Instead, Winthrop so far has opted for furloughs-- sharing the pain among all of us, because that path preserves employees health insurance and other benefits and keeps from adding to state unemployment rolls at the worst possible time from both individual and state perspectives.

As we are in the home stretch of this academic year, preparing to graduate another class of young citizens, it is customary for each of us to begin to turn our thoughts to the far horizon of the next year, and to want to begin to plan according to the usual rhythms and timetables that have set the cadence of academic communities for generations.

This year, our community’s cadence is being determined in Columbia, and clarity and certainty are in shorter supply than ever. We will do ourselves and our students little good by speculating about “what if…” scenarios, so please know that there are no established answers for the questions you likely will have as you read news reports like the one above. We must remain both flexible and focused, as we have since these unprecedented circumstances first arose last Fall. Please know that I will continue to keep you updated as developments warrant, so that you will have pertinent information to inform any views you may wish to express as private citizens to policymakers in Columbia. Please do so only in accordance with our usual guidance for citizens who also are state employees.

As always, many thanks for all you are doing for Winthrop during these difficult times.


Tony DiGiorgio


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