Cut in appropriation impacts CFO units
The University's top financial office has worked to preserve its level of service to teaching and research while pursuing a variety of measures to reduce spending by several million dollars to balance its fiscal year 2004 budget.
The plan from the Office of the Executive Vice President and Chief Financial Officer (CFO) is a response to the University's general fund budget cuts precipitated by Gov. Jennifer Granholm's proposal to reduce state aid to higher education by 10 percent to close the state's own anticipated budget gap. The ultimate state appropriation to the University depends on actions by the governor and the Legislature that will occur later this year.
"We have taken measures to increase efficiency, redesign our work and leverage technology more effectively," says Timothy Slottow, executive vice president and chief financial officer. "Yet these steps alone will not be enough. In FY04 we will be unable to meet our budget without reductions in service and personnel—cutbacks that we hope will be temporary."
FY03 cost savings
For example, debt refinancing undertaken in FY03 will save the University approximately $12.4 million over the life of the loans and approximately $600,000 per year to the general fund alone through 2013.
New utilities contracts were negotiated that will mitigate the impact of rising prices by an estimated $3.4 million for gas and electricity for Central Campus and an additional $1.1 million for electricity for North Campus.
Several other initiatives by the CFO reduce the costs of University outlays for the purchase of goods and services. For example:
• A CFO team negotiated prices for construction components and equipment for the Life Sciences Institute and the Commons, and for the Biomedical Science and Research Building that reduced prices by $5 million;
• Prime vendor contracts renewed and extended during the year saved $500,000 as the result of better pricing for items such as office supplies, copier service, chemicals and gases. The discounts available through the prime vendors program save University units an estimated $7.1 million annually;
• Improvements in waste management, such as separation of waste streams and waste minimization, will cut costs for that service by about $220,000 annually while maintaining current service levels;
• Energy savings programs now in place have the potential to mitigate rising costs by approximately $6.7 million annually.
Costs to be covered
In addition, increased research activity continues to generate growing amounts of hazardous chemical, medical and radiological waste, despite efforts implemented by staff in Occupational Safety and Environmental Health to reduce the volume. Despite the cost-cutting measures noted earlier, the combination of more waste and higher disposal costs are projected to increase waste management expenditures by $300,000 annually.
Reductions in annual spending
Overtime work and on-call coverage during non-business hours by Plant Operations staff will be reduced, for a savings of $377,000 annually. As a result, greater reliance on daytime maintenance may disrupt classroom and research activities and reduce the response to evening and weekend emergencies.
The Grounds and Waste Management area will cut $133,000 by reducing the number of areas on North Campus that receive full lawn mowing, and decreasing hand-weeding throughout campus. The practice of replacing salt with alternative de-icing products will not be extended.
An estimated $250,000 will be saved by increasing the amount of material that is separated from the general waste stream and recycled. The increase in recycling will decrease disposal costs and make it possible to remove trash from individual offices on a weekly, rather than daily, basis. The new trash collection schedule has been implemented in the Fleming Administration Building and Wolverine Tower in anticipation of a campus-wide rollout.