November 20, 2008
State budget challenges
Dear Members of the University Community:
During the past weeks of market turmoil and grim financial headlines, many of you have expressed concerns about the volatile state of the economy and what impact it will have on the University. With the release of the latest state revenue forecast on Wednesday, we now have a clearer picture of what we can expect. Unfortunately, but not surprisingly, the news is not good. The projected deficit for the state during the next biennium is much higher than anticipated. The budget shortfall is now expected to be more than $5 billion, up from $3.2 billion. While Washington state has so far weathered the economic downturn better than many other states, there is no question that Washington is now feeling the brunt of a bad global economy. Our state faces serious economic challenges, and it will take a concerted, strategic approach to overcome them.
For us in higher education, the economic outlook for the immediate future is chilling. As we approach the next biennium, Governor Gregoire has instructed us and other state agencies to begin to prepare for serious budget cuts. Some numbers being floated around suggest that the state’s higher education budget may be cut by as much as 20%. For the UW, that would mean a loss of $167 million over the next two years out of our total projected base biennial budget of $835 million from the state. Cuts of this magnitude would be unprecedented, and we will do absolutely everything in our power to see that they never reach such proportions.
To deal with these difficult issues, we will turn to our core values of collaboration, innovation, and integrity. Our priority in dealing with any reductions will be to maintain what is most important and reduce what is least important. We will also turn to you. A number of people on campus have already mentioned to me ways they have found to do things more efficiently. We all need to follow their example and look for new economies. Our goal is to find creative ways to reduce spending and still sustain our commitment to excellence.
Some of the effects of the bad economy have already been felt at the University, notably within our endowment. Like other major institutions across the nation, the UW has suffered losses in our investment portfolio. However, thanks to the excellent and exhaustive work of our people in the UW Treasury Office, those losses have been minimized. We will continue to pursue a prudent approach that will enable us to ride out the fluctuations in the market with as little loss as possible while protecting our investments for the future.
In the coming months, I will be working extremely hard to convey to the Governor, the Legislature, our Congressional delegation, and our region’s opinion leaders the critical role the University plays in solving our state’s economic problems. Now is the absolute worst time to cut funding for education and research. This is a message we intend to deliver at both the state and the federal levels. Our economy is driven by education and innovation. Demand for student enrollment is at its peak and is only likely to grow during this period of economic downturn. It is vital that we maintain access to a University of Washington education for our citizens and that we contribute an educated workforce for our state’s economy.
In the current economic environment, it is natural to fixate on the problems of the next biennium or the next fiscal year. We need to resist the temptation to limit our horizon in this way. As we go forward, we need to be focused not just on the next two years, but the next two decades. Indeed, I believe even in the midst of the current economic downturn, there are significant opportunities we can take advantage of. For example, we have a number of capital projects-classroom buildings, research facilities, and other critical infrastructure-that could be accelerated, since such projects are paid for over time. These are exactly the type of economic stimulus projects that would create much needed jobs now and add value to a state resource.
I have every confidence that the University will emerge from this economic downturn in a position of strength. I also know that the way we will do this is by working together. I intend to work collaboratively with campus leaders, faculty, staff, and students to make sure that all decisions are made openly and frankly after serious discussion. I will continue to keep you informed about the latest economic news affecting the University as it becomes available.
Mark A. Emmert