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.

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Dear Members of the University Community:

The state of our nation’s–and the world’s–economy is much on people’s minds these days. The University experienced firsthand some of the effects of the Wall Street investment jitters when we decided a few weeks ago to initiate legal action against Northern Trust of Chicago, the bank that held in custody a significant portion of our investment portfolio. Thanks to some expert work on the part of the University’s Treasury Office and our investment team, we were able to avoid significant loss and are back on track in managing and protecting the University’s assets. The approach the University takes to managing our assets enables us to weather a prolonged period of volatile and uncertain capital markets.

The nation’s credit crunch and its impact on the economy are being felt everywhere, including Washington state, whose economy had been rolling along at a fairly healthy clip. But the effects of the nationwide economic slowdown are being seen and felt here as well, and recent revenue projections in our state have shown that we, too, are in for significantly tighter economic times. We expect the 2009-11 state budget to be under considerable pressure, and we will be working very hard to preserve the University’s budget and fiscal health.

In the meantime, the first signs of the economic slowdown have appeared. Last week, as part of her effort to slow state spending in the current biennium and recapture funds from all state agencies, Governor Gregoire ordered $4 million in further budget reductions from the University and other higher education institutions for the remainder of this biennium (June 30). These reductions are in addition to the $36 million she previously directed state public higher education to save through a hiring freeze. For the University, our total budget reduction from these directives is approximately $10 million from our fiscal year 2009 state general fund budget of $402 million. We will be looking for ways to identify this amount of funding while at the same time protecting the University’s core educational mission.

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