Chancellor’s statement on budget impact

March 26, 2002

Chancellor John Wiley appeared March 26 before the Senate Biennial Budget Committee, which held a public hearing on the state budget adjustment bill in Tripp Commons, Memorial Union. Wiley testified and answered questions.

Here is a written statement that Wiley also submitted to the committee:

Thank you for having a budget hearing on the UW–Madison campus. We appreciate the opportunity to explain the consequences of the Budget Adjustment Bill, as it currently stands, on our students and our ability to help grow the state’s economy.

Let me start by reiterating that the university recognizes that the state is facing a significant budget deficit and that all parts of state government – including the UW System – need to be part of the solution in fixing that deficit. To that end, the university accepted without argument the $50 million cut that Governor McCallum included in his version of the budget adjustment bill. A cut of that magnitude would certainly have consequences. In fact, UW–Madison’s budget would be reduced by approximately $20 million, and would allow us to fund only half of the Madison Initiative programs designed to broaden student learning opportunities and enhance Wisconsin’s economic development. But we believe we can manage that reduction without scaling back enrollment or significantly harming the quality of education we currently provide our students.

However, as you know, the actions of the Joint Finance Committee and the Assembly Republicans have increased the reduction to UW System to more than $100 million. This campus would absorb approximately $40 million of this amount. I have provided you with a written summary of what a budget cut of that magnitude would mean to UW–Madison and its students, but let me highlight a few areas:

  • Approximately 100 faculty positions that are scheduled to be hired in 2002-03 would be eliminated. Another 50 positions would be eliminated if WARF and the UW Foundation decrease their matching funds that are contingent on continued state funding. A consequence of this is that we would have fewer faculty than we did at the time of the merger of the UW System 30 years ago. Moreover, approximately $25 million in research grants that these faculty members would likely bring to campus could be lost.
  • We would eliminate between 250-300 academic staff, classified staff and graduate assistant positions, resulting in some number of layoffs.
  • Because of fewer faculty and instructional staff, students will experience larger discussion and lab sections in nearly all freshmen and sophomore courses. Students will have a more difficult time getting the classes they need and accordingly will likely take longer to graduate.
  • We would not be able to fund the MS in Biotechnology program or the array of other economic development programs included in the last budget, such as the E-Commerce program, the capstone/terminal masters initiative and additional technology transfer grants.
  • In addition, funding would be frozen for campus-based financial aid, small courses for freshmen, undergraduate research opportunities and instructional technology initiatives (both in classroom and distance education)

Perhaps most importantly, a budget reduction of this magnitude would essentially gut the Madison Initiative. You will recall that the concept behind this initiative, which the Legislature endorsed both in the 1999-2001 and the 2001-2003 budgets, was that if the state and students would provide enough additional GPR and tuition to bring us to the median of our peers in terms of state and student support, our alumni and donors would provide matching funds to ensure our margin of excellence.

As a result, over the last two budgets student support of UW–Madison has increased by $20 million, state funding has increased by $33 million, and WARF and the UW Foundation have provided $40 million – more than a one-to-one match to the state. However, the boards of directors of both organizations have made it clear that a significant reduction in state funding to the Madison Initiative will result in a proportionate reduction in the private funding that they provide. The reason is simple: The Madison Initiative was a public-private partnership, and our alumni and donors are willing to contribute to this partnership only to the extent that the state and students are willing to do so. Given that an increasing percentage of our operating budget has to be funded by gifts, I frankly worry about the effect of a significant cut in state funding on the willingness of our donors to continue to be as generous as they have in the past. I firmly believe that UW–Madison will not be one of the top 10 public universities in the country five years from now if both our state funding and our private funding are substantially reduced.

I know there are those who suggest that a $40 million reduction in a $1.5 billion campus budget should not result in the kinds of consequences I have just outlined. But the $40 million is 12 percent of the funding provided by the state for instructional costs. The other state funding provided goes toward utility costs, debt service and the like – and is not reallocable. Further, the state provides only 26 percent of our overall budget. The remainder comes from student tuition, which is already used for instructional costs; federal funds that must be used for research and related projects (We cannot use money from a federal research grant to hire a faculty member to teach French or Spanish); gifts and grants that also must generally be used for the purpose specified by the donor, such as a new building); and auxiliary enterprises such as housing, food service and athletics, which are all self-supporting.

My point is this: Although a $40 million reduction appears relatively small against the overall campus budget, it is simply not possible to use funding from our other sources to make up the difference. A $40 million reduction will directly impact instruction and related student services.

Finally, I think it is generally acknowledged that the only way to eliminate the budget deficit in the long term is to stimulate the state’s economy and thereby generate more tax revenue from successful businesses and individuals. We cannot cut our way out and we cannot tax our way out. We must grow our way out.

I submit that in order to grow our way out of the deficit, the continued investment in higher education is imperative. I believe Governor McCallum’s budget recognizes that and certainly the Senate Democrats and other legislators do as well. It is my hope that the budget that is finally adopted by the Legislature and the Governor will treat the university equitably, with recognition both of the state’s budget situation and our role in growing today’s economy and educating tomorrow’s workforce.

Thank you again for the opportunity to testify. I would be happy to answer any questions you might have.