March 18, 2009

President David Skorton gives staff budget update

Maureen Brull
Lindsay France/University Photography
Maureen Brull, a staff member in Benefit Services, asks President David J. Skorton a question at a March 16 staff forum on Cornell's fiscal situation.

About 400 Cornell employees and others attended President David Skorton's budget update March 16 in Statler Hall's Alice Statler Auditorium.

Staff members asked questions about how the university's plans to address its $215 million budget deficit would affect them, their jobs and the departments and programs for which they work. The conversation lasted an hour, during which audience members expressed appreciation for Skorton's continuing efforts to keep them apprised of the university's financial situation.

An administrative assistant asked if those who are 55 and older will be targeted for layoffs should voluntary retirement programs fail to meet quotas. "Are you going to pressure departments and programs for layoffs?" she asked. She also asked if older workers would lose their retirement benefits if laid off.

Older workers are not being targeted for layoffs, Skorton emphasized. Rather, department and program leaders will make layoff decisions based on targets the administration has given them for reducing budgets, and the administration is currently in the process of approving those decisions, he said.

Although the administration gave department and program leaders instructions to try to retain the workforce while meeting those targets, Skorton said, given that 60 percent of the university's budget goes to personnel costs, layoffs are inevitable.

Staff who are laid off retain their benefits while on layoff status and, if they are of retirement age, may choose to retire, added Mary G. Opperman, vice president for human resources.

In responding to a question about the savings reaped by suspending pay raises in fiscal year 2010, Skorton said the university would save about $20 million. "However, it's not a sustainable solution to stop giving raises."

Regarding the costs of parking, Kyu-Jung Whang, vice president for facilities services, said -- to a round of applause -- they would remain stable. As for health and dental insurance, Opperman said that the university had already absorbed part of a January increase.

Regarding whether the construction pause through June 30 is preserving or cutting jobs, Skorton said, "It's a complex calculus." In the short term, a halt on building saves money, but in the long run, it hinders the university's ability to hire top faculty and compete for research funding. "A campus like ours ... has to be able to grow and develop," he said.

When asked how the economy is affecting the university's relationship with the State University of New York (SUNY) system, Skorton said that state cuts, Cornell's fiscal adjustments and SUNY's budget issues make for a difficult situation, but "regardless of funding I will not walk away from our relationship with the state, because we're not the state's land-grant university only if we receive $170 million. We're the land-grant university -- period."

As for how the financial situation is affecting Weill Cornell Medical College in Qatar, Skorton said very little, because of contracts made prior to the financial crisis.

In his overview, Skorton said the Ithaca campus faces a $215 million budget deficit -- $80 million is due to negative returns from the endowment's investments; $35 million is due to an endowment payout to increase need-based financial aid; $50 million is for increased debt service on facilities; and the majority of the remainder is for new strategic programmatic investments that were funded by excess endowment returns.

To shave the deficit, the administration has saved $50 million by cutting budgets by 4.8 percent across the board for FY 2010. A second $50 million "correction" will come from strategic planning that will reduce endowment payouts by 15 percent during FY 2010 and by 10-12 percent in FY 2011 and FY 2012.

Sources of revenue left relatively unscathed are tuition, which provides one-third of revenue; research funding; and Weill Cornell Medical College's patient care, which provides about 20 percent of the university's general funds.

Moreover, Cornell is in better shape than many of the 77 other research universities with endowments of more than $1 billion, Skorton said. While other schools may depend on their endowment to fund up to 45 percent of their operations, Cornell relies on the endowment to fund only 11 percent of its operations.

Toward the close of the forum, Opperman said that the administration is open to alternative solutions to cut payroll costs. These include reduced schedules, such as four-day workweeks, and savings through attrition.

"We're in a tough spot right now," Skorton said. "But we have a complete complement of approaches for getting through it."