Contact: Monty Jones, (512) 499-4363

Date: February 12, 2003

Education Subcommittee of the House Appropriations Committee

Prepared Remarks by Mark G. Yudof, Chancellor, The University of Texas System

Delivered: February 12, 2003
Subject: 7% Budget Cuts for FY 2003

I am pleased to appear before the Subcommittee this morning to discuss the state's budget crisis as it pertains to the current fiscal year.

This happens to be my first committee hearing since I was appointed Chancellor last summer. For five years during my previous assignment, in Minnesota, everyone showed up at meetings such as this wearing heavy overcoats and Russian-style winter hats -- so this is a refreshing change in that regard.

In addition, it is a relief not to have to arm wrestle anyone over legislation or to worry about someone giving me a body slam.

It is good to be home, and I look forward to working with you as, together, we face the challenges ahead.

I would like to begin with a brief overview of the University of Texas System - to provide an indication of the role that the System plays in higher education in our state, and, more broadly, in the lives of our people and their communities.

The U.T. System is the largest university system in Texas, with 9 general academic universities and 6 health science institutions. The U.T. System enrolls nearly 170,000 students; this is 36% of all students attending Texas public universities and 74% of the students in public health science institutions. The U.T. System employs more than 86,000 people, including 15,000 faculty.

The U.T. System annual operating budget is $7 billion. 22% of that budget comes from state general revenue appropriations. The rest comes from other major sources of revenue, including 33% from health care, 15.3% from research grants, 9.3% from tuition and fees, and 3.5% from gifts.

The U.T. System has a long-term capital budget of $3.7 billion and spends $1.4 billion annually on research from all funding sources, most of which are federal funding agencies.

The U.T. System's health science institutions provide more than $800 million in annual indigent health care.

Based on work of the state comptroller, it is estimated that the U.T. System contributes more than $9.5 billion to the Texas economy each year through resources attracted from outside the state, including sponsored research, and through the increased productivity of university graduates. The comptroller also calculates that there is more than a $5 economic return for every $1 in state appropriations to higher education. [Special Report: The Impact of the State Higher Education System on the Texas Economy, Carole Keeton Strayhorn, January 2003]

The U.T. System is firmly committed to promoting diversity in all aspects of higher education. 37% of U.T. System students are of Hispanic or African-American heritage. Four U.T. academic institutions are in the top 5 in the nation in the number of Hispanics earning bachelor's degrees. Four of our health institutions are in the top 10 in the nation in Hispanics graduating with medical degrees. U.T. Austin awards more doctoral degrees to Hispanics than any other university in the nation.

Now, to turn to the budget issues.

Last Thursday, the U.T. System submitted to the state a plan for meeting the goal of cutting 7% from spending from general revenue appropriations for the current fiscal year.

We estimate that this 7% cut would be $104.1 million. The materials that I am handing in to the Subcommittee today include considerable details about how these cuts will be carried out.

To meet the target, the System administration and the component institutions have pursued budget-cutting strategies that spare, to the extent possible, our basic teaching, research, and patient-care responsibilities. As part of these priorities, most campuses in the System have been able to spare financial aid and scholarships funds from cuts.

About 60% of our budget is in salaries and benefits, so personnel costs have been an important focus of the cuts. Every effort has been made to avoid laying off people. Instead, we are relying, at least for now, on a flexible hiring freeze. This will permit us to save the lapsed salaries and benefits created through attrition.The hiring freeze will result in savings in expenditures for group health insurance because we will have fewer employees than had been anticipated.

About 35% of the budget is maintenance and operations (non-salary items, e.g., library books, utilities, consumable supplies), and this is where the majority of the budget cuts have been made. Travel has been eliminated or sharply curtailed, with videoconferences and teleconferences replacing some scheduled meetings. Many routine purchases have been eliminated or postponed, including technology upgrades and library materials. Much of the routine maintenance of buildings is being deferred -- adding to a substantial backlog of already deferred maintenance on some campuses.

About 5% of the operating budget involves capital outlays, and the cuts made in this area have resulted in eliminating or postponing many planned construction and renovation projects.

In accordance with instructions from the state leadership, the budget cuts have spared debt service on capital projects.

As you can see, we have sought to minimize the impact on basic services, but teaching, research, and health care will inevitably feel some effects of these cuts.

Institutions within the U.T. System have already been operating with high efficiency and with very careful stewardship of all available resources, so it is not possible to reduce the budget by 7% without some harm.

Rather than try to dictate the budget cuts from downtown Austin, the System gave the institutional presidents wide latitude in deciding how to make the required cuts, and they have carried out this task with care and concern for the basic missions of their institutions and the need to provide the people of Texas with high-quality services.

Reductions of the magnitude that have been mandated are extraordinary measures for extraordinary times, and they are exacerbated by the fact that so much of our funding is obligated by the second semester of the academic year.

The U.T. System is committed to doing its part to identify savings that contribute to the solution to the current economic and budget problems.

Looking ahead to the next biennium, there is no doubt that further impacts on basic services will be felt if the current cuts are extended and additional budget reductions are put in force.

Difficult choices lie ahead. We believe that the best decisions are made when policy makers have a full understanding of the results of their decisions. It is in this spirit that we want to collaborate with members of this Subcommittee and other legislators in the weeks and months ahead.

Thank you for this opportunity to testify to the Subcommittee. I would be pleased to take your questions.