October 21, 2009

Dear Kutztown University Community,

On October 9, Governor Rendell signed the 2009-10 operating budget for the commonwealth of Pennsylvania.  This was a key step in determining the budget for the Pennsylvania State System of Higher Education (PASSHE) and, in turn, Kutztown University.

PASSHE will receive a total of $465.2 million in state funding along with $65.2 million in federal stimulus funding.  The federal funding is on a one-time basis only, and it will only be available during 2009-10 (our current fiscal year) and 2010-11.  The allocation includes $27 million for this year that is meant to restore last year’s 4.25 percent rescission (you may remember our institution had to return $1.85 million to the state).  This portion of the funding will have restrictions on the ways we could use the money.

Taking this one-time money into account, the system will receive 3.8 percent more in total funding compared to 2008-09.  However, it is important to understand that we are still facing some significant fiscal challenges.

For instance, PASSHE received nine percent less base funding ($45.9 million) from the state than it did last academic year (excluding the federal stimulus funds).  A portion of this reduced revenue includes the loss of nearly $14 million in Key 93 funds, which system universities have used in the past for the maintenance and repair of facilities.

Concerning KU, a draft of the allocation plan prepared by the chancellor’s office indicates that we will receive approximately $42 million in state and federal funding for 2009-10.  This is about $1.4 million less than anticipated.  The total federal stimulus money we will receive is projected to be $5.8 million and will have some restrictions on how it can be spent.  We will use a portion of the federal money to restore the $1.85 million we were asked to return to the state last year.

The allocation of this funding remains subject to approval by the PASSHE Board of Governors in early November. In the meantime, I have asked our divisional vice presidents to enact a budget reduction plan for their areas in preparation for the projected shortfall of funds.  These plans may include reductions in operational budgets, as well as the possible elimination of several vacant positions. 

Unfortunately, we are likely to face a similar situation in 2010-11 and 2011-12.  This is due to the eventual loss of the federal stimulus funds (which expire after 2010-11), coupled with severe increases in state retirement fund contribution requirements, and cost increases anticipated in other areas, such as salaries, other fringe benefits and utilities.

The projected fiscal challenges will certainly call for extensive planning throughout our university in the months ahead.  As in the past, we will be involving our many stakeholders as we determine how to best meet the needs of our students with significant fewer resources.  I will be meeting in the next few days with the Budget Review subcommittee of Strategic Planning to begin the planning process.

I will continue to update you on this situation as information becomes available.  Thank you for your time.   

Sincerely,

F. Javier Cevallos
President