U. to operate with deficit, budget states

The University is planning to run a $3.6 million deficit during the next fiscal year, making this the third straight year the University has been forced to resort to deficit spending. Last year officials budgeted a $25 million deficit, but Hoyle said at yesterday's budget briefing that the University is finally able to project a balanced budget for the current fiscal year, in effect making up the $25 million. Although officials say they expect to avoid red ink at the end of this fiscal year, a number of factors will make next year's budget an extremely challenging one to balance. "It's hard to be very optimistic," Interim President Claire Fagin said in her opening remarks at yesterday's briefing held in the Nursing Education Building auditorium. The briefing, open to all students, faculty and staff, was sparsely attended by faculty and staff, and only drew one undergraduate student. Hoyle announced that total budget expenditures are set to increase 8.1 percent for the next fiscal year. Normally this increase would imply times of financial prosperity for the University, but Hoyle cautioned against jumping to conclusions. Total expenditures on salaries and wages will increase 9.6 percent next year. The raise takes into account a larger faculty body and grants individual schools discretion to give two to five percent salary increases to their faculty members. The University will also admit more students next year, Hoyle said, to meet the demand from the undergraduate schools for increased tuition revenues. The rise in students, however, carries with it the liability of increased expenditures on financial aid and student services, such as Student Health and Escort Services. Undergraduate financial aid expenditures will rise by more than 10 percent next year. In recent years, the large reduction in state funding -- plus threats of no funding from Harrisburg -- has been the main force driving the planned budget deficits. Although revenue from the Commonwealth appropriations is projected to go up by more than $6 million to $35 million, only about half of that increase funds general instruction. This proposed funding still remains below 1991 levels. Moreover, Hoyle said low interest rates have plagued returns on the University's short-term investment holdings. "We experienced a loss of $3.2 million in our projected interest income this year and we are projecting a $1.5 million loss next year," Hoyle said. Hoyle added that returns on the endowment funds have been essentially flat from one year to the next. Research at the University will also experience a hard pinch next year if a proposed "pause" on indirect research funding finds its way into the federal budget. This pause that President Clinton is proposing would prevent researchers from collecting reimbursements for overhead costs for federally funded research beyond the levels they receive this year. Hoyle said this policy would seriously penalize institutions, like the University, which are increasing their levels of research. Fagin said the greatest drawback with next year's budget is its lack of financial flexibility. "It really bothers me that we don't have a lot of loose change," Fagin said. "We don't have a lot of wiggle room this time."