Uh oh, $ 28.5 Million Deficit?

[coachcap]

So, we've all heard about Susan wanting to dramatically increase the University's endowment. We've heard about the State wanting to enhance the University & its satellite campuses. Today, the Courant is reporting that UConn is tapping into its $ 71.8 Million reserve fund to address a $ 28.5 Million budgetary shortage. Not exactly the kind of press that a "World Class University" wants to garner in these trying times.

 

[Duncan Idaho]

So, we've all heard about Susan wanting to dramatically increase the University's endowment. We've heard about the State wanting to enhance the University & its satellite campuses. Today, the Courant is reporting that UConn is tapping into its $ 71.8 Million reserve fund to address a $ 28.5 Million budgetary shortage. Not exactly the kind of press that a "World Class University" wants to garner in these trying times.

What is the purpose of the reserve fund? For times like this?

 

[J187Money]

Link?

 

[metsfan2323]

Link?

http://www.ctmirror.org/story/2013/07/29/uconn-taps-reserves-close-budget-shortfall

The budget the system’s governing board adopted last month initially used $18.7 million from the reserves to balance the budget, but officials had to look to the fund again for more money after state officials boosted the amount UConn and the state's other public college system has to pay to cover current and retired employees’ health and pension benefits.
In the fiscal year ending June 30, UConn was required to put aside 46 percent of its payroll to cover these costs. This year, the university must set aside 54.7 percent. This means for each $1,000 in salary and wages, UConn last year had to pay another $460 for fringes, and this year that rose to $547.

 

[J187Money]

This is a pension issue. Not directly under her control.

 

[freescooter]

What is the purpose of the reserve fund? For times like this?

Except you usually don't want to take 40% of your reserves in a single year, particularly when you are unlikely to be able to restore it in the upcoming year. perfect world you want to establish a reserve, grow it to a certain level, then only tap it as needed for minor over runs or 1 time unforseen expenses and replenish it when it gets below the fixed level.

While I agree with J187 in part, they were already committed to using a quarter of the reserve fund to balance the budget, which in my view is high. And it seems a little odd that nobody in UConn's budget office had an inkling that fringe costs were going up. I don't completely get how contributions from various state entities to the state benefits system works, but the budget has been approved for a while now. though I suppose it is possible that it has been known for a while but just now being made official.

 

[Exit 4]

http://www.ctmirror.org/story/2013/07/29/uconn-taps-reserves-close-budget-shortfall

The budget the system’s governing board adopted last month initially used $18.7 million from the reserves to balance the budget, but officials had to look to the fund again for more money after state officials boosted the amount UConn and the state's other public college system has to pay to cover current and retired employees’ health and pension benefits.
In the fiscal year ending June 30, UConn was required to put aside 46 percent of its payroll to cover these costs. This year, the university must set aside 54.7 percent. This means for each $1,000 in salary and wages, UConn last year had to pay another $460 for fringes, and this year that rose to $547.

Sounds like its time to raise tuition 7%. Underfunded pensions (and generous pensions) are the legacy of coy leadership over the past 30 years regardless of political affiliation. I'm glad to see they are beginning to tackle the issue. The burden will likely be similar next year, so look for that tuition to rise. If we are going to give out generous benefits, it costs money.

 

[J187Money]

Fixing budgetary issues when you don't have a lot of discretionary costs usually takes a cycle or two and some long range planning. Glad that the reserve fund was there to use, but ultimately this needs to get under control going forward.

 

[Rumrunner]

While not fungible, the reserve draw down for benefit contributions is right about the same amount that the Big Ten is distributing to member schools annually. So if anything, those "missing" media revenues should serve as a giant wake up call for anyone in the administration who is ambivalent towards UConn's conference affiliation.

At some point, too, someone, somewhere should start thinking about what happens if the state's overwhelming good will towards UConn athletics begins to wane. Everyone loves a winner, so the athletic subsidy thru student fees has been tolerable. But what happens if being in a non-Big 5/ little five/mid-major-whatever the pejorative of the day- combined with tuition increases draws out the academic long knives?

A lot on the plate coming up- $'s for the HE upgrade and concomitant title ix scholarship increases, potential attendance problems based on fb performance, bb schedule. And of course, the upcoming mac daddy expense surge by the power 5 to weed out even further lower revenue programs. Next couple of years will be defining.

 

[metsfan2323]

While not fungible, the reserve draw down for benefit contributions is right about the same amount that the Big Ten is distributing to member schools annually. So if anything, those "missing" media revenues should serve as a giant wake up call for anyone in the administration who is ambivalent towards UConn's conference affiliation.

At some point, too, someone, somewhere should start thinking about what happens if the state's overwhelming good will towards UConn athletics begins to wane.

The desire to join the B1G actually greatly increases the goodwill toward UCONN athletics, we can't get there without UCONN athletics.

 

[Carl Spackler]

This is a long term problem in CT state government and something that will most likely result in higher tuition, and cuts in the UCONN budget in the near future, although I'm not sure how they're going to be able to justify another jack up in tuition fees so soon. This is not a UCONN specific problem, so it shouldn't be made out to be. It sucks, but it's the state we live in, and the work of many elected officials over many years, and actually, addressing this problem in a way that kinda sorta makes sense, is one of the few things the current elected administration has done well.

So UCONN's going to have to make some cuts, and look at tuition again, next year, to make sure the state employee retirement funds are adequate for the future. That's what it means, and it's something that has been handed down from Hartford -and it's not specific to only UCONN. All state agencies are going to be making these kinds of decisions.

The real problem, is that over the past 2-3 decades, the State of CT itself has systematically become the largest payroll in the state, (meaning - the State and it's agencies, are the largest employer in the entire state - by FAR) and the state is funded by tax dollars. State government has made a clear move toward favoring big business, multinational corporations to fund it's expenses with tax money, and is breaking the backs of small business owners, and private citizens with property taxes, business taxes, sales taxes to do it.

It's essentially the anti-thesis of a free market, capitalistic economy, and the interaction of unionized state labor, having influence over state government is why we're at where we're at in so many different levels - the state pension plans being just one.

Only way to change it, is for voters to know what they are voting for. That's the one beauty of our system, as FUBAR as it gets, you can still vote. It's reached the point though, where the voting process itself, needs to be policed.

 

[Carl Spackler]

Athletics revenue has nothing to do with this.

 

[hthusky74]

Sounds like its time to raise tuition 7%. Underfunded pensions (and generous pensions) are the legacy of coy leadership over the past 30 years regardless of political affiliation. I'm glad to see they are beginning to tackle the issue. The burden will likely be similar next year, so look for that tuition to rise. If we are going to give out generous benefits, it costs money.

Actually, it sounds like it may be time to reduce pensions in the future. Many corporations have done away with their programs for newly hired employees.

 

[Carl Spackler]

Actually, it sounds like it may be time to reduce pensions in the future. Many corporations have done away with their programs for newly hired employees.

Try passing that against a state worker union though, with their own elected people in place in the state government!!!

 

[Rumrunner]

Given UConn's conference/media revenue situation, your two statements are impossible to reconcile.

This is a long term problem in CT state government and something that will most likely result in higher tuition, and cuts in the UCONN budget in the near future, although I'm not sure how they're going to be able to justify another jack up in tuition fees so soon.

Athletics revenue has nothing to do with this.

 

[freescooter]

Actually, it sounds like it may be time to reduce pensions in the future. Many corporations have done away with their programs for newly hired employees.

The elimination of pensions has been one of the worst public policy debacles of the past 25 years. And it will ultimately have huge negative consequences. Oddly it grew out of a good idea, giving people without access to pensions an opportunity to save for retirement. The finacial meltdown demonstrated how difficult the impact could be, with people seeing IRAs and 401k's losing 40% of their value at times. Fortunately, that occurred before the baby boomers started retiring in droves. Something similar happens in the next decade and it will be disasterous.

 

[Carl Spackler]

Ok folks -

please find in this document, where a hit like this to UCONN - was unexpected?

please find reference in this document to athletic department revenue.

http://www.finance.uconn.edu/BOT/6.26.13/Slides.pdf


This is a non-issue for athletics.

 

[FrostyNuggets]

A management prof once told a class of MBAs that the greatest motivation speeches he ever witnessed was seeing Jamelle Elliot tell a team during a timeout that they were "playing not to lose, rather than playing to win". When I suggested to him that the phrase was one if the oldest cliches in sports, he told me I needed to think outside of the box. I think his pension is in the mid 200s.

 

[Rumrunner]

Carl, I think that we're on the same page. UConn's finances because of the pension/health care issue, are in a bit of a bind. That discrete issue has nothing to do with athletic revenues.

However, since UConn subsidizes almost 25% of the athletic department (at least using the "revenue" figure of $63m), any diversion of UConn's state budget allocation or tuition monies to this new expense will impact athletic revenues. The point I was (inartfully) trying to make was that the AD has ridden a wave of good will. Its success has kept opposing voices muted. That big old money pie from which UConn's AD draws from will shrink. The danger is the muted voices become louder and the money flowing to the AD becomes a target, especially when there is talk of paying s-a's combined with uconn's precarious conference situation.

 

[Carl Spackler]

The athletic department, for years, has publicized themselves as being "self-sufficient". All that really means is that they run an annual budget that breaks even on paper (last year approx. $63 mill in revenue and $63 mill in expenses. Net profit - zero.

How much of that $63mill in 'athletic revenue' comes from the 'expenses' in the UCONN FY 2014 budget is what I believe you're getting at. I honestly don't know. but going with your figure : 25% of $63million is $15.75 million with an M.

The balanced FY year budget for UCONN is $1.1 Billion with a B. Whatever money is coming out of the schools 'expenses' in the budget for athletics is the definition of a drop in the bucket.

These kinds of things are always explosive topics among academics, coaches, academic administrators, and athletics administrators though.

A good way to make up 10 million dollars really quick - would be to get 100,000 UCONN alumni to donate ten dollars a week, for 10 weeks.

 

[hthusky74]

The elimination of pensions has been one of the worst public policy debacles of the past 25 years. And it will ultimately have huge negative consequences. Oddly it grew out of a good idea, giving people without access to pensions an opportunity to save for retirement. The finacial meltdown demonstrated how difficult the impact could be, with people seeing IRAs and 401k's losing 40% of their value at times. Fortunately, that occurred before the baby boomers started retiring in droves. Something similar happens in the next decade and it will be disasterous.

Pensions are different than 401ks. The state workers have guaranteed value pensions that are becoming very rare in the private sector. That is what I am referring to. The issue with the 401ks is a valid one, but again, the state workers are somewhat insulated from that as they still have guaranteed value pensions.

 

[hthusky74]

A management prof once told a class of MBAs that the greatest motivation speeches he ever witnessed was seeing Jamelle Elliot tell a team during a timeout that they were "playing not to lose, rather than playing to win". When I suggested to him that the phrase was one if the oldest cliches in sports, he told me I needed to think outside of the box. I think his pension is in the mid 200s.

But no one ever delivered that cliche with the same passion as Jamelle. I still say the Elite Eight come from behind victory over Virginia in 1995 was a matter of Jamelle Elliot saying, just by her actions and mannerisms, that we're not losing this game.

 

[freescooter]

Pensions are different than 401ks. The state workers have guaranteed value pensions that are becoming very rare in the private sector. That is what I am referring to. The issue with the 401ks is a valid one, but again, the state workers are somewhat insulated from that as they still have guaranteed value pensions.

Right. My comment was really dealing with the idea that the state should move away from defined benefits pensions. While I agree that "everyone is doing it" i also think, and there is some research backing this up, that the move away from pensions to IRAs was a bad policy, and will have negative long term consequences. Whether the state should contribute to bad policy is a legitimate subject of debate.

 

[J187Money]

Try passing that against a state worker union though, with their own elected people in place in the state government!!!

I've never understood why unions care about future workers the way they do. Who cares if some 15 year old gets a pension as long as I get one?

 

[J187Money]

The elimination of pensions has been one of the worst public policy debacles of the past 25 years. And it will ultimately have huge negative consequences. Oddly it grew out of a good idea, giving people without access to pensions an opportunity to save for retirement. The finacial meltdown demonstrated how difficult the impact could be, with people seeing IRAs and 401k's losing 40% of their value at times. Fortunately, that occurred before the baby boomers started retiring in droves. Something similar happens in the next decade and it will be disasterous.

In my opinion the biggest problems with pensions are this:

1) They aren't required to be fully funded so the "costs" of them are always understated / deferred. Private pensions should not be like social security, which was never intended to be tied dollar for dollar with what was put in.
2) They aren't portable. Which means people stay in jobs that they don't like or aren't good at because economically they are slaves. Do you know how many teachers would quit tomorrow if they could take their pensions with them? And because they can't really leave, the unions make it impossible for them to be fired. Suboptimal situation for everyone involved, including the great employees that get held back by the dreck.