In Need of the Rosetta Stone
To an incoming CFO, some elements of an already-completed budget-reduction plan might as well have been written in hieroglyphics. Leadership teamwork with the chief academic officer helped translate details into implementation.
By Myron Allen and Douglas Vinzant
An unusual challenge for our leadership team involved the arrival of a new chief financial officer (Douglas Vinzant), who joined the University of Wyoming, Laramie, immediately after our institution's trustees had adopted a budget-reduction plan. The main architects of the slimmed-down budget were the president, provost, and the previous
chief financial officer.
After soliciting formal input from a wide range of institutional constituencies, these administrators based the plan on decades' worth of prior experience with the organization. To a person new to the university, some elements of the plan most likely would appear to be in a cryptic foreign language.
Implementing the budget-deficit plan required the provost and the CFO to put their heads together to figure out the best execution methods for the new budget.
In the absence of a Rosetta Stone to decipher the details, implementing the plan required the provost and the CFO to pursue a combination of techniques. Included were systematization and acculturation involving their own staffs, in addition to certain leadership tasks needed to bring the rest of the institution along.
As we approach the two-year mark, the end of the budget-reduction plan is in sight, and some of the measures developed to implement the reduction promise to be valuable tools for our work together over the longer term.
Beginning With a Tabula Rasa Budget
In early 2009, the University of Wyoming (UW) faced a challenge that was hardly unusual for public universities across the country: a request from then Gov. Dave Freudenthal to plan for reductions in state funding. The CFO at the time had already announced his retirement, and a national search for his successor was under way. Between January and May, the provost (Allen) led the university community through a budget planning process that included several activities:
- Discussions with 11 distinct constituency groups (including faculty senate, student government, staff senate, academic deans and directors, athletics administrators, and the vice presidents of six nonacademic divisions).
- The development of position papers by each of these constituencies, followed by feedback from the provost and resubmission of the position papers.
- Submission of a report by the provost to the president, followed by meetings involving the president, the former CFO, and the vice president for governmental relations to hammer out specific budget reduction priorities and strategies.
- A meeting with the board of trustees to gain approval of this plan.
The president and provost knew that the university would have to implement any budget reductions with a new CFO—one who would be knowledgeable of budgeting practices in public universities, but who would be unfamiliar with the details and idiosyncrasies of the University of Wyoming budget.
The Axe Falls
On June 4, 2009, Gov. Freudenthal directed a reduction in state funding of 10 percent for all state agencies, including UW, effective July 1. For UW, this bill amounted to $18.3 million per year. That same day, the president and provost formally announced the plans for responding to the governor's mandate. The plan contained the following elements:
- Elimination of state funding for several administrative offices and functions, resulting in the simultaneous layoffs of 42 nonfaculty employees. This was by far the most traumatic element of the plan.
- Reductions of 10 percent in all support budgets (nonpersonnel operating expenses), a 10 percent reduction in the athletics budget, and the rescission of recent state-funded increases in the library collections budget.
- A plan to replace some state funding with tuition revenues in selected professional programs.
- A governor-approved proposal to redirect up to $6 million in one-time university funds toward a "ramp-down" fund, to allow us to reduce certain budgets over a three-year time frame, instead of the three-week period that the July 1 deadline imposed.
- A plan to limit nonfaculty position replacements during the ensuing three fiscal years, via a system of vacancy reviews and priority setting.
The plan was complex, involving a combination of expenditure reductions, revenue enhancements and shifts from one source to another, hiring restrictions, and other process changes. The plan to stage the reductions over three years cushioned the impact but added complexity. Still, the major attribute of this approach was that it enabled the university to accommodate the budget reduction without trimming the faculty position budget and without eliminating any degree programs.
By the time we announced this plan, the former CFO had retired. Eleven days after the plan's announcement, on June 15, 2009, the new CFO (Vinzant) came on board.
Stranger in a Strange Land
Although the new CFO knew about the budget reductions, understanding the plan was a supreme challenge, for several reasons.
- The plan was already under way, and the learning curve was steep.
- The budget officer had also retired at the same time as the former CFO, leaving no one on staff with deep historical knowledge of the university's budget.
- The budget reductions required a complex combination of fiscal measures and business process changes.
- Reports, instructions, and other materials were cast in terminology that was in some respects unique to UW and hence unfamiliar even to a seasoned financial administrator who had previously managed budget and fiscal processes at several other public universities.
Indeed, some elements of the plan may as well have been written in hieroglyphics. It combined actual budget reductions, revenue replacements, planned ramp-downs supported by one-time budget reallocations, and shifts in funding sources—all in a way that was far from transparent to a newcomer. In fact, for many of our own long-term employees, the exercise was difficult to comprehend.
In the absence of the Rosetta Stone, implementing the plan required the provost and the CFO to put their heads together to figure out the best execution methods for the new budget. Essential elements of the plan's implementation included (1) frequent communications between the provost and CFO and the university community regarding various aspects of the plan, including progress reports; (2) completely reconfiguring our master workbook, to rationalize the plan; (3) replacing two key vacancies-the budget officer and the director of institutional research-with a newly configured position that combines the two functions; and (4) strengthening and increasing the analytic support for the senior management team from the budget, planning, and institutional research areas.
All four elements required the endorsement and support of the president, provost, and CFO during the initial stages of implementation of the budget actions and in the months that followed. The common attention and work on this mutual challenge has helped forge a solid relationship between us. Equally critical to the success of these efforts was the trust and collaboration of our respective staffs in sorting through the inevitably messy details of implementing the plan and its changes.
We've learned many lessons since June 2009. Here are three:
- An institution's long-standing budgeting practices can act as conceptual constraints. A budget reduction provides an impetus, albeit unwelcome, to clean out the cobwebs.
- Budget planning and institutional research should not be managed as separate, discrete functions; both activities should support development and implementation of institutional strategies.
- Communicating a budget-reduction plan to the university community is arguably a most challenging task. No approach will satisfy all constituencies, especially if the reductions involve the identification of institutional priorities (and hence the necessary focus on low-priority units and activities).
The University of Wyoming is fortunate among state universities, in two respects. First, so far we have had to manage just one budget reduction. Second, that reduction, while painful, was followed by a subsequent legislative budget that softened the blow and permitted the institution to ramp down its expenditures more quickly than the original three-year plan allowed. Some measures developed to implement the reduction—such as the establishment of strict ceilings on salaries of newly hired staff and the central capture of residual funds left by their predecessors—promise to provide valuable decision-making latitude for the longer term.
As we approach the two-year mark, the budget-reduction plan has been completed (one full year ahead of schedule), with all 34 of the reduction measures implemented and 11 of 13 revenue changes also in place. With the leadership and support of the president and trustees and an improving state economy, the university is now building the case for an aggressive state budget request for the 2013–14 biennium, to enable continued progress in implementing its strategic plan.
Teamwork, mutual respect, frequent communication, and support for one another's roles have enabled the provost and CFO (in conjunction with other campus leaders) to complete the plan early and position the university for growth and success in the years ahead.