Posted December 4, 2008
Timeline of recent economic events: What’s next?
| A declining national economy and the convergence of several demographic trends continue to have a profound impact on Temple’s budget. In early December, Gov. Rendell is expected to report on the latest economic indicators for the Commonwealth, which will likely affect the amount of revenue Temple can expect from state appropriations this year and next. In the meantime, below is a brief timeline of recent events related to Temple University’s budget and state appropriation as well as a look at where we stand and what to expect. A Look Back Mid-September The governor’s office first announced plans to reduce spending by $200 million in mid-September. Shortly thereafter, Temple University was asked to prepare for a 4.25 percent reduction to its appropriation for 2008-2009. This move presented Temple with a potential reduction of $7.5 million, or 1 percent from the current operating budget. With salaries and benefits being the largest costs for the university, vice presidents were asked to reserve $5.9 million from their compensation budgets. Additionally, the university took back a 2 percent inflationary increase, or $1.6 million, that was given to all schools and colleges and some administrative units in the 2008-2009 budget for non-compensation related costs, such as office supplies, equipment and books. Mid-October By mid-October, state revenues had continued to decline and in anticipation of deeper cuts from the state, Temple further reduced its operating budget by another .5 percent for a total of 1.5 percent or $11.625 million. As part of the budget reduction, Temple implemented a hiring freeze and travel restrictions. November 20 Several news organizations reported that Gov. Rendell would soon be ordering a second round of budget cuts due to a continuing decline in state revenues. Temple will likely be affected by these actions. "We're expecting a shortfall of somewhere between $1 billion and $2 billion" by June 30, the end of the current fiscal year, Gov. Ed Rendell said. Looking Ahead What to expect After the reporting of the latest figures in early December, Temple University can expect to hear that the portion of the budget previously placed on reserve will now be cut permanently and that more cuts are likely, according to Anthony E. Wagner, senior vice president, chief financial officer and treasurer. Where we stand Temple’s balance sheet is solid but middle of the pack when compared to universities like the University of Pittsburgh, Penn State University and the University of Maryland according to Moody’s Investor Service. Like most university endowments, Temple’s endowment has been affected by the declining stock market, falling from $237 million on June 30 to $220 million by Sept. 30. With an endowment per full-time equivalent (FTE) student of just $7,634, Temple has less financial flexibility than its state-related peers. By comparison, endowment per FTE at the University of Pittsburgh is $75,798, nearly ten times higher. Long term Longer term, Temple will face greater competition for students as demographics shift regionally. Pennsylvania is projected to lose 13 percent of the 18 year-old population, while Temple is projected to lose 8-10 percent. According to Wagner, Temple will need to increase market share to maintain current enrollment levels in future student recruiting cycles. |