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Cut Waste, Redundancy Not Jobs, Not Pay

Cut Waste, Redundancy Not Jobs, Not Pay. Presented to Faculty, Staff , Administration and Community at large. October 20,2009. Alabama A & M University is at cross roads

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Cut Waste, Redundancy Not Jobs, Not Pay

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  1. Cut Waste, Redundancy Not Jobs, Not Pay Presented to Faculty, Staff , Administration and Community at large. October 20,2009

  2. Alabama A & M University is at cross roads A & M administration projects revenue of over $97* million from unrestricted sources for FY 2010 ,after providing for 7.5% reduction in state appropriations Expenditures for FY 2009 from these funds were about $92 *million Increased enrollments generate additional revenue. Every 1% increase in enrollment generates approximately, $ 400,000 in tuition and fees 4% increase in enrollment for Fall 2009 is reported* More than $6.5 million additional funds are available in FY 2010 compared to the same for FY 2009 * FY 2010 Budget proposal, September 11, 2009

  3. In spite of additional revenue, administration has cut budgets for Instruction, when productivity, as reflected by CRH, has increased;

  4. 7. Continued… Requiring faculty to increase their teaching load to 5 courses/15 credit hours From: Ronald Slaughter Sent: Sunday, October 11, 2009 5:38 PM Subject: Spring 2010 schedule Since the meeting we had re reducing overload/adjuncts, I received instructions from the Dean to submit the spring 2010 schedule with 15 hours designated as a full load. We have to submit the new schedule this week. I have major concerns about this schedule for a variety of reasons but we will try to comply with this request. And contemplating outsourcing custodial and ground services functions of the University… Outsource the management of custodial and grounds services at savings of $1,000,000 (FY 2010 Budget Proposal Page 23)

  5. 7. Continued… While continuing to spend more on administration and non-value adding activities

  6. and has implemented furlough programs • No other public university in State of Alabama has furloughed anybody or cut their pay • Something is seriously wrong here; what have we done to be punished ? Faculty and staff should not have to sacrifice for gross negligence and sheer incompetence of the management

  7. The Solution is to • Cut waste and redundancy, improve operational efficiency, by better management and accountability • Grow revenues, increase enrollments • Divest from non-value added activities • Build reserves

  8. A & M’s organization structure was built to deal with different challenges from a different era. Too often, the result is wasteful spending, bloated bureaucracy and programs producing less than the desirable results. • Our guiding principle is to seek best ideas on how to grow our revenue streams, maintain positive image and reputation, manage costs and reorganize to best make use of our strengths and respond to ever changing environment. We need to reinforce our motto “ Service is Sovereignty”. • Our plan proposes ways to reduce/manage costs and grow revenues which are concrete and quantifiable. • We are proposing ways that AAMU should be organized to operate efficiently by cutting waste and redundancy. • We are proposing ways to implement workable solutions which are fair and equitable with accountability. • We are proposing ways to build reserves.

  9. Facts at a glance

  10. The Plan Executive Summary • Implementing and executing the suggested actions on the following pages, with due diligence and dispatch, the University can realize combined savings and enhanced revenues of over $ 5 million without the punitive and drastic measures of furlough and pay reductions for FY 2010 and beyond, which in turn can be used to build cash reserves. • Combined with over $ 6.5 million additional projected revenue affords the university adequate amounts to cover increased expenses due to increased health insurance costs, retirement match, fair amount of deferred maintenance and other pressing issues and still have at least, $ 3 million to build cash reserves. • The Board of Trustees (BOT) should mandate the administration to build these reserves by setting aside at least, $ 250,000 per month, rather than budgeting for contingency fund. • The administration has been budgeting contingency funds of $ 1 million per year for last several years, without any reserve funds to show. • Budgeting for contingency funds without mandate is irresponsible.

  11. Manage Expenses/Costs Action : Assign and allocate faculty and staff time and effort properly to unrestricted and restricted funds. The Vice President of Business and Finance reported to the Board of Trustees on August 27, 2009 that university pays out about $10 million from restricted accounts. $2 million of this qualifies for release time. Result: $ 2,000,000 savings to general funds Effective date: Immediately

  12. Manage Expenses/Costs Action: Restructure, realign and consolidate functions of the top administration. Go back to the spending level of FY 2005-2006 by the end of December 2009 and further refine it for more operational efficiency and cost reduction by beginning of the next fiscal year. Result: Savings in the range of $ 500,000 to 1,000,000 to general funds. Effective date: January 1, 2010.

  13. Manage Expenses/Costs Action: Restructure, realign and consolidate functions of the administration of various academic schools and departments. At present, there are six to seven schools deans and about 25 chairpersons and several directors and at least equal number of clerical and support staff. The cost of this level of administration exceeds $5.5 million dollars. Reduce the release time allowed for these functions to half of what it is now. This will reduce the need for 8 to 12 FTE faculty and support staff. Result: Savings of at least, $ 400,000 for FY 2010. Starting FY 2011, the savings can be over $ 1,000,000 per year. Effective date: January 1, 2010

  14. Manage Expenses/Costs Action: Judicious offering of the multiple sections of the same course can result in substantial savings, and reducing/eliminating need for adjuncts and overtimes. Result: Savings of at least, $ 200,000 for FY 2010. Effective date: January 1, 2010.

  15. Manage Expenses/Costs • Action: Divest from Normal Hills project. • AAMU Foundation, LLC. (The Company) developed Normal Hills project. • The Public Educational Building Authority of the City of Huntsville – Alabama A&M University (The Authority) issued and sold bonds exceeding $18,000,000 to finance construction of this project. • The bonds are limited obligation of the issuer and do not constitute a debt, liability or general obligation of the issuer, the University, the City, or any political subdivision of the City or State of Alabama. • According to VPBF-Charlie Rucker’s Report to BOT on August 27, 2009 AAMU has receivables in the amount of $361,661 from AAMU Foundation, LLC. • Additionally the bond liability, by the end of September 30, 2008, on this project exceeds $17 Million while assets are carried at approximately $12 Million (AAMU Financial Statements, September 30, 2008 ,page 13) Result: Savings ??? Effective date: ???

  16. Manage Expenses/Costs Action: Realize operational savings from Banner implementation and other cost savings measures (VPBF’s report to the BOT, August 27, 2009) Result: Savings of $ 500,000 for FY 2010 Effective date: Immediately

  17. Longer term cost management actions • Systematic elimination of non-viable, non productive programs, both in academics and non academic areas • Halve the tuition assistance to employees and their siblings • Retirement Incentive (A cost of about 1.5 million in FY 2010 can save 3 to 6 million in payroll related costs for FY 2011 and forward) • Utilizing faculty and staff personnel for combined duties, whenever appropriate • Revisit the athletic spending, general fund scholarships and support of band and choir.

  18. Grow Revenues Action: Realign tuition and fees to at least at the median of all public universities in Alabama (see next slide). AAMU, a doctoral degree granting, major research university needs to be competitive in assessing tuition and fees for educational services it delivers, with its peer universities in State of Alabama. Median tuition and fees charged in FY 2010 by these public universities for undergraduate, in state student is $ 6,185, which is more by $ 1,145 more then it was in FY 2008. For FY 2010, AAMU charges only $ 5,670, while Alabama State University charges $ 6,468. Enrollments are function o demographics, economic environment, quality of programs and not of tuition and fees. The Alabama Board of Education is considering to increase tuitions for junior colleges by 27% effective Spring Semester 2010, to increase revenues by $38,000,000. (Huntsville Times - Oct 9, 2009) Result: Increased revenue of about $1,500,000 for FY 2010. Effective date: January 1, 2010.

  19. Grow revenue Action: Offer two 5-week Summer terms for undergraduate programs and 8-week regular terms for graduate programs. AAMU implemented similar program in !,999 with great success. The enrollments and revenue increased substantially over the previous year. Result: Increased enrollment, increased flexibility of scheduling for faculty and students alike. Increased revenue of at least $500,000 for FY 2010. Effective date: January 1, 2010.

  20. Furlough Program or Pay Cut • The furlough program implemented by the administration is grossly unfair, inequitable and down right regressive. It is, clearly a pay cut for the faculty. • Furlough/pay reduction program is applicable to employees earning more than $ 30,000 per year. That is, an employee earning $ 30,001 is subject to this program. $ 1 of compensation above the threshold subjects this employee a reduction in compensation of $ 1,384.66. It is clearly unfair and unjust. • If , the University must go through with this punitive plan, then we ask the management to replace it with the one which is fair, compassionate and progressive. Call it a “ Contribution to building Reserves Fund” and require every employee to participate. We suggest, Contribution rate of 2% on first $ 25,000 of earnings “ rate of 4% on next $ 25,000 of earnings “ rate of 8% on next $ 50,000 of earnings “ rate of 12% on next $ 50,000 of earnings and, “ rate 20% above the cumulative earnings over $ 150,000. • This plan is progressive, requiring employees at the higher end of pay to contribute more.

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