University dodges severe budget cuts

ANNAPOLIS – The state slashed $25 million from the university system's cash reserves yesterday, ensuring state jobs and programs will be shielded from this round of budget cuts.

The state essentially withdrew from the University System of Maryland's savings account, which contains money it had set aside in case of emergencies or one-time expenditures such as renovating a lab or funding the start-up packages for new faculty.

This university will likely bear 40 percent of the $25 million cut, about $10 million, officials said. The state's decision was a victory for the system, which sought to safeguard its 13 institutions' day-to-day expenses from cuts.

"It seems like the least painful choice in a world of bad choices," said Joe Vivona, the university system's vice chancellor for administration and finance. "When you're talking about [reserves], you're not talking about programs."

Still, university President Dan Mote fears a fourth cut to this fiscal year's budget, and hardly any system officials are optimistic about what the legislature will do when crafting the next fiscal year's budget in the spring.

The damage of yesterday's cut brings this university's total reduction since the beginning of the fiscal year in July to about $63 million, said John Blair, the university's director of budget and fiscal analysis. Those cuts include initial reductions, operating budget cuts, reserve cuts and furloughs.

Some of the university's cash reserves may have already been committed to one-time spending projects, but this  reduction beats the alternative, Blair said.

"It's better than certainly taking a base reduction to our operating budget, but it still hurts," Blair said.

Blair added the budget cut also won't likely hurt the system's bond rating, important for securing low-interest loans.

Vivona said while the system wasn't happy to lose the $25 million in reserves, he was grateful the state spared the system's operating budget, which funds salaries and other expenses.

Yesterday's budget cut, which makes up about 4 percent of the system's reserves, was made by the state's Board of Public Works in order to close a revenue shortfall of over $360 million. The board has authority over the state budget when the legislature isn't in session.

"This is not the sort of thing anyone stands up and applauds," said Gov. Martin O'Malley, who is facing a $1.5 billion deficit next fiscal year. "We're steering ourselves through the recessionary storm."

Mote said last week he expected the state would cut the system's budget by up to $100 million in this round of budget cuts, but System Chancellor Brit Kirwan had indicated the university would be spared. Vivona clarified Kirwan meant the system would be spared from operating budget cuts.

"We drove hard to protect our operating budget," Vivona said.

In mid-December, the state will release its revenue estimates for the next fiscal year, which begins July 1, 2010. Once those estimates are released, the system will have a better idea of how large a budget cut they may have to take next fiscal year, Vivona said.

This budget cut has allowed the state to keep back $120 million in its own cash reserves, which will hopefully provide a cushion to avoid further fiscal year budget cuts once the revenue estimates are released in December, Vivona said.

The system will decide how much this university's share of the $25 million cut will be before Thanksgiving, Vivona said. The cash reserves are spread throughout hundreds of different departments and units at the university.

cwells at umdbk dot com