MEMORANDUM

To: NJIT Faculty, Staff and Students

From: Robert A. Altenkirch

Date: Thursday, March 23, 2006

Subject: Proposed FY07 Budget Impact

Following the Governor’s budget address, we have been able to put together more detailed information than the top-level information I shared on Tuesday, which can be found at http://www.njit.edu/publicinfo/bulletins/budget_state_memo_032106.php, as to how the Governor’s proposed budget would impact NJIT. Our unrestricted budget, which supports the educational program and infrastructure and personnel needs, by and large is funded from State appropriations and tuition and fee revenues. The State appropriation has essentially two pieces, the base operating support and a separate allocation for negotiated salary increases. However, in the past few years, we received only on the order of 40% of the salary increase obligations. The remainder had to be secured through reallocation of the base appropriation and/or from the tuition and fee revenue stream. The Governor’s proposed budget for FY07 does not appropriate any funds for negotiated salary increases for FY07.

In addition, the State reimburses us for a substantial portion of our fringe benefit expenditures. However, the Governor’s proposed budget does not allocate any increased funds for fringe benefits, which we anticipate to result in an increased cost to NJIT. There are other expenditures, such as increased utility rates, and commitments, such as annualizing salaries for those positions that receive a mid-year salary increase and Strategic Plan reallocations, that need to be built into the budget and either increase or result in a reallocation of funds in the expense budget.

Last year’s base operating appropriation was $51,512,000. The proposed base operating appropriation for FY07 is $45,752,000, a shortfall of $5,760,000, for an 11.2% reduction. Overall, the base operating appropriation reduction for the twelve senior public colleges and universities for FY07 is 15%, so a number of institutions are experiencing a larger base operating reduction than we are.

We estimate that the salary increases for next year are $4,225,000, the anticipated increase in fringe benefit costs are about $1,500,000, and the built-in cost increases and commitments could be as much as $6,048,000. The above is summarized in the excerpt from the budget presentation at yesterday’s Faculty meeting that can be found at http://www.njit.edu/publicinfo/pdf/summary_excerpt.pdf . Conservatively projecting tuition and fee revenue for FY07 to be equal to FY06, at $79,175,000, for planning purposes only, we project that the proposed State appropriation plus tuition and fee revenue may be negatively impacted by as much as 13.4% overall, including the State shortfalls and built-in cost increases and commitments.

The State budget process has just begun, and we will be working with the Legislature and the Governor’s Office in an effort to have some of the State shortfalls restored. We will certainly keep you informed as to progress on this effort. It is unfortunate that these proposed reductions come on the heels of a decade of effectively declining State support.

We will this week or next identify short-term actions to manage the FY06 budget as conservatively as possible in an effort to maximize year-end balances that can be carried forward to FY07 as well as to minimize commitments for FY07 until we have done some work on approaches to address the potential 13.4% impact. A taskforce of faculty, staff, and students will be appointed next week to assist in the budget development process.

Thanks,

Bob