Ball State is in trouble. It must cut an additional $15.25 million from its budget for 2010-11. These cuts come after the already belt-tightening cutbacks of 2009. Employees are still seething from no salary raises for this academic year, so how can BSU possibly extract another $15 million in budget cuts?
This is exactly what President Jo Ann Gora and the presidential cabinet are trying to figure out. In an open letter to students and faculty, they ask us to take a moment and contemplate the realities of BSU's situation. They even offer us a chance to submit our own ideas on how best to approach the budget cuts. Submissions are to be sent to Budgplan2010@bsu.edu by the end of January.
Even though the tone of Gora's letter was grave, I have some ideas that will sufficiently reduce the budget and also increase the productivity, efficiency and overall reputation of BSU.
Before deciding what areas need budget reductions, we should first look at where BSU spends most of its money. For 2007-08, BSU had operating expenses of approximately $380 million; of that, salaries and benefits accounted for 67 percent, or $255 million.
Salaries are the major cost driver of Ball State. Even though expense growth slowed this year with salary freezes, salaries and benefits are still the most attractive place to make additional cuts. Salary freezes are not the answer, but merely a move to buy time — what BSU really needs is a large scale early faculty retirement buyout plan.
It's no secret that BSU as a whole has an aging faculty ... excuse me — maturing. These mature faculty members are a problem for the university. First, they are generally at the top of the pay scale — many earning over $100,000 a year. Second, their research output in terms of publications is usually marginal. Consider that these old-timers could be replaced with freshly minted PhDs who would work for significantly less money (probably half in some cases, and well below the last five year average starting salaries, thanks to the recession). New PhDs are also hungry for publications because they have an incentive to publish.
Publications mean tenure, and tenure means security (and thus lack of having to research and publish!).
For BSU to get the largest benefit from this plan, they should identify the highest paid professors, who are near retirement age. All professors 65+ should be offered an early retirement buyout. The offer could vary significantly. Some professors would probably be willing to retire with 20 percent of their salary to be paid until they reach 70. Others might accept no salary, but keep benefits to 70. There are many variations, but the point is — there is a price that professors would be willing to retire early for. That price is low enough that BSU can hire young faculty to replace the retiree — and profit from the difference.
BSU has 925 professors/instructors. Assume 20 percent are near retirement age (likely much higher). If they each earn on average $100,000 a year, and can be replaced by new faculty for $50,000, BSU could offer a retirement package worth all the way up to $50,000 to invoke early retirement. Assume they offer a package worth $25,000, thus saving $25,000 per year initially (BSU will save more when the early retirement package runs out and it's paying only the new faculty members). So 925 x 20% x $25,000 = $4.625 million. That's nearly 30 percent of the needed budget cuts right there.
Now consider that BSU has around 2,800 employees, many of which are near retirement age. It's not only tenured faculty with large salaries. There are administrators galore at BSU, many with fat salaries. There are 950 administrators and professional and technical staff at BSU.
Assuming the potential early retirees are also at the top of the pay scale and average $100,000, we can apply the same formula.
950 x 20% x $25,000 = $4.75 million. That's another 31 percent toward the goal!
Maintenance and clerical employees make up the remaining 964 employees at BSU. Assuming their average top salary is $50,000 and can be replaced with an employee earning $25,000, and the buyout package would be $12,500 per year. We can apply a modified formula: 964 x 20% x $12,500 = $2.41 million, 16 percent closer to the goal!
So the early retirement plan can yield BSU close to $12 million from my calculations. That leaves around $3 million to further save. That could be found from tampering with the retirement package, but I propose BSU eliminate unnecessary positions. Possible cuts could be made to athletics, administration or even to academics; however, I would argue the most reasonable budget to cut would be sports. In another column, I revealed BSU students are paying about $827 each per year for sports.
There is much more subsidization taking place by the university. BSU should carefully consider how much money to allocate to sports, especially when the alternative is making cuts to academics.
Overall, I think if BSU follows some form of early retirement incentive, the university can emerge from the budget cuts better off. BSU will have a younger, more publication-motivated faculty that will cost the university much less. The older faculty will not necessarily be worse off. They will benefit from the buyout packages. This is a situation where faculty, administration and students can all benefit if approached carefully, otherwise, everyone stands to lose.
Derek Wilson is a senior finance and economics double major and writes ‘Making Cents' for the Daily News. His views do not necessarily agree with those of the newspaper.
Write to Derek at dawilson2@bsu.edu.
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