Dear Colleague,

Thanks for your attention to budget matters concerning UTC for fiscal year
2002 - 03.  As you know we have been asked to plan what we would do if the
$40,000,000 state appropriation awarded us for this year were shorted by
$1,000,000 or $2,000,000.  Such cuts or cost avoidance in the remaining
five months of the fiscal year were discussed by the University Budget
Committee earlier in the week - and are ready to be made if or when the
state asks us to act on the plan.  Essentially, we will leave many
personnel vacancies vacant,  defer purchases, curtail travel, defer
preventative maintenance, reduce or eliminate overtime, defer classroom
care, defer technology plans, etc.

Some of you may have read the report released this week by the
National  Conference of State Legislatures.  In part they reported "With
just five months left in fiscal year 2003 in 46 states, more than
two-thirds of the states still face current year budget gaps totaling $25.7
billion.  Fiscal 2004 promises an even bleaker picture with a cumulative
budget gap of $68.5 billion - with eleven states still to release their
2004 estimates."

Tennessee is right in the middle of the reported budget gaps for both
fiscal 2003 and fiscal year 2004.  The Governor's actions have alerted us
to expect less state appropriation for both years.  I attach the following
pie chart to clarify that the cuts mentioned are per cent cuts in state
appropriations only - not total budget.  While the state appropriations
represent our biggest revenue source,  it is not our only revenue
source.  The 2.5% or 5% cut in appropriations represents the one or two
million dollar cuts we have been discussing.  Our total budget is not cut
by 2.5% or 5%.  The opportunity remains even in this year to continue to
seek to diversify - and increase -  funding
sources.   http://www.utc.edu/helpdesk/fy2002-03.htm

The University Budget Committee will begin next Monday to look at our
funding options to support the mission of UTC for 2004.  As usual, revenue
projections are the essential beginning point.  While we will likely not
know the Governor's budget recommendations for us until after his March
10th budget address to the legislature, we have been alerted  to anticipate
something less than the $40,000,000 originally appropriated for 2003.  The
reductions alert for 2004 ranges from 7.5% to 8.8%. That will most likely
include the same one or two million level reduced this year - and perhaps
another million and a half.

Our fiscal planning has to keep UTC focused as a national role model of an
engaged metropolitan university, putting academics and students
first.  Budget presentations will require attention to our strategic goals
and accountability of progress toward meeting our goals.  Chattanooga has
enjoyed remarkable success in diversifying its resources.  We will need to
look closely at appropriate management or increase of student
enrollment/fees, gifts, grants, contracts, and other miscellaneous sources.
And even as we try to add resources, we will still need to keep strong
attention to efficiencies, streamlining, and cost avoidance. Tennesseans
will still expect to see our scorecard of results.  They know something
good is going on at UTC as acceptances of new students are up 49% for the
next school year.  That is nearly 600 more students who want to come to UTC.

While Chattanooga's official E & G Budget is reported at $76,000,000, each
of us knows of the restricted enhancements that augment our educational and
general operation.  The great efforts of the University of Chattanooga
Foundation, other donors, Mr. and Mrs. Lupton's unbelievable gifts, great
faculty efforts to attract extra grants, gifts, and contracts push our
"real" budget over $100,000,000.  While not  so Pollyanna as to try to kid
myself or you that we can give up two or three million and not miss it, it
was helpful to me to see the scope of those millions lost against
$100,000,000 rather than against only $40,000,000.

Represented in the file attached above is the current revenue by source for
2003.  We will begin Monday reviewing revenue projections and current
expenditure patterns.  Of course, we will be looking for ways to defer
expenditures that simply do not have the revenue to support them.  The
"cuts" or deferrals we are about to make are not going to be easy or
desirable.  It is a practical matter for any family or firm to trim
expenditures when an accounts receivable does not arrive.

I look forward to the beginning of our deliberations Monday.

Thanks,

Bill