U of L $48M in the hole, interim president pledges belt-tightening
Facing a $48 million budget shortfall, the University of Louisville's interim president is pledging drastic belt-tightening.
The announcement comes amid revelations that, before former university President James Ramsey left last summer, he arranged for athletic director Tom Jurich to receive a total of $6 million in additional compensation. While the deal reportedly involves athletic department cash — not university operational resources or foundation funds — the latest details add another layer to U of L's financial chaos.
On Thursday, interim President Greg Postel told the U of L board of trustees that a 4 percent shortfall means that administrators will need to trim up to $48 million to balance the budget, a task he hopes can be achieved without major layoffs and changes to programs. A hiring "frost" will be imposed that allows no more than 25 percent of open positions to be filled. In addition, renovation and deferred maintenance projects will be put on hold, salaries will remain flat and administrative and expense reductions will be increased, he said.
The message that none of the steps would boost tuition came as a relief to U of L student President Aaron Vance, who sits on the board. University leaders pledged last summer that current and incoming students would not see a tuition increase in the 2017-2018 school year, and he said that knowing they intend to stick with their pledge despite the shortfall is encouraging. “I really do appreciate the commitment that we are going to hold tuition flat,” Vance said. Hikes are “not in the plan at all.”
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A budget draft for the 2017-2018 fiscal year should be reviewed by the trustees in May. Postel's remarks were intended to provide an update on his first three weeks, which included warnings about work to deliver a balanced budget. The institution, meanwhile, remains on probation after its accrediting agency raised concerns over Gov. Matt Bevin's order to abolish the board of trustees last June.
A call to David Grissom, the new trustees chairman, was not returned. University spokesman John Karman said that Grissom was not available to comment.
The budget shortfall is the latest in a string of revelations dating to 2014 about U of L's financial troubles. Much of the spotlight has been on the foundation, which the university relies on for substantial annual support when state appropriations for higher education have dwindled. During the 2016-2017 fiscal year, the state provided about $132.8 million and the foundation disbursed $149.3 million to U of L, a decrease of about $5.4 million over the prior year as a result of concerns about unsustainable spending levels by the foundation.
Postel said Thursday that the reduction in support from the foundation was a factor in the current shortfall.
On Friday, U of L confirmed reports that Ramsey arranged in October 2014 for Jurich to receive $3 million in incentive pay if he stayed in his position until age 65. If the 60-year-old executive remains until he's 70, he'd be paid an additional $3 million by the athletic department. The terms include having the funds accrue investment returns at the same rate as the foundation's $715 million endowment, which means that millions of dollars more could be added to the compensation upon the final payout.
At the time of the agreement, Ramsey was president of the foundation board and chaired the athletics board. U of L athletics spokesman Kenny Klein said that the agreement was presented to Jurich as a retention incentive. He offered no additional comment.
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In response to questions, Karman said in an email that "those deals were arranged by a previous administration. In the future, such compensation packages will be closely scrutinized, and the university and (the) University of Louisville Foundation will work closely together to ensure that best practices are being followed. Decisions going forward will be based on what is best for the university, its students, faculty and staff."
In addition to scholarships, the athletics department provides $2 million a year in operational support to the university, Karman said.
A state audit released in December ripped the foundation and Ramsey for lack of transparency and for overstepping authority in paying Ramsey $2.8 million on top of his $350,000 salary approved by the board of trustees in 2014. Ramsey defended his actions, insisting that auditors also were wrong in saying he and the nonprofit organization couldn't increase his salary.
Under pressure from major donors and other community leaders, the foundation and board hired an international forensic accounting firm to investigate the foundation and its finances. The review, estimated to cost up to $897,500, is due by June 30.
Reporter Grace Schneider can be reached at 502-582-4082 or gschneider@courier-journal.com. Reporter Phillip Bailey contributed to this story.
