A Midyear Budget Recall at Hickory State College THE INSTITUTION

Hickory State College was founded in 1950, as this Midwestern state’s college population expanded rapidly after World War II. Two other similar public colleges were founded in other cities in the state in the same year, doubling the number of state institutions in the state. Hickory State was established to provide educational opportunities to those who could benefit by them, with particular emphasis upon serving the economic and educational needs of its region of the state. Hickory State is still defined as a “regional college” by the state’s System Office, which is the office established by the State board of Regents, which is responsible for all six public institutions in the state. 

Hickory State has served its region well in its 70 years of existence as a college and is well regarded by business leaders, elected officials, and public school personnel as a sound and reliable place to earn an education. Its enrollment grew steadily during the first 35 years and peaked in 2000, when it enrolled 6200 students. The state’s population, mostly rural in nature, has remained level since that time, and enrollment has dropped to its current 5600 students. Officials at Hickory State do not anticipate this figure to change by more than 200 students in either direction during the next ten years. 

The number of high school graduates in the state will remain almost exactly even for the next ten years, and Hickory State’s students come almost entirely from within the state. Indeed, over 85 percent of its students come from within the region, and live within 60 miles of the institution. Hickory State is part of the state’s coordinated system of public higher education and is responsible to the State board of Regents. The faculty and staff at Hickory State have felt for many years that their institution does not get its fair share of state funds, as it does not have the political influence and history of the largest and oldest institution in the state. This has been the cause of much complaining by the supporters of Hickory State, but very little has changed over the years. 

The leadership of Hickory State is comfortable with what the institution is: a small, regional state college with a good reputation among its supporters in the state. They know it is extremely unlikely to grow in the future but are determined to make its programs attractive to students and to continue to improve the quality of everything it does. The current President of Hickory State is Dr. Deborah Crane, who has been in her role since 2005, having come to the institution from a neighboring state university where she was the Provost. Dr. Crane is a forceful leader who has helped Hickory State gain greater visibility in the state and respect among the other colleges and universities. She is known for her ability to speak effectively on behalf of the College, her reliability in carrying out the expectations of the State board of Regents, and the close working relationships she has developed with faculty, staff, and students. 

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Hickory State’s academic program includes schools of Business, Physical and Biological Sciences, Education, Agriculture, and Humanities. The Vice President for Academic Affairs and Provost is responsible for these schools, each of which is headed by a Dean. The other two Vice Presidents direct the Division of Finance and the Division of Student Affairs. Of particular note at Hickory State is the well-known and respected “Undergraduate Research Program” which was established in the 1960s by the faculty. It provides opportunities for many undergraduate students to work closely with faculty members on in-depth study of problems and issues in their academic majors. It has resulted in higher achievement for many students, closer student-faculty relationships, and many students going on to graduate and professional schools. The Vice President for Finance has responsibility for Purchasing, Buildings and Grounds, Payroll, Personnel, Auxiliary Services, Food Service, the Bookstore, Athletics, and the General Accounting Office. The Vice President for Student Affairs has responsibility for Residence Halls, the Student Life Office, the Student Health Center, the Student Union, Counseling, Career Services, and Financial Aid. The Admissions Office and the Registrar report to the Vice President for Academic Affairs. There is no development program at Hickory State. All three of these Vice Presidents were hired by its current President, Dr. Crane. They have worked well with each other, although most of the time these administrators have remained focused on their own responsibilities. 

Most of Hickory State’s graduates have remained within the state, and many still live within the region. The institution maintains close contacts with its alumni, and each of the schools at Hickory State has an advisory board, comprised mainly of graduates of its programs. Many of its graduates work in teaching positions and in the agriculture- related businesses that dominate the region. Hickory State is particularly proud of two of its graduates, one who is a U.S. Senator, and another, the other is president of a major chemical corporation. 

THE STUDENTS AND THE FACULTY 

The students, all of whom are undergraduates, come almost entirely from within the state. About 60 percent of the students are female, a percentage that has remained unchanged for the past ten years. Less than four percent of the students are minorities, reflecting the state’s ethnic distribution. Many of the students are attracted to Hickory State because of its location close to their homes and its relatively low cost. Many of the students commute to the campus daily and live at home to save money. However, there are residence halls on the campus, and almost half the students reside in these facilities. Students can attend Hickory State for about $12,500 per year and, of course, those living at home and commuting can attend for even less. Most students and their families consider Hickory State to be a very good place to go to college, at a reasonable cost. Over three-fourths of the students are recipients of financial aid, reflecting the modest economic backgrounds of their families. Almost half of the students work while enrolled, either for the College or for businesses in the local community. The city in which Hickory State is located has only 30,000 residents and is considered a pleasant and safe place to live and attend college. 

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The students at Hickory State participate in a variety of out-of-class activities and especially enjoy social and athletic programs. The student union is the center of social activity and concerts, talent shows, dances, and related events are conducted there almost every week. Many of the students are members of the 14 men’s and women’s intercollegiate sports teams at Hickory State and compete in an athletic conference with nearby colleges of similar size. Informal recreational sports are extremely popular, as most of the students grew up in the area, where fishing, hiking, camping, climbing, and hunting are very popular. There are no social fraternities or sororities at Hickory State and most students would be described as conservative in their religious and political views. 

There are about 450 faculty members at Hickory State and most have the terminal degree in their field, usually earned from one of the state universities in the Midwest. Most of the faculty are very pleased to be at Hickory State, as its emphasis upon teaching and the relative ease of earning tenure coincide with their professional commitments. Few of them are very engaged in research activities, although scholarly activity is certainly not discouraged at the institution. Most faculty are very visible members of the local community and are very active in civic affairs. The faculty identify primarily with their academic departments and schools, but since Hickory State is relatively small and has no graduate programs, there is a collegiality among the faculty not found at most other institutions. There is a strong service orientation among the faculty, all of whom serve as academic advisers to students. Faculty also willingly serve as advisers to student social, academic, recreational, and religious groups and accept their role in assisting students who need special attention with their academic work. This attitude among the faculty and staff at Hickory State has become well known and is a major reason the institution has continued to thrive. 

The Faculty Council at Hickory State is a 24-member group, with its members elected from the various schools. It is chaired by the Vice President for Academic Affairs and the Council is consulted on most issues at the institution and its advice is often useful to the President and other decision makers. There has been a spirit of cooperation between the Council and the administration for several years, and Dr. Crane has assured the Council that she will continue to seek the advice of the Council before making major decisions. 

THE ISSUE 

Hickory State has experienced stability in its state funding during the past ten years, although it has not enjoyed any substantial increases. Faculty and staff salaries, which are relatively low, have remained the major budgetary issue. There have been no new dollars for new faculty positions, as the state’s allocation formula is based upon student credit hours, and Hickory State’s enrollment has declined slightly during this period. But, the institution has been able during the past ten years to avoid actual budgetary call backs due to an overall state budget which is bolstered by a state income tax. Student tuition comprises about 20 percent of the institution’s annual income and this tuition is set by the State board of Regents and approved by the legislature. 

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During the early part of the academic year 2014-2015, it became evident that the state was likely to experience some serious budgetary problems. The state is heavily dependent on farm income and bad weather and very depressed prices for major agricultural products combined to create this problem. At its late October 2014 meeting, the chancellor of the state system, speaking to the State Board of Regents and to the Presidents of the six public institutions, warned that the state’s budgetary problems could have a very negative impact on higher education. He asked the Presidents to be conservative in their spending and to anticipate making some financial adjustments by the first of the year. His public comments were noted in the press but were not taken very seriously by most faculty, students, parents, and others. Even the Presidents themselves did not establish any planning groups on their campuses, as they were confident that the Governor’s office would find a way to get through the year without a recall. Moreover, the Presidents did not want to create an issue on their campuses before it might even occur. 

There was very little discussion of the financial problem on the campuses during the rest of the semester. However, on December 29, 2014, the Governor and his cabinet called a special meeting, at which time they announced that effective January 25, 2015, all state agencies would be required to return six percent of their annual state appropriation. This was necessary, the Governor added, for the state to avoid having a deficit, something that state law prohibits. All agencies were to submit their plans by January 19, 2015, at which time they would be reviewed by the Governor’s cabinet and final decisions would be made by the January 25 deadline. The Governor expressed his regret at having to force this very difficult task on all levels of state government, but said that there was no choice in the matter. 

The Chancellor of the State System was in contact with each of the Presidents of the six public colleges and universities that same December day and informed them that they had complete latitude in their decisions about how to meet the requirements of this recall. He urged them to protect the quality of education as much as possible and to try to establish fairness in the decisions they make. 

Dr. Crane was very upset at this news, as she understood that a recall of this magnitude (six percent of her annual state appropriation at Hickory State is $1. 75 million) would have to include layoffs of full-time employees. Eliminating allocated dollars for such purposes as major equipment, part-time staff, and normal supplies would not come close to meeting the six percent requirement; moreover, there were only six months left in the fiscal year, and a good deal of these dollars had already been spent. She knew this was a crisis for her institution and the faculty and staff would be very worried and would be looking to her for leadership. She immediately called a meeting in her office of the three Vice Presidents, the five Deans of the schools, the chair of the Faculty Council, and the General Counsel for the institution. It was December 29 and classes for the next semester would begin on January 7. She told the group in her office about the problem and asked them to prepare written plans, detailing how they would meet this six percent recall requirement and submit these plans to her by January 3. She said 

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that a thorough discussion of all the plans would begin at that time and that it was better to get this unpleasant task done right away, as opposed to extending it for too long. Some of the Deans expressed their strong view that “the teaching program has to be protected and should be given the highest priority.” The Vice President for Finance reminded everyone that the functions he was responsible for, including such things as payroll and utilities were essential, and could not be reduced. Others made similar arguments about their functions, and Dr. Crane decided it was not going to be productive to continue this discussion on that day. She realized how contentious this was likely to be and that it would test the level of trust and collegiality at Hickory State in the next three weeks. She adjourned the meeting and asked the Vice Presidents and Deans to go to work. 

Dr. Andrew Frost is the Vice President for Student Affairs at Hickory State and he was hired by Dr. Crane in 2009. He had worked in various student affairs positions at three other institutions in other states before coming to Hickory State. He likes the small, informal nature of the institution and is well known and popular with students. He is close to his staff and is proud of their work on the campus. He is respected by the faculty for his ability to assist students and he works very cooperatively with the Vice President for Academic Affairs on various programs and projects they have developed to assist students. His relationship with the Vice President for Finance has been less cordial, as they have disagreed about responsibility for maintenance programs in residence halls and the student union and about whether Hickory State should begin a child care program. 

However, Dr. Frost has enjoyed his time at Hickory as Vice President for Student Affairs and has had a good deal of freedom in building his division with very little interference from others. Dr. Frost has responsibility for Residence Halls, Student Life, the Student Health Center, the Student Union, the Counseling Center, the Career Services Office, and Student Financial Aid. The directors of each of these departments report to him. The Residence Halls are self-supporting, receiving all of their income from student rents, and receive no state appropriated dollars. The department is classified as an auxiliary, and while it is subject to state regulations, it would not be affected by the budgetary recall. Its resources cannot be transferred to a state appropriated budget line. The Student Union and the Student Health Center are also auxiliaries and receive no state appropriated dollars. They are both supported by mandatory student fees which are part of tuition. The same state rules that apply to the Residence Halls also apply to the Student Union and the Student Health Center. Dr. Frost knows that having three auxiliaries in his division, especially ones that are healthy financially, is a great asset, as they are immune from the budgetary recall. Moreover, in terms of total dollars, these three departments are by far the largest in his division. But, he is already thinking about a problem: should staff working for the three auxiliaries be immune from the budgetary recall, when others who happen to work for departments supported by appropriated state funds might lose their jobs? 

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Dr. Frost decides he should review his overall budget and describe it in a very direct way to his staff when he gets them all together. Setting aside the three auxiliaries, he summarizes his budget as follows: 

Vice President’s Office: Student Life Office: Counseling Center: Career Services: Financial Aid: 

2 professional staff; 1 support
5 professional staff; 4 support
4 professional staff; 2 support
3 professional staff; 2 support 12 professional staff; 15 support 

$150,000 $310,000 $220,000 $160,000 $600,000 $50,000 $1,490,000 $89,400 

Office supplies, equipment, and part-time employment: Total appropriated state funds for student affairs:
Six percent of total appropriated state funds: 

Dr. Frost, before meeting with his department heads, thinks about ways he might be able to find the $89,400. He does not have the authority to take money from the auxiliaries, but he has decided he wants the three directors of these departments to participate fully in the decision-making process for the division. He realizes that this will be a painful process, knows his staff will be very upset about it, and understands that the budgetary recall percentages for all areas of the institution may not be the same; there is a possibility that the President may establish priorities and protect some programs while allowing others to be more severely cut. He has at least two daunting tasks: to work with his own staff and to reach agreement on a six percent recall within the division and to compete with the other Vice Presidents in trying to convince the President that the various student affairs functions should not be cut more than other areas. He also feels obligations to students, as he has always involved them in major decisions within his division, and is considering ways he might accomplish this as well. 

As Dr. Frost reviews the various programs and services in the student affairs offices, he considers further these matters: His own office is small; it consists of himself, an Assistant Vice President, and a secretary. When he arrived, there was another secretary in the office, but Dr. Frost transferred that position to Financial Aid, as that department had greater needs, in his view. The Student Life office handles orientation, conduct, Student Government, disabilities, leadership programs, and student organizations. It also employs several students who are paid under the auspices of the work-study program. The Counseling Center has students on a waiting list due to high demand and such a small staff. The Career Services Department also employs a number of work-study students in order to complete all of its programs and services. Finally, the Financial Aid staff is probably the most stressed of all, as the department is constantly required to provide more services and faster aid delivery by almost three- fourths of the student body. Dr. Frost knows that the financial aid program is critical to the future of the institution; if students do not receive their loans, grants, and employment, many of them will not be able to continue in college. 

Dr. Frost also thinks about his staff directors; all are under 50 years of age, and none is considering retirement for many years. All of the professional and support staff at 

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Hickory State are on 12-month contracts. The total amount of money in his budget for office supplies, equipment, and part-time employment is only $50,000 and he has already spent $30,000 of this. Moreover, the departments have to have some money to operate. By not buying any more equipment or supplies the rest of the year, he might be able to save $10,000. Thus, Dr. Frost knows that in order to get to his required total of $89,400, he will be forced to eliminate some positions, resulting in staff losing their jobs. As he prepares for his department heads to arrive in his office on the night of December 29, Dr. Frost feels very unsettled as he considers his options. 

Assume that you are Dr. Frost within this case. Based upon your analysis of the situation, identify what you would now do and why. Support your proposed actions with relevant theories, and explain why these would be the most appropriate actions to take.