Lou, You recently asked for some clarifying information on variations in budgeted academic salaries across the system. Specifically, you wanted to gain information on the following two topics: (1) Are the budgeted increases in Academic Salaries at all units to be expended on Academic salaries or are these budgeted amounts expected to be spent by some units on other operating costs? (2) How are the priorities for differential allocation of the budgeted Academic salary lines between units determined and in particular how is it that the percentage increase was so different between units? The general answer to both questions is that campus policies determine how budget adjustments occur as long as the federal, state, and university policies are followed. Regarding compensation, at the state level, guidance is provided in the appropriations bill. At the university level, guidance is found in the annual compensation guidelines. The state salary policies drive the largest allocation of funds. As Denise indicated, the FY 2007 appropriations bill calls for a 2% ATB/Merit combo adjustment, a non-recurring bonus, increases in the 401(k), and increases in longevity. All campuses would implement these increases the same. That's probably where the similarity ends. The following items contribute to the variance among the campuses, which should help answer your second question in greater detail: 1. The expenditure comparison you provided is compares the Probable Budget (based on April 2006 info) to the FY 2007 Budget (Original Budget). This is not the best comparison because the Probable Budget should reflect anticipated expenditures at June 30, 2006, which means that unfilled positions, mid-year hires, and changes in salaries during the first ten months can impact the budgeted amounts. The FY 2007 Budget includes all authorized positions at approved budgeted amounts before any transactions occur thus assuming that all authorized positions are filled throughout the year, which we know will not happen. 2. Changes in authorized faculty lines also impact the comparison. For example, UTM funded 7 new faculty lines to support increased enrollments. UTK also added 9 faculty lines associated with enrollment growth to teach additional classes at the junior and senior levels. UTM's projected cost of $400,000 compared to UTK's projected cost of $702,000 had a bigger impact on the percent growth in academic salaries because their budget salaries are significantly lower. Thus, the level of base funding is an important piece of information to consider when trying to gauge the true impact of various changes. 3. The appropriations bill provides for supplemental salary adjustments upon approval of a plan by the Board of Trustees. This was true in FY 2006 as well as FY 2007. Like last year, the system is providing each unit the ability to tailor plans to meet their specific needs. This includes both the allocation methodology and the amount of funds allocated for salary adjustments. Depending upon the plans, which are campus/institute defined, this could have some impact on the salary allocations. I am attaching a summary of the plans taken to the Board of Trustees for consideration last year, which they approved. The FY 2007 plans will be considered at the Board's November 2-3, 2006 meeting. 4. The budgets used in your comparisons are for unrestricted funds only. Therefore, the impact of budget changes occurring because of changes in restricted funds is lost in this comparison. The HSC, UTK, UTSI, and UTIA all have movement between these funds that can impact the analysis in either direction. There is little movement at UTC and UTM so it's really a non-issue in their numbers. 5. Salaries and benefits account for approximately 3/4 of the university's unrestricted budget. During the year as faculty and staff salary savings occur, these savings are available for other expenditures. Depending on the campus/institute practice, these funds may be used for other operating expenditures. Therefore, the Probable Budget would show a budgeted decrease in salaries as funds are made available for travel, equipment purchases, and other departmental needs. It is also possible that some salary funds could shift between positions and not have an impact on the bottom line if, for example, you abolish/downgrade a position to provide salary adjustments for remaining positions. If this happens, you miss the impact of the reallocations between faculty lines that may be of importance in your analysis. This would include filling vacated professor positions with a new associate professor. You can have a change in title but no change in expenditures. Other comparisons you may want to consider that I use include: 1. Comparison of changes in authorized positions. I also have an interested in how long positions remain vacant to understand true staffing levels. 2. Comparison of average salaries by rank. October information, which is available in the Spring, is widely collected allowing us to look beyond UT campuses for information. We also have available in October, available in December, a THEC average salary analysis that includes only full-time, unrestricted positions. These types of comparisons are more meaningful as they compare points in time. The drawback is the averages may not demonstrate the true average salary because other types of pay may not be captured in the reported data such as extra service pay, bonuses, incentive pay, or longevity pay. 3. Allocations of new revenues to determine funding priorities. We are linking budget adjustments, particularly the allocation of new revenues, to the university's strategic plan. I suspect this is a little more information than you wanted but I hope it helps in your review. If you have questions, I am more than happy to spend time with you to clarify my thoughts and/or provide my insights. Sylvia Wed, 6 Sep 2006