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Budget deficit should be call to action for Trustees

I wrote about Rockland Community College in Suffern, NY in November. RCC discovered that it had a $3.5M budget deficit and determined that the best way to close it would be to institute faculty and staff furloughs and layoffs. The furloughs will continue through June 30, 2024 and will save the school about $700,000. In addition to the furloughs, RCC will eliminate nine administrative positions.

I’m not a math major, but you don’t have to be one to note that $700,000 is only about 20% of the budget deficit that RCC must close. When administrators first announced the deficit and the plan to close it, they characterized it as “structural.” The term “structural deficit” has a specific meaning. It means that an organization’s planned spending would exceed its revenues in an entirely favorable economy.

No economy is entirely favorable, but a budget deficit in a public institution raises the question of how such a circumstance arose in the first place. Usually, it is a combination of factors like failure to correctly estimate revenues; adding positions to the payroll when additional hiring is not sustainable in the long run; excessive executive compensation; and failure to address ongoing operational losses on activities that should be self-supporting.

It also raises the question of why people who had nothing to do with creating the deficit are the ones who have to close it. Doesn’t it make more sense to also remove the executives whose decisions caused the budget deficit? As in those who approved the hiring of more people than the payroll could sustainably support? Those who created and approved the faulty budgets? Those who approved salary increases for executives that the revenues would not cover?

Employees shouldn’t have to remedy budget deficit alone

Of course, these are questions for the Trustees of the institution. In RCC’s case, the CFO is not only a CPA but also a PhD. He does not lack the necessary information to make appropriate budget assumptions and decisions that would have completely avoided the creation of a structural deficit. It is safe to say that the CFO is NOT one of the nine people who will be losing their jobs soon. It is also safe to say that when the RCC administration meets to discuss next year’s budget and additional layoffs, his job will also NOT be in jeopardy.

While the CFO might be one of the employees who will be furloughed for nine days, his salary is undoubtedly high enough to paper over the minimal loss of income that nine days represents. Other employees – especially those on the low end of the pay scale, may actually notice a 3.5% pay cut. (Even if it is spread out over nine random days.)

If you haven’t considered the true impact of a nine-day furlough, it’s almost two weeks of unpaid, mandatory time off. The affected employees could probably burn vacation time (if they have it) to finance their unplanned “paycation.” That still doesn’t address the massive administrative failure that has taken place at RCC.

The institution’s trustees must recognize and address structural deficits, furloughs, and layoffs as exactly what they are – management failures. Heads should be rolling in the C-Suite. And if that happened more often, an institution’s decision-makers would be far less likely to sign off on actions that create deficits in the first place.

Photo Credit: Daniel Scully, via Flickr