JOHNSON CITY - No longer comfortable relying on reserves, leaders at East Tennessee State University's medical school have been making cutbacks this fiscal year to cope with a long-standing budget deficit.
"We were taking $300,000 to $500,000 a year from reserves to make up the shortfall," said Dr. Ronald Franks, ETSU vice president for health affairs. "That worked, and we thought it would get us through until June of '06. Then the chickens came home to roost, so to speak."
According to Franks and Dr. Philip Bagnell, dean of ETSU's James H. Quillen College of Medicine, the $1.4 million deficit's origins date back to 2002 when the first of two major setbacks hit the college's coffers.
That year, the medical school occupied its new basic sciences building, Stanton-Gerber Hall, which brought about $1.4 million in annual operating costs, including utilities. A pledge that the state would help the university with those costs never materialized.
Then early in 2003, fiscal woes prompted the state to take back 5 percent of its higher education appropriation for that fiscal year and reduce its 2003-04 allocation by 9 percent.
"So it was kind of a double whammy, if you will," Franks said, referring to the Stanton-Gerber operations and the state cuts.
The medical school's share of ETSU's cuts amounted to $1.1 million in 2002-03 and another $2.2 million for the next fiscal year. To get through the 2002-03 fiscal year, the college used about $600,000 in reserves, froze travel expenditures and purchases, and held off on filling vacancies.
Franks, who was vice president and dean at the time, said the college then had to figure out how to manage the 9 percent reduction.
"We could get to 6 percent without more than one or two layoffs without having to close out clinical positions," he said. "We felt we could get to 6 percent without hampering education or eliminating services to the community.
"We hoped the state situation would improve, so we cut 6 (percent) rather than 9 percent and tried to manage the difference over the next several years until we came to the point where we just couldn't, and we would make the correction at that point."
That point arrived this fiscal year, as medical school officials believed they could not afford to keep eating away at reserves, which had gone from about $6.5 million to about $4 million.
After no substantial increases in Quillen's state operating allotment for a decade, the college finally got some relief, however, in a $700,000 increase for the current fiscal year. Coupled with a $300,000 bump in tuition, the medical school had about $1 million in new money against a $2.4 million problem.
"That million gave us some breathing space, but you can't continue to absorb that kind of a hit because we don't have the reserves to do that," Franks said.
Franks said having a $1.4 million problem was not the way he wanted to hand the medical school's baton to Bagnell, who was assuming the dean's portion of Franks' duties as Franks made the transition to full-time vice president last fall.
To cope, all medical school departments took a 5 percent reduction in funding across the board, as leaders were asked to make cuts where they would create the fewest problems. Again, that included not filling vacancies except in key positions.
"We had to make those kinds of choices," Bagnell said.
In some cases, the college relied on interim appointments within the faculty's ranks to save salaries, including Bagnell's former slot, associate dean of academic affairs. The dean also commissioned an equipment inventory to prioritize purchases based on the college's most crucial needs.
While Bagnell and Franks were reluctant to estimate how much they would have to make up to balance the books in the 2007-08 fiscal year, they expressed hope for additional assistance from state sources.
"One is the utility money, and if the tobacco tax does go through and higher education does get some additional appropriations, there's some operating money in there for us," Franks said. "That would be the first time in the 10 years I have been here that we would have new operating money two years in a row."
Bagnell said state officials had been receptive to the medical school's request for utilities assistance, but ETSU would have to explain the logic.
"Every state facility has needs, so they need to understand why they're supporting us," he said. "We're still following up with that."
Franks and Bagnell also noted that ETSU's medical school operates with less than 50 percent of the allocations in the state's funding formula, which is based on funding at peer institutions. At full funding, Quillen would receive about $25 million more in annual state support.