By Sheri Alzeerah
Photo by John Foxworth
Construction, renovation and maintenance on the University of Texas campus will press on as planned during the 2010-2011 school year despite recent layoffs and the upcoming state-mandated 10 percent budget cut, officials said.
UT responded to the state-mandated 5 percent budget cut by trimming $14,631,620 from the University’s recurring expenditures in May, according to the budget reduction plan for the 2010-11 fiscal year. More than 90 percent of the budget reduction affected administrative units, and the remaining cut impacted colleges and schools within the University. UT eliminated 125 positions during the 2009-10 academic year, according to statistics the University released in May.
The University is preparing for the 10 percent budget cut effective 2012-13. Campus Planning & Facilities Management (CPFM), the University’s department responsible for the planning, design and construction of new buildings and renovations on campus, cut about $3 million from its budget and eliminated 28 filled positions and 63 vacant positions before the fall semester began.
To accommodate the upcoming budget cut, the University needs to eliminate 600 jobs, UT President Bill Powers said in his address to the Board of Regents in August.
Officials do not anticipate the cut to slow down major construction projects that are underway, said CPFM Senior Associate Vice President Steve Kraal. Part of the reason behind this logic is budget reductions primarily impact funds that are recurring, and construction is often funded by nonrecurring sources, Kraal said.
In addition, the economic slump has forced construction firms to work at the lowest possible cost, said UT Vice President and Chief Financial Officer Kevin Hegarty. Construction costs the University 10 to 15 percent less in this economy than in a good economy, Hegarty said.
UT bonds carry AAA credit, the highest credit rating possible, which equates to borrowing costs at record lows, Hegarty said. Although construction is in its first phase, the University has already fully financed the Liberal Arts Building, scheduled to open in 2013, with a 3 percent interest rate as opposed to a 6 percent interest rate when the plan was conceived. The difference in what it costs the University to finance the building will save $30 million in the long run, Hegarty said.
Despite construction’s positive outlook, layoffs are inevitable if the University budget has to be cut, Hegarty said.
“Somewhere between 65 to 70 cents of every dollar that we spend are on people costs, which means somewhere in the neighborhood of 30 percent of our budget are for things like goods, services and maintenance,” Hegarty said.
Nationally, the construction industry lost 21,000 jobs in September, according to an analysis of federal employment figures released in October by the Associated General Contractors of America. The job losses are nearing a 14-year low, and nationwide construction unemployment is at 17.2 percent, officials said.
Phil Thoden, president and CEO of the Austin Chapter of the Associated General Contractors of America, oversees a staff of seven who provide business services to commercial builders and contractors in the Austin area. Thoden said the state of the construction business is cyclical.
“We’ll rebound once the whole economy shakes off the cobwebs — maybe a year, maybe two, maybe three or four,” Thoden said.
Although layoffs are widespread, some contractors cut overhead expenses and keep their costs as low as they can to avoid excessive job losses, Thoden said.
Kraal said CPFM can improve the department’s work efficiency and cost effectiveness in preparation for the upcoming budget cut by grouping projects and positions. By hiring one contractor instead of three, the department can more easily manage expenses. CPFM combined skill sets by laying off a cabinetmaker and fusing the previously separate cabinet shop and carpentry shop.
Facilities Services and Project Management and Construction Services, two departments within CPFM, implement other cost-cutting strategies before laying off workers. Major approaches include reducing custodial services, reducing vacant positions, reducing operating hours of 10 fountains and eliminating overtime except in emergencies or where reimbursed.
“We don’t want to eliminate our ability to do things necessarily, but we want to make sure that we’re only delivering our core services to the campus—things that really are essential to campus operations,” Kraal said.
In addition to CPFM’s 6 percent budget reduction last year, the University requires a 2 percent merit increase for all employees. The merit increase is usually funded by the University, but this year, the fee comes out of the CPFM budget. To fund the merit increase, CPFM created an exit incentive, a one-time payment made in the first week of December to retiring employees, Kraal said. The exit incentive saved the department $429,000, which was not enough to fund the merit increase and meet the 6 percent budget reduction.
To further cushion budget cuts, CPFM implemented a hiring freeze that ended Aug. 31, 2010. The department posted 30 positions open only to laid-off employees.
UT Human Resource Services provides services to laid-off employees, said Lou Scaruffi, human resources senior representative. The University of Texas at Austin Original Handbook of Operating Procedures outlines the “special consideration” policy that laid-off employees are eligible for when applying for another University position. Under the policy, qualified employees are placed in open positions without the requirement of a posting and competitive selection process.
Additionally, Human Resource Services holds workshops for laid-off employees that include topics such as healthcare benefits, retirement, unemployment benefits and resume-building, Scaruffi said.
With layoffs underway, the University is being criticized for funding major construction projects while eliminating teaching jobs, but Hegarty said this is “a chicken-and-the-egg argument.”
“Without space, you cannot attract or probably retain the best and brightest faculty, graduate students, etc., just as without them, you wouldn’t need the space,” Hegarty said. “You need to balance that off.”
Nine major construction sites are in progress, including the College of Communication’s $50.6-million Belo Center for New Media and the $206.5-million Norman Hackerman Building, which will replace the Experimental Science Building. Additionally, CPFM is spearheading 680 projects that cost less than $3 million, Kraal said.
“When you have 20 million square feet of space, it’s going to continually need attending to,” Hegarty said.