08 August 2008
In an open forum with staff at The University of the South Pacific today, the Vice Chancellor, Professor Rajesh Chandra appealed to the Academic and Professional staff to consider the economic environment in which they live and offer a 5% across the board salary reduction. The full address is below:
VICE-CHANCELLOR’S OPEN MEETING WITH MEMBERS OF STAFF
I have taken up the Vice-Chancellorship at a time of significant financial and other difficulties at the University. My email to the University staff when I joined has provided the general overview of our challenges. These challenges, whilst difficult and perhaps painful to resolve, need to be tackled with boldness, vigor and confidence. The Council has given clear targets for the University to achieve, and it is now far more engaged in its oversight of governance and performance. I am duty-bound to respond fully to the requirements and expectations of the Council and the Governments and people of the Pacific Islands. We need to secure the future of USP in the midst of these many difficulties and uncertainties.
To resolve our difficulties, to secure our future, and to give immediate and clear signals to our stakeholders that we are determined to reshape the University to become the place of first choice for undergraduate and graduate studies; the place of first choice for scholars interested in Pacific economies, societies and cultures; the first choice of our governments for policy advice; and the preferred partner of donors for Pacific island development; we will need a strong, trusting relationship between the Council and the Management; between the Management and Senate and staff in general, and between ourselves and all the stakeholders, including students, unions, and the NGO community.
2. FINANCIAL CHALLENGES AND COUNCIL/FIC REQUIREMENTS
The University is facing serious financial challenges that require urgent and serious attention. Unlike any of our previous challenges, these challenges cannot be dealt with band-aid solutions—they require serious and fundamental changes. These challenges, even if significant, can be overcome provided we are ready to make the necessary changes and sacrifices. How we deal with the challenges will impact not only on our finances, but on how we are perceived and valued as an institution. It will also depend on the readiness of governments to fund us in the future.
3.1 Scale of the Problems
Many members of staff may not fully comprehend the scale of our financial difficulties. Let me summarize them:
- Compared with a surplus of about $3 million in 2004, the University had a deficit of $5.1 million in 2006; $2.3 million in 2007; and 2008 has a budget projected deficit of $1.4 million.
- These deficits were financed from our recurrent reserves, which have now been exhausted.
- The Finance and Investment Committee has directed that we produce a balanced budget for next year. This means finding $5.7 million over 2008.
- For the following year, the requirements have been made more stringent. We will need $11.9 million over 2008 figures or an additional $6.2 over 2009 figures.
- Since the Governments will not increase their grant for 2009, and there is limited scope for additional revenue, most of these funds will have to be found from within the 2008 resources, meaning significant re-deployment of resources within the budget.
- The University also faces a cash-flow problems and is likely to need to borrow towards the end of the year
- These are not the only problems—there are real problems of perception of USP that we need to deal with. The Meeting of the Ministers of Finance made it clear that they view the University has having a bloated cost structure which was not possible for Governments to support in the future. They felt that as they (the Governments) had done, USP also needed to restructure and reform to make it more cost effective and responsible to the circumstances and needs of the Governments and peoples of the Pacific islands.
- Let me quote directly from the speech of the Chairman of the Ministers of Finance meeting: “While I do not want to be negative, USP has been living beyond its means...Let me simply say at this stage that such practices must change as we plan for the next 40 years. USP must learn to work within a practical budgetary framework… I am sure that there is room for exercising greater economy in the running of USP. This must be fully explored, and measures implemented to eradicate wastage and extravagance (Opening Speech of the Chairman, p.2).
In order to respond to these challenges, we have to first understand how we have got into this situation. According to information prepared by the Director of Finance, the most important short term contributors to the problems of our budget deficits relate to salary increases that were granted to Academic and Comparable staff but were not funded by Governments, the creation of additional posts without funding, and the liberal use of inducement, again without regard to the funding situation and the cost of inflation which is no longer covered by the Governments.
However one looks at it, a large part of our current financial problems have to do with the fact that salary increases were awarded to Academic and Comparable staff that were not funded by governments. This is nobody’s fault in particular because of past practice where Governments did fund it—but the fact remains that the University cannot give salary increases without financial provision for it.
The other contributor to the challenges is the requirement that we need to make adequate investment in capital—both equipment, repairs and maintenance and capital works. We have not made much investment in these areas. This expenditure needs to come from our current budgets since we will not have new monies from the Government, and there is no major capacity to raise revenue from student fees.
While we have significant problems, we also need to put much more money into research and graduate activities, as well as in regional campuses—this is additional to the figures shown above.
3.3 Other Challenges
In addition to our current financial challenges, we have significant other areas of concern. There is a perception in our Governments and indeed in our community that USP pays its staff too generously; that people do not work hard enough (cf the comments of Ministers of Finance regarding the workload model); the emergence of strong national systems of higher education and the need for governments to share resources; the increasingly open higher education market; the strong push by universities in Australia and New Zealand; and, for the first time, the possibility of declining enrolments.
I wish to emphasize the point that the economies of our member countries are in crisis. In Fiji, there was a negative growth of 4.4 percent in 2007, and the outlook for this year is still problematic; the economy of Tonga contracted by 3.5 percent in 2007; Marshall Islands has declared an economic emergency due to the fuel and food price hikes; Nauru is in serious difficulty—and indeed, the other countries face an uncertain economic future.
4 Fundamental, Sustainable Changes Needed
These problems will require fundamental changes at the University that will enable it to be much more agile, responsive and responsible. Our management and administrative arrangements, our academic arrangements, the number of courses and programmes, the efficiency and effectiveness of our staff, and all expenditure will need careful scrutiny.
ONLY BY DOING ALL OF THESE CAN WE SECURE OUR FUTURE COLLECTIVELY.
4.1 Actions already taken
- The Council has already taken action to reduce the salaries of the Vice-Chancellor and Senior Management very significantly. As you already know, the VC’s take-home pay is only about one-third of that or my predecessor, and the salaries of senior management has been cut by around 40 percent.
- Freeze on hiring unless authorized by the Vice-Chancellor to ensure that we have adequate financial provisions for them
- No more hiring of tutors because of their excessive salaries relative to comparators. Temporarily, hiring is being done where necessary under the new category of Teaching Assistants with more realistic salaries
- Significant curtailment of travel by SMG and hopefully by staff in general
- All vacant academic positions revert to the level of Assistant Lecturer unless case is made for filling at more senior level—as was the practice for a long time
- Re-organization of PIAS-DG, the paper on it to be brought for the consideration and approval of the Senate
- Decision in principle to reduce the number of faculties from 4 to 3, combining FIO and FAL—again the paper will come to Senate for approval shortly. This will produce three roughly equal sized faculties and save about half a million dollars annually
- BDRC has already taken action on many cost areas with significant savings. These have resulted in savings in such areas as Internet charges, travel, utilities, to name a few important areas.
5. Proposals for Dealing with the Deficit
The situation we find ourselves is this:
- There has been a substantial increase in the salaries of Academic and Comparable staff of just over 22 percent from 2005 that was not funded by governments. Unless we deal with this, it will always remain a major problem in the normal functioning of the University and will eat resources that are meant for other priorities
- The Ministers have talked about our bloated structure and the need for us to be sensitive to the plight of our Governments and people, where are budget deficits and redundancies
- The Council has talked about changing the Comparator Index. I have been made aware of suggestions of substantially altering the mix of universities to include other Pacific universities and Institutes which will definitely bring the salaries down for the long-term
- We need to prepare properly for our triennial submission to the Ministers of Finance, whose attitude to future funding will depend on what they perceive our response to their crisis to have been
- Resolve the present difficulties to avoid long-term damage to our future in what is already a competitive and uncertain higher education operating environment.
In order to secure our future, we need to make some sacrifices. The VC and the Senior Management have already taken significant cuts to their salaries.
- The Vice-Chancellor and Senior Management Group volunteer for a 5 percent salary cut on top of this reduction that has already been made.
- I appeal to our Academic and Comparable Staff (those who benefitted from the salary increases in 2005 and 2007) to agree to a 5 percent cut to salaries from 1 January 2009.
- We will reinstitute the full salary on 1 January 2011, backdated to 1 January 2010. So the salary cut is effective for one year only.
- To recognize the sacrifice that staff will make, we will increase the annual leave for staff for 2009 by 5 extra working days.
I do believe very strongly that the future of USP is at stake. We need to demonstrate to our Governments and people that we are not a selfish elite blind to the serious plight of the people we are supposed to serve; that instead, we are ready to give real meaning to the statement in our Mission Statement that says that we are the conscience of Pacific societies. We need to demonstrate to them that we do not just subscribe to empty ideals, but are prepared to make some real sacrifices for a University that we deeply care about.
This is our fortieth year of existence. We are at our most significant crossroads. We can lose our way in the midst of our current difficulties, or show clear leadership and determination, and demonstrate to the region that we can reshape the University to become more valued by the Governments and people for whom it was created. We have an exciting future ahead of us provided we make the necessary sacrifices and changes. With humility, I appeal to all Academic and Comparable members of staff to agree to the proposed salary cut and thereby assist in securing our future. I assure you that there will be a huge dividend from our small sacrifices.
This is our fortieth year of existence. We have done very well. We have served the needs of the region in a significant way and we are recognized as an international university and one which has led the political, economic and social thinking in the region for the past 4 decades. As your Vice Chancellor I can assure you that I will do my best to champion that role of the University to our leaders and our international partners. I also want to say to our governments, to our leaders and our donors that while we may be going through difficult financial times we are confident that we will resolve our difficulties with the support of our staff, many of whom work very hard and care passionately about the future of our University. I also want to say to all of you that I will continue to impress upon our leaders and donors that USP is a critical institution for our region and continued and appropriate funding is vital for the well being of our countries in the future.