A Thousand Cuts: As the University of Chicago slashes budgets, workers and administrators feel the pain

image by Sam Bowman

photo by Sam Bowman

The University of Chicago’s bureaucratic machinery usually runs quietly in the background, unnoticed and unknown to all but those that keep it humming. Only in times of strain or controversy do its organization, governance, and finances come under public scrutiny. Now, with the recession pushing the administration to impose budget cuts, the University is likely to experience a fresh round of exposure as it becomes the site of bureaucratic conflicts and staff reductions.

The University is presently caught between revenue and expenditure pressures that are squeezing its operating budget. Its endowment, much of which was invested in the financial markets, has fallen by an estimated 25 percent. This amounts to a loss of roughly $1.5 billion, which is comparable with peer institutions. Then there’s the credit crunch, which has pushed up the borrowing costs for building projects. Since university research is largely federally funded, and all schools are seeing their budgets tighten, competition for grants is increasing. The Medical Center, which makes up a large part of the University, is losing patient revenue as fewer people seek out care. On the other end, as Provost Rosenbaum emphasized in a university-wide email, the UofC is committed to maintaining student aid, and even to increasing it for those families in need of extra support.

The administration is responding by cutting budgets. Rather than mandating across-the-board cost-saving measures such as hiring freezes from on high, the leadership has given targets to the Deans and VPs that head each Division, and devolved the actual decision-making. According to Rosenbaum, this decentralized approach will give officials maximum flexibility to overhaul their budgets in accordance with their individual priorities, eliminating or reducing what’s not essential while stamping out inefficiencies and figuring out ways to increase revenues.

The targets are not proportional. Administrative units are being asked to cut 3 to 9 percent, academic units only 2.5 to 5 percent. “You can look at the targets and see that academic momentum is clearly a priority,” says Steve Kloehn, the director of the News Office. He cites continued support for students and the transformation of the department of civic engagement as other top priorities.

So what are the effects of its cuts? Difficult to tell, as planning is still ongoing. No department head has yet sent out an email outlining their plans, according to Kloehn. Each is moving at its own pace. Almost all the Deans and VPs I contacted for comment either did not reply or stated that it would be “premature” to answer specific questions. Ron Gemkow, executive director of finance and facilities at the Booth School of Business, mentioned a short-term reduction of travel and hiring and unsettled plans for the long term. “It might be months before we have a comprehensive picture,” according to Kloehn.

Some University employees are concerned that budget cuts will translate to staff reductions. “Nobody has taken layoffs off the table. We’re in a business where the biggest cost is people, so it’s impossible to consider the budget without considering people,” Kloehn said. “That said, I don’t think there’s a manager at any level that takes the idea of layoffs lightly. Both for humane and for strategic reasons.”

Given the unsettled state of the University’s response, it’s unclear how the cuts will affect academic departments, especially graduate admissions. Or student life, patient care, community relations, neighborhood development, and campus sustainability efforts, for that matter. The administration has yet to announce which construction and renovation projects will be delayed. It remains to be seen whether the current economic and financial turbulence will ultimately produce any significant restructuring, especially if endowment growth doesn’t return to trend rates after two years. This appears to be the administration’s underlying assumption, though there is little evidence that the financial markets will return to the old pathological situation that allowed the endowment to double in eight years. And if they don’t, the administration could be stuck with the bloated and inefficient organization saddled with indirect costs that they grew when times were good, having missed the opportunity to create the leaner, more flexible outfit that might be necessary to produce cutting-edge research in a far less auspicious environment.

The University of Chicago Medical Center, photo by Sam Bowman

Some of these questions are becoming clear for Chicago BioMedicine, the umbrella that houses the Hospital, the Medical School, and the Biological Sciences Division. On January 9, Dean James Madara sent a message to employees announcing $100 million in cuts (out of a $1.5 billion budget) in addition to extensive reorganization. Madara mentioned staff reductions, but did not provide any numbers, though Crain’s Chicago Business claimed the hospital was poised to lay off 1,000 employees, or about ten percent of its workforce. Madara also left the scope of reorganization unspecified, but spoke of “greater integration of administration across [Biomedicine’s] patient care, research, education, and community outreach activities,” with the aim of streamlining decision-making and reducing costs by eliminating duplication and inefficiencies. He informed employees that the changes and cuts would be announced by mid-February.

BioMedicine’s move is already sparking controversy. On January 29, three unions representing 2,300 Hospital employees–Teamsters Local 768, the Illinois Nurses Association, and SEIU Local 73–responded with a letter that questioned the need for such drastic cuts and requested information on the Hospitals’ economic situation.

“We’re looking at the fact that they’re moving ahead with a $700 million hospital pavilion. Have they considered looking at scaling that back, or less drastic options to address this financial concern?” says J Burger, union representative for the Teamsters. “There have been wide-ranging rumors about the number of jobs being cut…from tens to thousands. Employee morale is down because people are asking, “Am I on the chopping block?” We’ve been trying to control the rumor mill and encouraging people to suggest where cuts can be made.”

Union representatives met with their Hospital counterparts on Monday. They were given no specific information on the Medical Center’s financial situation or on the number and location of layoffs. “We’re working with them to mitigate the impact on our members,” Burger said. “We’re fighting for good severance packages, making sure temporary employees are impacted first, and making sure that our contract is followed.”

The Teamsters’ contract with the University guarantees some kind of payout, two weeks notice, and select bumping rights (where more senior employees bump less senior employees in the event that their position is eliminated) to members who are laid off.

The unions won’t announce a response until they have more knowledge of the Hospital’s intentions. Burger believes that a large part of the response will be driven by members: “We’re scrambling to create vehicles so members can weigh in on what they want to do.”

The budget crunch, both at the Hospital and the rest of the University, will play itself out in the coming months. Its effects are likely to be felt throughout the campus for much longer.

Despite the pain and complication involved, some see the University’s approach as fundamentally sound. For Kloehn, the response is very characteristic of the kind of place the UofC is: “There’s going to be a lot of intense scrutiny, rigorous debate. There’s going to be a demand that decisions are made on good, sound data and in the end there is going to be a genuine effort to get to what’s right, not what’s easy.”