Shaking the Foundation: How the University of Louisville thrives during statewide budget cuts

By James El-Mallakh–

Over the summer, the University of Louisville laid off 10 staff members as a way of reducing costs in the university’s budget, among other measures. The cost-cutting measures became necessary early this year when the state of Kentucky cut funding to higher education by 6.4 percent. This cut reduced U of L’s funding by approximately $9 million.

The University of Louisville Foundation is a non-profit organization that is separate but affiliated with U of L. It is part of the Foundation’s job to raise money for the university through soliciting and receiving donations.

The U of L Foundation, which granted Ramsey his pay raise and oversees the donations to the university, has played an increasingly important role at U of L. For the first time since U of L became a public school in 1970, the Foundation will provide more money to the University in the form of private donations than state funding will for fiscal year 2012-13. According to the University of Louisville website, the Foundation will provide $141.8 million in funding to the University, whereas the state will provide $141.1 million.

About 10 percent of money that the Foundation raises is in the form of unrestricted funds. These are donations or revenue that do not have to be used according to the wishes of a donor, but can be managed in whatever way the Foundation Board of Overseers see fit. It is from this pool of money that University of Louisville President James Ramsey was given a raise.

“There is maximum flexibility as how [the Foundation] can use those funds,” said Mike Curtin, the Vice President for Finance at U of L.

According to Curtin, the Foundation generally views these funds as a way of adding “margin of excellence items” to the university. It is for this reason that the Foundation Board of Overseers decided to give Ramsey a raise rather than have those funds used to curb the possibility of layoffs. President Ramsey is considered to be a valuable asset to the university due to the large increase in fundraising that he has helped oversee.

“We want to do things like endow professors and scholarship programs,” said Curtin. “We want to do stuff that kind of puts U of L out there by itself as a community leader and we want to put our dollars into areas that are high value, we don’t want to just replace state dollars. So that’s kind of been [the Foundation’s] philosophy for a long time.”

Since Ramsey became the President of U of L in 2002, fundraising for U of L has more than tripled from about $33 million in 2003 to $145 million in 2012. The increase in fundraising is credited to the university’s “Charting Our Course” initiative, a campaign to raise $1 billion by 2014, according to the University of Louisville’s website.

“During Dr. Ramsey’s tenure, our fundraising has gone through the roof,” said U of L Director of Communications and Marketing, Mark Hebert, in an email. “Who knows what kind of financial shape we’d be in right now if not for the job that Dr. Ramsey and his team have done.”

Despite the cut in state funding and the recent layoffs at U of L, Ramsey received a pay raise to his salary. The raise came as the university was expecting the 6.4 percent cut at the beginning of the year and it brought Ramsey’s annual pay up to $600,000 per year, along with the opportunity for bonuses that would total $3 million by the year 2020.

Bert Deutsch, the Vice Chairman for the University of Louisville Foundation, says that layoffs are “regrettable,” but says that Ramsey’s raise is appropriate compensation for the job he’s done.

“There are layoffs all around but that doesn’t mean you take the people who are still working and not pay them appropriately,” said Deutsch. “We want to make sure [Ramsey] is paid appropriately for what he does because we don’t want to lose him.”

However, this sentiment is not shared by everyone, “I think, to an extent, a pay raise is appropriate, but the amount needs to be limited,” said senior Jacob Faul, a student in the College of Education. “I think that considering the fact that he’s been here for a while and he’s done a relatively good job as president, a pay raise is acceptable in my mind. But I think the current circumstances need to get taken into account and the pay raise definitely doesn’t need to be as much.”

Although Ramsey receives part of his overall compensation from state funds, none of the pay raise that Ramsey received came from students’ tuition dollars or state funding. The money that pays for Ramsey’s raise comes exclusively from the University of Louisville Foundation, which means that Ramsey’s raise was funded by private donations.

President Ramsey, in a February interview with Ryan Alessi of CN2, said that he did not think that he should have received a pay increase during a time with high budget cuts. Ramsey says that his raise was decided by the U of L Board of Trustees and was out of his control, although the Board has withheld bonuses and raises for Ramsey at his own request in the past.

“So [the Board] said, ‘you’re going to take a pay raise and just smile about it,’” said Ramsey.

Ramsey also says that the numbers regarding his pay increase are misleading. “A lot of that compensation is tied to me staying until 2020, I won’t stay until 2020 and so a lot of those numbers don’t mean anything.”

Faculty and staff received an average of a three percent raise to their salaries in fiscal year 2011-12, though they had not received any pay raises in the three prior. Ramsey had also declined raises and bonuses during that time because faculty and staff were not receiving them.

According to Pat Arauz, the Executive Director of Financial Aid, no financial aid programs have been at risk of being cut due to declining state funding, “The administration has been very supportive of ensuring that students still have resources available to them.”

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Photo courtesy University of Louisville