USM FURLOUGH/TEMPORARY SALARY REDUCTION PLANS:
FREQUENTLY ASKED QUESTIONS
What does the USM mean by a "Furlough/Temporary Salary Reduction" Plan?
What this means is that each campus will have to meet a specific budget reduction target through personnel-related measures. The Board of Regents has authorized a couple of options to achieve their goals. Institutions will have the discretion to implement either furloughs, temporary salary reductions, or a combination of both, in developing their Plans.
Furlough: If an institution's Plan includes furloughs, employees will be assigned a number of furlough days that must be taken by June 30, 2011. The number of days for each employee will be set according to a progressive scale depending upon salary level. Under federal employment laws, the number of furlough days that an employee can take in a single week may be limited, and the reduction for that day(s) must be taken out of the employee's pay check for the pay period when the day was taken. Under federal law, employees cannot report to work on furlough days.
Temporary Salary Reduction: Campuses that choose to implement temporary salary reductions will meet their budget reduction targets by reducing employees' pay across the fiscal year (until no later than June 30, 2011) according to a progressive scale based on the employee's income. Then, employees will be given a proportionate number of paid administrative leave days. A temporary salary reduction is a technique to spread out the dollar effect of salary loss over the fiscal year by applying a small amount to each pay period.
An Institution also may use a combination of furloughs and temporary salary reduction. In this situation, the institution could reduce employees' pay in an amount commensurate with the number of days that it plans to shut down the campus, and require employees to take furlough days for any additional days that they are assigned under the institution's Plan. An institution could also implement furloughs for some of its employees and temporary salary reductions for others.
Will a temporary salary reduction affect my base pay for the future?
No, if your campus plan includes temporary salary reductions, your pay will be reduced only during the current fiscal year that ends on June 30, 2011. On July 1, 2011, your pay will be adjusted and will be based on your salary before the plans were implemented.
Will a temporary salary reduction affect my retirement benefits?
No, retirement contributions and credits will be made during the Plan period based upon your salary before the Plan's implementation.
Will a temporary salary reduction affect my health benefits or leave accruals?
No, your health benefits and accrual of annual, sick and other leave will not be affected at all by the Plans' implementation.
Will a temporary salary reduction affect my federal and state tax or Social Security and Medicare (FICA/Med) deductions?
Yes, your taxable income is decreased by the amount of any temporary salary reduction or reduction in pay for furlough days. Thus, the amounts deducted for federal and state income tax and FICA/Med will be reduced accordingly.
Will institutions shut down as part of their Plans?
Most campuses plan to shut down for a few days, usually close to their existing winter or spring breaks, as part of their Plans. Employees will be expected to use furlough or administrative leave days on days when the institution closes.
What happens if my institution closes for more days than I have been assigned Plan days?
If your institution shuts down for more days than you have been assigned furlough or administrative leave days under the Plan, you will have to use accrued annual or personal leave or unpaid administrative leave on those closure days. For example, if you have been assigned three Plan days, and your institution is closing for five days, you will have to use accrued annual or personal leave or leave without pay for two days.
Why is the USM requiring each campus to implement a plan that requires furloughs and/or temporary salary reductions instead of options that do not affect employees?
Since the start of the fiscal year on July 1, 2009, the USM (and the rest of State Government) has experienced multiple rounds of budget reductions. Through all of these budget reductions, a total of approximately $160 million in savings will have been achieved by reductions to non-salary accounts, transfers from reserves, and the elimination of vacant positions. Though some filled positions were also eliminated, employees were largely protected.
However, salary and wages represent a large share--approximately 65%-- of the USM budget. The USM was asked to take part in state-wide furlough programs in the last two years. The use of furloughs was deemed to be the best course of action in a difficult circumstance because it allowed our institutions to achieve needed savings by reducing everyone's salary temporarily rather than laying off a significant number of our co-workers. Also, under a furlough/temporary salary reduction approach, the loss in pay is temporary.
Unfortunately, the USM is required to implement a similar plan for fiscal 2011. The FY2011 Budget Bill (SB 140) specifically requires that USM "funding for regular and contractual salaries shall be reduced . . . to reflect furlough savings in fiscal 2011." Thus, the USM must, for a third year, reduce its salary costs by implementing unpaid leave plans for employees. Similar to last year, the amount of savings that must be achieved through such plans is $26,088,466, to be distributed across institutions in amounts specified by the Department of Budget and Management. Because the use of furloughs is unambiguously required by legislation, the USM has no choice but to make up more than $26,000,000 through reductions in "regular and contractual salaries," and cannot look to other non-personnel sources to achieve those savings.
Why are there variations among the Plans of different institutions?
When the General Assembly established the amount of furlough savings that the USM must achieve in FY 2011, the Department of Budget and Management allocated that amount across the USM campuses, generally in proportion to the amount of state funding support that each institution receives. The Board of Regents established some basic principles that applied at all institutions; for example, all plans had to be progressive, affecting the lowest paid employees the least, and the implementation of campus plans could not seriously affect essential student services. Within those principles, each institution then had to develop a Plan that would reach its allocation, given the unique circumstances of the campus.
The specific elements of each plan depended on a number of factors. These include the proportion of total funding that the institution receives from the state, the salary structure at each campus, the institution's reliance on federal and other external grant and contract funding, and need to coordinate closure days with the pre-existing academic calendar in order to minimize the impact of furloughs on student services. Each campus was required to take these and other factors into account in developing the details of their Plans, resulting in some variation among the Plans across the USM.