UA Decides Against Donations 'Tax' to Cover Advancement Shortfall

University of Arkansas officials have decided against implementing a gift-tax fee on donations to help pay down a projected $4.3 million shortfall in the budget for its Advancement Division.

In an email sent to campus deans on Thursday, Chancellor Dave Gearhart said the UA will work to cover the deficit in other ways. That includes a mix of budget cuts, hiring freezes, money transferred from within the university and what is described as "unrestricted funds." UA Spokesman John Diamond said the unrestricted funds include money from donations that not are earmarked for a specific college or purpose.

It is possible the gift recovery fee will be implemented for the next fiscal year (2013-14) as the UA continues working toward the launch of a new capital campaign. Gearhart projected $1.5 million could be generated if the fee were implemented this year, but that plan was abandoned for 2012-13.

"He’ll decide at some point in the future whether or not to adopt such a fee," Diamond said. "It will definitely not be for fiscal year 2013."

How much money will come from non-earmarked donations is unclear. Diamond said the hope is for Advancement to close the gap primarily through cutting operating costs in each department within the division. Gearhart’s original plan called for $800,157 in cuts, but that number could increase over the final half of the fiscal year.

"We’ll be working on doing as much as possible with smaller operating budgets for the reminder of the fiscal year," Diamond said. "We think we can close the gap by the end of the fiscal year. We won’t know for sure until we get there but the steps that are being taken now are intended to close if not eliminate that gap."

As Arkansas Business first reported, officials discovered a shortfall in June. UA Advancement overspent by $3.1 million in 2011-12 and is on track for a deficit of more than $4 million in 2012-13.

Advancement, which houses fundraising, communications, marketing, special events and the World Trade Center in Rogers, includes 154 employees. That total has grown by 16 since 2009. 

Already, the budget mishandling has resulted in the reassignment of Joy Sharp, who had budget oversight and human resources duties in advancement, and Vice Chancellor for Advancement at University of Arkansas Brad Choate.

Sharp is now in human resources and has no budget oversight. Choate continues to work in fundraising, but does not have day-to-day management responsibilities. Gearhart, who made fundraising a priority of his time at Arkansas, is now handling those duties.