On Friday, UK President Lee Todd foretold a grim financial future for the university in the next two years warning faculty, staff and students that the coming months could bring wage and hiring freezes, tuition hikes and possible layoffs.

Todd sent a campus-wide email saying UK had fared better than many other agencies in Kentucky in the face of budget cuts. Yet in handling the $25 million reduction in appropriations since December 2007, Todd said, “The easy decisions have already been made.”

Todd said the current allocation from state funds to UK’s budget is $310 million, down 7.5 percent from December 2007. Todd expects state appropriations for the 2010-11 fiscal year to be at least $306 million, of which $21 million comes from federal stimulus money. But Todd warned that $21 million would not be available for the 2011-12 year.

In addition to losing the stimulus money for 2011-12, Todd estimated the cost of running the university would increase $17.4 million next year, including an additional $8 million to fund to health care and other benefits for employees and retirees.

Todd said it would take about a 9 percent tuition increase to cover the $17.4 million, but he is reluctant to recommend such a raise in the face of economic hardships already faced by Kentucky families.

“Increasing tuition (a significant amount) is among the least likely possibilities,” said UK spokesman Jimmy Stanton.

Todd said lay-offs are a last resort to balance the budget because a significant faculty reduction would have severe consequences for UK in both the short and long term. He did not completely rule out faculty and staff reductions, however.

“Everything will have to be on the table for discussion as we build the university’s budget for next year,” Todd said.

Ernie Yanarella, a UK Board of Trustees faculty representative, said he appreciated the president’s frank and candid budget message, but said he would like to see more options explored as UK tries to replace disappearing funds.

“If the options for dealing with the looming budget problems are as narrow as President Todd has framed them, furloughs are not just an option. They’re inevitable.” Yanarella said.

Todd’s message also squelched hopes that the wage freezes in place for UK employees for the past two years would be lifted even though Todd said raising salaries remains one of the top priorities concerning the budget.

“A 1 percent salary increase would cost the university’s general fund $3.6 million,” Todd said. “But it is very difficult to add a recurring expense of that magnitude given substantial increases in fixed costs and the prospect of no additional support from Frankfort.”

Yanarella said he understands the burden will have to be shared throughout the university but he expressed frustration over how much the faculty has been asked to absorb including the prospect of two more years without salary increases.

Yanarella offered a solution for the president and said the UK Athletics Department should be asked to give additional money to the UK general fund to help shore up the deficits since the athletics program is consistently in the black.

“It seems to me when you have a successful sports program that continues to increase its budget — by virtue of its successes to be sure — it should be tapped to help shoulder the burden,” Yanarella said.

Gov. Steve Beshear will make his budget recommendations to the Kentucky General Assembly on Jan. 19, and Todd said he and his staff would be working to convince lawmakers to continue funding UK without major cuts.

“We will do our very best to convince Kentucky’s policy makers that their investment in us — even in these most difficult of times — is essential to Kentucky’s long-term success,” Todd said.