Dear faculty and staff,
We are writing to share an update with you on the university budget.
The impact of the COVID-19 pandemic has forced us to rethink almost every aspect of our campus operations, including finances. The financial impact of the pandemic has already been significant for us as we provided millions in refunds from the spring semester, invested in new ways to deliver courses remotely, incurred added costs to implement new protocols for the Fall 2020 semester and more. While many of our pandemic-related expenses may be eligible for reimbursement through CARES Act funding, many are not eligible for reimbursement.
Uncertainties brought about by the pandemic delayed preparation of our FY2021 budget from the spring to allow time to understand the impact on state appropriations and university enrollment. We know now that state appropriations will decline 2.5 percent from last year; since FY2016, the decline in state appropriations to the university is 10.6 percent.
The combined effect of these impacts plus continuing uncertainties about the current environment and the prospect of pandemic-driven enrollment declines will require us to reduce our core Educational and General Budget to match expected permanent revenue levels.
We were able to get through FY20 without implementing any budget reductions. We now know that FY21 revenues will be less than predicted expenses. As a result, we need to implement budget reductions to align expected revenues with expected expenses. Final enrollment figures will determine the size of the overall cut for FY21. At this time, we are asking Vice Chancellors to prepare plans for a 4.95 percent cut in permanent funds (based on expense and revenue predictions), and warned that cuts may grow as large as 7.5 percent if enrollment declines again at predicted rates. Due to the unpredictable nature of the pandemic, we will not know the size of the cut until the first day of classes on Monday, August 24. Traditional enrollment forecasting methods are not as reliable in the midst of the pandemic, so we must confirm our actual enrollment once classes begin before we make appropriate adjustments to our core operating budgets.
All of this comes on the heels of declines in college and university enrollment nationally. The number of undergraduate students declined by approximately 1.4 million since the peak in 2010 (according to the National Center for Education Statistics), and we’ve felt that trend as enrollment declined each of the last three years. Student tuition and fees represent our largest funding source for the university’s operating budget, so enrollment declines translate directly into less funding for our operations. In spite of these trends, the university has avoided cuts to our permanent operating budget and funded a 2 percent annual raise pool in FY2019.
We know this is difficult news. It must be noted that we don’t know the full depth and duration of the pandemic’s impact on our finances, so it is vital that all of us make very prudent use of any FY2021 budget authority.
We will provide a more detailed update to the campus community shortly after the start of the fall semester.
Sincerely,
Glenn F. Boyce
Chancellor
Larry Sparks
Vice Chancellor for Administration and Finance
