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Friday, August 21, 2020

Budget contingency plans and update

 Over the past several weeks I’ve shared with you an update on how the college closed out fiscal year 2020 as well as our initial fiscal steps in response to the pandemic

The “initial fiscal steps” post provides information on what we submitted to central for “Contingency Plan 1” in response to the fiscal effects of the pandemic. That post also provides more general information and background on the process and the targets we needed to meet. 

In late July, we submitted a list of items for “Contingency Plan 2.” As with Contingency 1, these items needed to total $7.4 million. The items submitted for Contingency 2 included:

  • Instructional savings: Enrollment minima for courses and guidelines for course staffing (i.e., when a TA is or is not provided for a course) would reduce non-faculty instructional expenses. Lower graduate admissions during FY 2021 would result in fewer graduate students in need of instructional positions ($3.5 million).
  • Retirement Incentive Option (RIO): CLA’s portion of the assumed savings from the RIO program, based on the University’s Office of Human Resources analysis. OHR factors in an expected take-up rate and an expected eventual refill rate in computing the collegiate savings ($2.2 million). 
  • Eliminate administrative unit positions: Eliminating approximately ten positions across the various administrative units of the college through attrition when positions are vacant. Some are currently vacant that will be evaluated for elimination ($850,000).
  • Reduce non-personnel spending: Collegiate allocations to academic units would account for about $500,000 of this reduction, with an additional $150,000 from administrative units. Expected savings would come from lower spending for activities that are less likely to occur with the current COVID-related restrictions ($650,000).
  • Deferred collegewide spending from administrative units: During FY 2021, CLA will pause the collegiate share of purchases of new computers ($200,000).

These are not easy steps. I appreciate the feedback from the Council of Chairs at the outset when we began developing the two lists, with perspectives on the range of difficulty in accomplishing various possible steps. In some of these areas — for example, the first item on the list — we do have the proverbial situation where a challenge is an opportunity. In the case of enrollment minima combined with a downtick in graduate admissions, we can think of alternative ways to support graduate students other than, or in addition to, the instructional budget, and we can focus on improving support for those students we recruit. 

More generally on the budget front, we have a mixture of good news, bad news, and unknown news. On the good news side of the ledger, as of right now it looks like we will recruit our full 3800 undergraduate students for fall 2020 (2/3 first-year students and one-third transfers). That will be a great outcome if it holds up. The mix will be a little different than planned — a few percent more from Minnesota and a few percent less from around the country and internationally) — and that will have some revenue implications. But still, a good result overall. 

On the less happy side of the ledger, the state’s latest budget estimates have gone from a surplus for the current fiscal year to a $4.5b deficit. That new reality will likely have implications for the upcoming biennium budget (FY 22-23) and in a "worser case” scenario would result in pullback of state funds in FY 21, the current year. Any of these outcomes would affect the college adversely.

Also on the less happy side of things, as I reported to you in the fiscal 2020 recap linked above, we needed to draw on $3.5 million of collegiate carryforward to balance last year’s budget and that is a finite resource. That means we will likely need to implement items on our contingency lists regardless of whether the University declares we are in a Contingency 1 or 2 situation. 

In the category of the unknown, we have a number of items, such as the fiscal condition of other colleges or campuses in the System. State appropriation dollars are moved by central to fill those gaps and that would affect CLA. We don’t know whether any pivots away from in-person teaching will require extra expense or collegiate refunds to students as happened in the spring. We don’t know the take-up rate on the Retirement Incentive Option and what percentage of those positions are permanently not refilled (i.e., we don’t know if we will reach the $2.2 million in expected savings through the RIO program). And we will have new University financial leadership beginning at the end of September and we will see what implications that has. 

Many of you may be wondering also about the implications of the postponement or perhaps eventual cancellation of fall revenue sports. Although there’s no new information to report on that topic, in the past the message from central has been that the academic side of the campus would not be asked to shoulder the impact of those revenue reductions. 

We will continue to monitor all of these variables and I will report to you when I have new information to share. In the meantime we will continue to take the steps that enable us to fulfill our mission and purpose while building long-term fiscal sustainability. We aren’t in the budget balancing business and our primary focus is how we fulfill our mission at high levels of excellence and creativity. To do that, however, we do have to address the reality of budget balancing and I am grateful for your collaboration on this work as we move forward and together.