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Thursday, February 25, 2021

Three possible University budget scenarios

As we all know, the University’s financial picture became unsettled with the onset of the pandemic. We worked our way through fiscal year 2020, are proceeding through fiscal year 2021 with many adjustments in spending and revenue. And, as I’ve reported to you previously, we are planning for fiscal years 2022 and 2023 as the state enters a new budget biennium. 

Late last month, we had our first look at the University’s budget framework for fiscal 2022. The framework outlines the main parameters of University budget assumptions and planning for the coming year — changes in state appropriations, tuition rate adjustments, potential compensation increases, possible funds for investment in academic units, and so on. The framework is a starting point, as during the spring any of these variables might not pan out to be what was planned or hoped for in the framework.

Due to the uncertainty of the moment, this year the framework laid out three different scenarios: one based on the state providing the University’s request for a modest increase in state appropriations, one based on appropriations remaining flat, and one based on a decrease in appropriations.  

Here are a few topline notes of interest. Each scenario includes a tuition increase from 1 to 2.5%. The amount required from unit reallocation exercises ranges from $35 million to $55 million in total across the System and relates directly to the state appropriation: the better the appropriation result, the lower the amount needed to balance the budget through reallocation (I.e., reduction). The scenarios with higher state appropriations and stable state appropriations provide for a small compensation increase of 1.5% or less. The scenario with lower state appropriations does not provide for a compensation increase. Lastly, the framework provides for some investment in academic initiatives across the System. The amount is conditional on the other pieces falling into place, including the tuition increase and tuition and enrollment shortfalls not being larger than the amounts already incorporated into the framework.  

As we were going through the budget process last year, I asked the CLA Assembly, with a later review by the Council of Chairs, to provide some suggested guidelines for the college as we were establishing lists of spending reductions to get through fiscal year 2021 as part of an overall University process. In fall 2020, I asked the Assembly to review their guidance as we were now in a new stage of needing to address reallocation targets of 3%, 6%, and 9%, which translates to reductions of $7.5 million to $22.5 million in CLA, as part of the Compact process for the fiscal year 2022 budget. I invite you to read the Assembly’s guiding principles for budget reallocation

These are challenging times but we can work through this moment collaboratively. Our determination to be excellent, to be best for the world, doesn’t change. There is no way around difficult decisions. We do indeed have to balance the budget to do our work, but budget balancing is not our purpose. Our purpose — to transform lives through research, teaching, and engagement — remains our paramount objective. We will continue to aim to be ever improving in meeting that purpose. I am grateful for all you do to make that purpose a reality.