TO: University of Idaho Students, Faculty and Staff
FROM: Scott Green, President
DATE: April 10, 2020
SUBJECT: Budget Update with COVID-19 Impact
FY20 Goals Met, State Holdbacks Still an Issue
I again ask forgiveness for the length of this communication, but I prefer to err on the side of transparency. The FY20 year-end is rapidly approaching and, given the disruption and economic impact of COVID-19, we felt it important to provide an update on our financial condition. All indications are that, except for COVID-19 related expenses and lost revenues, we will meet our FY20 budget reduction goals. Thank you to everyone across every college and unit for helping us meet the $14 million expense reduction target. This was not easy, but we all contributed and we succeeded.
We are still working to meet the additional 1% holdback the state implemented last fall. You suggested, and we offered, a voluntary furlough program. To date, we have secured $300,000 toward the approximately $1 million goal, but with nearly all work now being accomplished remotely and notification today from the state that Change in Employee Compensation (CEC) is being held back, there is understandably little chance we will see additional voluntary furloughs.
Last week, the governor imposed another 1% holdback for this fiscal year to help offset the costs to the state of the COVID-19 pandemic. Given how close we are to the end of the fiscal year, we have little choice but to use our cash reserves to meet both these holdbacks. It will further deplete our already insufficient reserves but will allow us to meet the governor’s expectation.
FY21 Budgets Approved, But Further Proposed State Holdbacks Are Unaddressed
Late last fall, we determined the $14 million in budget reductions for FY20 would become permanent in FY21. We also tasked each college and unit with developing plans to reduce the budget another $8 million to, in essence, balance our budget. It was a long process, but each college and unit has met that challenge, and FY21 budgets, with a total base reduction of $22 million, have been approved.
While these cuts, on paper, will eliminate our deficit, we will not see the complete benefit in our reserve balance in FY21. Some of the reductions are in faculty non-renewals, which require one more complete contract year.
We are also using some of the salary savings to pay the required incentive payments of those in the Voluntary Separation Incentive Program (VSIP) and Optional Retirement Incentive Program (ORIP). These have one- and three-year payouts, respectively.
Progress on other budget-related work took a back burner when the fast-changing COVID-19 situation caused the institution to act quickly to move all classes to online/remote delivery and react to all the other implications, including working remotely and adopting new state and federal rules for paying our employees. We continue to work through the details of many of the impacts and appreciate your patience as we balance guidance from the federal and state governments with what we know is best for our Vandal community.
Despite the turmoil, we were able to finalize changes to our Other Post-Employment Benefits and communicate that to our community. We are now refocusing on some aspects of our budget-related work, including outsourcing.
Even though we have taken much of the anxiety out of the outsourcing discussion by making the decision to keep our current staff as university employees, our final review has understandably been delayed by the need to prepare and respond to the COVID-19 threat. I am told that the outsourcing review committee will soon issue their recommendation. At that point, I will solicit feedback from the Staff Council and Faculty Senate before making a final decision.
Program Prioritization is in its final stages, and I am told will be delivered to me for approval soon. This process does not have a specific budgetary goal but is intended to review our programs to ensure they are cost-effective and impactful.
While we have done well to set our goals for addressing our historic budget challenges, additional cuts from the state make our work more challenging. Last fall, we knew we would most likely face another 2% holdback from the state in FY21. But last week, the governor indicated he will likely implement as much as 5% more due to COVID-19. We also now know we will not be getting a CEC distribution approved earlier by the state, adding to challenges we face. We are discussing how to address these additional financial challenges should they come to pass.
Fall Enrollment
We put a lot into recruitment this year, including adding a traveling Enroll Idaho event, complete with a U of I-branded van that lets everyone know we are in town. Things were looking good with applications and admissions up significantly, until COVID-19 hit. The timing could not be worse as we were gearing up for our on-campus recruitment events. We all know our campus sells itself. It is a beautiful place and getting potential students to visit often seals the deal. Our Strategic Enrollment Management team, with help from many across the university, quickly pivoted and developed a robust UIdaho Bound website with videos, a virtual tour and highlight videos from each college. It was an incredible amount of work. But nothing takes the place of having those students right here in Moscow and, while very early in the cycle, we have yet to see the typical enrollments we normally would at this point. I have heard from my peers at other universities that they too are experiencing low yields, so this may just be a delay related to COVID-19.
As a result of all this, our summer and fall enrollment numbers are more uncertain than we like. It remains to be seen if this is temporary or will result in a decline in tuition revenue. In the meantime, we will continue working hard to convert our robust admissions pool to enrolled students, which means we all need to be fervent recruiters for our university.
COVID-19’s Impacts on Revenue and Fund Balance
When we put together our aggressive budget reduction plan, there was no way we could have known what else we would face in 2020. While we continue to deliver the great Vandal education through online/remote delivery, the loss of our energetic students on campus is not only disappointing to all of us but is also costly. At each turn we are losing revenue: housing, dining, parking, events, branded gear sales and more. We estimate a total revenue loss of more than $7 million through June 30 due to COVID-19.
The federal government has passed a stimulus package that will mitigate some of the financial impact of COVID-19 on our institution. The Department of Education will distribute $6.9 million to the U of I. Half must go directly to student aid to those demonstrating need due to disruption associated with COVID-19. The other half can be used to defray costs to the institution. The net result is another anticipated $3 million to $4 million reduction to our reserve balance.
Looking Ahead
We have been successful at addressing those things we can control, and looking forward, it is not only important that our budgets are balanced, but that we have the ability to re-position our university for the future. Lack of investment in systems, processes and programs limits what we can do for our students. That is why I have been advocating for Public-Private Partnership (P3) financing in the form of the long-term leasing of our utility system assets. We continue to move this process forward. The legal documents are being prepared, and we have a number of interested high quality potential investors which bodes well for a favorable offering. COVID-19 has also impacted this initiative as potential investors and operators need to tour the facility and meet with our management team. We are, therefore, looking at fall for the completion of this financing. It is admittedly a complicated structure, but successful financing will allow the university to invest in more teaching assistants, graduate students and postdoctoral researchers to advance our mission. It will also allow us to allocate resources to undergraduate scholarships to make us more competitive. Finally, it will allow us to advance our strategic initiatives.
Many steps have been taken to address our budget challenges. As mentioned earlier, in those things we can control we have been quite successful. The other challenges, although beyond our control, are frustrating and complicate things. I know we all wish we did not have budget and reserve deficits. I know we all did what was needed and had hoped to see the other side of our budget challenges by now. I know none of us expected or wanted to respond to a pandemic. But we are Vandals, and Vandals are resilient. I am proud of how we responded and how we all came together. We resisted the politics of envy, focusing instead on how each of us could contribute. Without a lot of complaining or finger-pointing, we just got it done. For that I am grateful. We will continue to do what is needed to respond to the unknown and re-claim our future. Keep fighting the good fight. I still am.
Keep Calm and Vandal On.
Scott Green
President
president@uidaho.edu
uidaho.edu/president
