Top administrators at the University of Arkansas got a surprise e-mail late Friday afternoon asking them for input by today of how they could adjust budgets to accommodate expected reductions in state support and perhaps student fees as a result of the coronavirus crisis.
For those not favored with the e-mail, it follows. Athletic Director Hunter Yurachek wasn’t among those on the mailing list for this e-mail, by the way, in case you’re wondering what the thinking is about that Fayetteville VIP (very important program) — football.
Subject: Budget and Finance Update and Request – FY20 and FY21
As we continue to work our way through the FY 2021 Budget process we are faced with numerous changes and contingencies as a result of the COVID-19 pandemic that have already had an impact on the FY20 Budget and will most assuredly impact our FY21 budget preparations. We have put together this email to serve as a status update relative to impacts we are experiencing in FY20 and those we can reasonably expect to see in FY21 and to request some high level budget information for FY20 and FY21 (detailed below).
Fiscal Year 2020:
- As a result of delayed State tax filing requirements (which have been pushed back to July 15th, 2020) and the State’s other anticipated financial commitments in combating the COVID-19 pandemic, the University is planning for reduction in FY 20 Appropriation of at least $8.3 million; however, given the uncertainty surrounding the current pandemic situation we are planning for up to $10+ million in reduced appropriations this year.
- We anticipate in some areas there will be expense reductions due to the current remote work environment, the fact that students are now fully off-campus (outside of particular exceptions), the social distancing environment that has postponed or fully canceled numerous campus events, restrictions on travel, and other factors resulting from the pandemic.
- Given the reduction in appropriation for FY20 and it’s expected carryover into FY 21 we are at this time requesting that within your Colleges and departments you please provide the following:
- A high-level listing of expenditure reductions and potential cuts your College or department is considering/planning through the remainder of FY20.
- A high-level listing of areas where your Colleges and departments could potentially make cuts or defer expenditures for FY21 and the estimated dollar value of those cuts/deferrals.
- We have provided guidance below (under a section titled Fiscal 2021 Budget Preparation guidelines) relative to early levels of overall budget reductions we are suggesting all Colleges and Departments plan for.
- We are faced with a short turnaround for this information unfortunately, and are requesting it be sent to me at email@example.com by the end of business on April 6th. This will allow the budget office the day of April 7thto compile the information, reach out with any questions or for clarifications, and have it ready for discussion at the Special Board Meeting that will be held on April 8th.
Tuition and Fees;
- With the move to remote courses for the remainder of the Spring 2020 Semester we do not at this time anticipate significant reductions in Tuition and Fee revenues for the spring semester. This remains an area under review, particularly with respect to fees; however, at this time we are not anticipating significant adjustments of tuition or fees on student accounts for this semester.
- Summer Session enrollments could be impacted – possibly significantly. Estimating the level of impact is difficult at this time.
Room and Board;
- The decision on adjusting any portion of the Room and Board fees charged to students will be made at the System level and at this time has not yet been decided.
3rd Quarter Provost Report;
- Instructions for completing the 3rd Quarter report will be similar to the instructions for the 1st Quarter, that is – we will send out the quarterly budget report file and request that you respond with twitter length explanations of how deficit balances will be resolved by year-end. The current due date for the 3rd Quarter Provost Report remains April 30th.
COVID-19 Related Expenditures;
- As both the State of Arkansas and the Federal Government (through the recent passage and signing of the CARES Act) have pledged funding to help combat the COVID-19 pandemic there may be opportunities for the University to receive reimbursement of expenses associated with our efforts to continue to maintain instruction for students during this time.
- While we do not yet have details on how these expense reimbursements will flow, and cannot guarantee that all expenses will be reimbursed, colleges and departments on campus are encouraged to track their expenses associated with supporting students as they have moved remotely and any additional expenditures your areas may have incurred in responding to the COVID-19 pandemic. Detailed guidelines from the Federal Government have not yet been released on allowable expenditures, although we do know that expenditure reimbursements are focused largely on supporting students. The Controller’s Office is working through the best method to ensure appropriate tracking of expenditures and once determined, will follow up accordingly. We will also provide additional information regarding eligible expenditures when we receive further guidance.
Fiscal Year 2021:
- We expect that, at a minimum the State Appropriation reduction of $8.3 million in FY20 will be made permanent in FY21. However, given the uncertainty of our current environment, our budget plans for FY 21 are anticipating a cut of $10 million. Many things could impact the level of appropriation reduction including the severity of the pandemic, the State’s response, and how well State revenue collections come in from July-December.
Tuition and Fees;
- As all of you are aware, we have delayed releasing estimate information on potential revenues generated from fees for you to use in your budget planning for FY21. As Chris communicated last week, we were ready to release that information two weeks ago, but a great deal changed quickly and we held those estimates back.
- Estimating SSCH production for FY21 is the area most open to variation currently. While trackable enrollment and SSCH generation numbers still remain positive in many respects for FY21 – including housing deposits, applications, and admits, much can change. Registration for returning students runs throughout the month of April and it is our intention to help use those as a guidepost in our estimations of enrollment. As we work through our projections we also know that there is a potential for a reduction in the number of non-resident students, but we may see some lift in residents staying closer to home. At the same time, when the job market is impacted negatively we often see an influx of students as people come back to school to acquire new skills, finish a degree, or earn a degree in a new area. All of these factors will impact our SSCH production.
- We continue to evaluate our options with respect to a tuition and required fee increase for FY21. Action was not taken on the potential for an increase in tuition and required fees within a 2%-3% window during the March 2020 Board Meeting. We hope to receive further guidance regarding tuition and required fees during the Board meeting that will be held on April 8th.
Salaries and Wages;
- Given the uncertainty surrounding State Appropriations, allowable tuition and fee increases, and overall enrollment we are still evaluating the viability of Salary and Wage increases for FY21.
- We have reached out to the System office to request additional time in submitting our Budget for FY21. It is our hope that our Mid-April deadline will be able to be pushed until at least the first week in May. The current deadline is April 14th, but we will notify you if that deadline is extended.
FY 2021 Budget Preparation guidelines: Given the potential for volatility in appropriations and enrollments we would make the following suggestions at this time;
- For hard budgeted areas – begin to make plans relative to reductions of 5% and 10%.
- For soft budgeted areas reliant on SSCH driven fees – begin to make plans relative to reductions of 5%
- Although the foundation does not provide spendable earnings projections for annual budgets, their ongoing recommendation has been to use the past 4 quarters of earnings distributions (adjusted for new gifts) as a basis to apply a conservative lean to estimates. Given the potential prolonged impact the COVID-19 pandemic may have on market conditions we would recommend an even higher level of conservatism in your estimates.
- On the grant side, for federally sponsored awards, please note that the OMB has allowed agencies to approve a one year no-cost time extension for any award that has an inactive date from March 31, 2020 through December 31, 2020. This will allow researchers to plan for activities that were not completed during the COVID-19 season. For all other sponsors, we have not received notice of reductions of any awards, but communications will be sent out if the University is notified of any changes from our sponsors.
- These suggestions are meant to assist in the planning process only. As there is much in flux, and in the absence of information that will become clearer over the coming days and week, our budget suggestions are naturally more conservative. It is our hope that as more information comes to light (clarity on returning student enrollment, the upcoming legislative session for FY21 Funding, tuition and required fee rates, and numerous other impactful areas) that we can home in on more precise estimates.
FY21 will be a challenging year financially for the University, as it will be for most if not all higher education institutions around the world. We find ourselves now with some time to prepare and plan and we must take advantage of that. Chris and I are available to discuss particular budgetary issues within your areas and can be reached via Teams, Skype, email, or phone. We realize there are many issues within each of your Colleges and areas, beyond those listed above, that will be impacted. This could be especially true in those units that rely on soft-funding to cover parts of their operations. Please do not hesitate to reach out. As more information becomes available, we will continue to communicate with this group as all of you are on the front lines of financial management in your respective colleges, divisions, and units.
Thank you for your leadership during this time and please reach out with any questions.
Cale Fessler, PhD, CPA
Associate Vice Chancellor for Budget and Financial Planning
Interim Associate Vice Chancellor for Business Affairs
University of Arkansas