UA budget update

UA President Jim Johnsen issued additional budget and financial management guidance to the three university chancellors asking that they work together to find inter-university collaborations to help reduce the budget.

Per the conditions of the Compact Agreement between the university and the governor, state funding for operations at the university system will be reduced by a total of $70 million over three years: $25 million in FY 2020, $25 million in FY 2021, an $20 million in FY 2022. 

Now add COVID-19 to our budget challenges, with direct expenditures in the $3 million range, and hits to revenues projected to be north of $35 million. Funding from the state and federal governments for COVID-19 response are unlikely to fully cover these impacts. And, all this is taking place while the state‚Äôs budget is reeling under historically low oil prices, declines in the investment market, and disruption in other key industry sectors such as tourism and fishing. 

On the cost reduction side of the equation, we have done a good job implementing the reductions for FY 2020. In addition to state funding, $2.5 million in one-time funds have been allocated to the universities to increase recruitment and marketing activity to strengthen enrollment. Other associated programs for those funds include costs associated with accreditation, transitions for the teacher education program, K-12 outreach programs, the OneHealth program, and match funding for archiving Senator Stevens' papers. Additionally, the Board of Regents has allocated $1.5 million for additional financial aid as part of the FY21 tuition rate approval. And, the requirement that $5 million be reallocated by the universities for strategic initiatives in FY 2021-22 has been rolled back.

Plans for the additional reductions for FY 2021 and FY 2022 are being developed to meet budget reduction and compensation targets:

 

 

State
UGF Cut
(pro rata)

Compensation

Total

Mkt
(FY21+22)

1%
(FY21)

Total
(FY21+22)

UAA

16.3

2.6

1.4

4.0

20.3

UAF

22.2

3.2

1.9

5.1

27.3

UAS

3.6

0.2

0.3

0.5

4.1

SW

2.9

0.4

0.3

0.7

3.6

TOTAL

45.0

6.4

3.9

10.3

55.3

 

The Board of Regents Audit Committee has requested a financial plan that includes the detail of base reductions and one-time reductions from available reserves to meet these targets.  

In preparation for the May 13 committee meeting, each Vice-Chancellor of Administration is working with CFO Myron Dosch and VP Michelle Rizk to clearly identify base reductions sufficient to meet FY 2021 and FY 2022 Unrestricted  General Funds (UGF) and compensation targets during that period. Decisions for both FY 2021 and FY 2022 are needed in June 2020 to comply with critical notice and program completion requirements. 

Review is underway of reserve funds for possible use for FY 2021 transition expenses. More information on these funds will be discussed at the May 13 Audit Committee meeting.

President Johnsen implemented a mandatory leadership furlough program effective July 1, 2020. Equivalent to a pay cut, the furloughs will save UA about $554,000. Other budget reductions under consideration include a broader staff furlough and a delay in compensation increases.

Additional information and budget planning documents will be available on BoardDocs in advance of the May 13 meeting of the Audit Committee.