FY2020 Operating Budget

As provided in Regents' Policy and University Regulation 04.09, the Board of Regents may declare financial exigency when it determines that a shortfall in projected revenues compared to projected expenditures over the same period, will have a material adverse effect on University operations. The board then may decide to reduce the operation of, modify, or close any component of the University, at any level of the organization.

FINANCIAL EXIGENCY FAQ (HR website)

The Governor of Alaska has vetoed the University’s budget by $130 million, resulting in a $136 million funding reduction from FY19. While numerous attempts at providing additional funding for UA are on the table, so far, none have made significant progress.

On a vote of 10-1 during an emergency meeting July 22, the Board of Regents approved a declaration of financial exigency for the university. A vote of financial exigency does not absolve the university of debt, as would be the case in bankruptcy; it is a tool that allows for modification of contracts. Exigency permits the UA system to modify terms of employment, including termination on shortened notice. There is the potential for unit, program and service eliminations. The university will put students first and per our commitment to our accreditation, we will provide options for students to complete their degree programs.

The BOR also discussed three options for a new university structure. They address how the university should respond to unprecedented budget cuts while continuing to serve its mission as the lead provider of higher education for Alaska. Learn more about those options HERE. The BOR asked the president to take a more in-depth look at options two and three along with detailed impacts for each option. President Johnsen will present these scenarios at the next BOR meeting Tuesday, July 30, where we expect they will choose an option to pursue.

Though administrative reductions may proceed more quickly, specific programmatic reductions would be proposed to the regents at their September meeting following a period of input from students, faculty, staff and the public. If approved by the regents during the September regular meeting, notices to affected faculty and staff would be distributed this fall, and work would begin to address the teach-out considerations of affected students.

The UA community will have the opportunity to provide public input to the Board of Regents on reductions throughout August, before the board takes action to approve academic restructuring plans at its September meeting.

Because FY20 spending levels are about $11 million dollars/month less than FY19, each month of delay in implementing reductions in programs, services, and personnel adds an estimated $11 million that will then need to be cut in the remaining months of the fiscal year.  For example, if we continue spending at FY19 levels, by January 1 we will need to reduce programs and services by over $22 million dollars a month.

Our goal is to provide a reasonable transition period during the Fall semester, and teach outs for any programs affected. Ultimately whether certain units, programs, or services are eliminated immediately depends on several factors, including further budget actions by the state, and decisions by the Board of Regents. Many programs will continue or be available via distance delivery.

Depending on the final budget, regents may consider a tuition increase for the spring semester. This would be in addition to the already approved 5 percent tuition increase for the fall 2019-spring 2020 academic year.

An exigency declaration has direct legal, financial, and reputational impacts. Unlike bankruptcy, a declaration of Financial Exigency does not involve discharge of all obligations. While exigency allows rapid downsizing of personnel and programs, doing so abruptly means students who have invested in programs may not be able to finish them at UA; other contracts may go unfulfilled; and litigation is likely. Additional indirect effects may include decreased enrollment, accreditation issues, decreased employee morale and retention, reduction in grant and contract revenue, reduced giving, and long-term damage to the University’s reputation.

The UA System operates on a shared services model which reflects the fact that we are one legal entity, and avoids duplication of costs. The System provides a variety of services required by each university and the community campuses, including audit, financial, legal, HR, Labor Relations, and certain IT services. UAS and the community campuses would have to fund their share of those services through reallocation of the separate appropriation. The dual appropriation thus reduces the flexibility and authority of the regents to allocate resources as they deem appropriate to achieve the mission of the university. It also creates administrative burden for UA and the state’s Office of Management and Budget (OMB) to process reallocations.