Budget update: April 29, 2020

April 29, 2020

Tori Tragis

— by Dan White, chancellor

On April 25, Chancellors received a memo from President Johnsen with specific guidance on budget management techniques that Universities will be required to follow as we prepare our budget over the next several years. This is a follow-up to a March 9 memorandum with updated information and expectations with respect to University budget management. 

The two formal memos are posted, but to summarize, some of the key expectations are as follows:

  • Use of our one-time reserves (e.g., UFB, debt reserve) is appropriate to bridge any base reductions necessarily delayed by notice requirements, within limits ensuring that reserves are available for unforeseen events and opportunities

  • Specify base reductions to mitigate execution risk and ensure that identified/planned reductions will be timely implemented/realized

  • Continued cost reduction in academic and non-academic areas through inter-university collaboration, program reduction, and consolidation

  • Peer benchmarking in relation to cost effectiveness in all functional areas

  • Maintenance of viability levels for critical support and compliance functions

  • Be at new base at end of FY22 (down $70M UGF from FY19 and $45M by FY20)

  • Prudent use of our Unreserved Fund Balance (UFB): in order to have reserves needed for COVID and other unforeseen challenges and to invest in opportunities to grow revenue or other strategic priorities, UFB levels at each MAU fall will be no less than 2% at year-end FY20 and 4% at year-end FY22.

  • Prudent use of our debt reserve funds: for the reasons and purposes stated above, debt reserve levels at each MAU will be no less than one-half of the maximum annual debt service at year end FY22.

  • Implement a leadership furlough program effective July 1, 2020 and consider a general furlough program that would apply to all employees after COVID impacts are more clear in FY21.

The President has asked that each University clearly identify base reductions sufficient to meet FY21 and FY22 UGF within new guidelines for UFB and management of the debt reserves. This approach does not factor in revenue or tuition strategies, but is an approach designed to protect the university from unknowns related to COVID-19 as well as the constantly changing state budget picture. That said, it will require a modified approach to budget planning at UAF compared to what  we developed over the last 9 months as we must now fully meet base reductions, including any unmet UGF gap from FY20, by the end of FY22. We will also be managing UFB to a higher level, increasing from 2% with a goal of 4% by the end of FY22. Financial Services will be putting out updated UFB guidelines to align with these standards as we approach FY21. 

The approach will require UAF to make more significant operating budget reductions on a shorter timeframe than originally planned. From a planning standpoint, the work that units have been doing, planning at the 15% reduction level, will be sufficient to meet the current FY21 budget targets under the revised approach. It is unlikely, however, that we will be able to provide much relief as University wide efforts to reduce the budget will likely go to meeting the total budget gap on a shorter timeframe. 

At this time, units are still expected to plan for compensation increases in FY21-FY22. The President’s memo outlines that we “consider delay in one or both compensation increases, consistent with our employee relations values, collective bargaining requirements, and the condition that all employees are treated equitably.” Therefore, as decisions are made in this regard, I will provide additional information. 

Given the new guidelines, and a request for a more “inter-institutional coordination academically or administratively,” the other Chancellors and I have met twice to discuss the techniques outlined and plan to meet again to discuss additional collaborative efforts that can be done. We will be meeting again, this time with Provosts and Faculty Senate leaders from across the system to discuss other opportunities for collaboration. With this in mind, I’m seeking input from our deans, directors and faculty on ideas and ways we can collaborate academically or administratively. I would encourage you to contact either me or Provost Prakash with thoughts you have before Friday at 9 am when we will meet to discuss initial strategies.

We are already well down the path with our own shared services model, with expanded proposals due back April 29. The Chancellors and I discussed any other opportunities there may be for shared services across the Universities, or opportunities for shared contracting, student services, auxiliaries, outreach and engagement, athletics, academics and research administration. We did not discuss any specifics, only explored if there were opportunities that would be win-wins for our universities and ways in which we can help each other meet the budget gaps. UAFs core cabinet and I have been having this conversation already as we look for ways to meet the next few years’ budget targets. The broader university discussion will begin with Chancellors, Provosts and faculty leaders on Friday and expand from there. An initial list of ideas is due from the Chancellors to the President on May 6 so we will publish that broadly. Again, these will not be decisions, but rather some thoughts about areas for exploration.

Always feel free to contact me ( dmwhite@alaska.edu ) directly with questions or suggestions as we navigate this next phase. Knowing the work that is going on across our campus gives me great confidence in UAF. Work in our research units, student affairs, academic units, financial and fiscal units, and our community colleges and campuses is nothing short of amazing. I have confidence in our future because I see it in the work you do, the work we do. Thank you for that, and thank you for choosing UAF.