University Budget Update - Cost Reductions
June 29, 2020 - 10:39 a.m.
Message from the President - Cost Reductions
To: Stephen F. Austin State University Faculty and Staff
Date: June 29, 2020
As we conclude a challenging academic year, I thank you for the incredible dedication and commitment you have extended to our students and campus community. Through your great efforts, we pushed ourselves beyond our preconceived limits, developed new and creative approaches to teaching and learning, and demonstrated what it means to be a Lumberjack.
Although the “COVID-19 semester” is behind us, the pandemic is not, and the volatility and uncertainty of this virus remains. We have developed a “reopening plan” for SFA and are ensuring we have the proper protocols in place to resume operations as safely as possible – with the information we know thus far. It is our sincere hope to welcome students as scheduled in the fall. However, we are making contingency plans for a variety of scenarios. We will be working with many of you over the summer to finalize these plans.
As explained in my previous memo and throughout the recent Zoom town halls, COVID-19 has resulted in tremendous revenue losses and significant additional costs. This memo will provide a summary of the fiscal year 2020 budget (FY20) actuals and serve to give our best projections for the fiscal year 2021 (FY21).
Here is a recap of FY20:
We experienced an academic year enrollment decline (approximately 17,680 credit hours through summer I) that resulted in a net revenue decrease of approximately $3.8 million, which required a corresponding $3.8 million reduction in expenditures. Reductions by division were:
- Academic Affairs: $2,285,496
- Advancement: $121,581
- Athletics: $441,190
- Board of Regents: $30,364
- Enrollment Management: $102,095
- Finance and Administration: $460,796
- ITS: $199,465
- President: $21,780
- University Affairs: $130,536
- Total: $3,793,303
In addition, the University Affairs budget was reduced by $2,062,362 in housing and meal plan revenue;
Based on the Governor’s directive to reduce state-appropriated general revenue by $3.265 million during the current 2020-21 biennium, we reduced state-appropriated general revenue by $1.63 million during FY20; the remaining $1.63 million will be reduced during FY21;
As a result of COVID-19, we refunded approximately $9.1 million to students for housing, meals, recreation center, and student center payments in spring 2020;
We eliminated travel, enacted vacation furloughs for staff members, minimized discretionary expenditures, and swept certain FY20 funds to address revenue shortfalls;
We received CARES Act funding of slightly over $10.5 million. Of this, $5.2 million was legislatively mandated to be awarded to students as emergency aid; the remaining $5.2 million is divided as follows: $2.6 million allocated to instructional classroom technology upgrades and $2.6 million allocated to FY21 budget support;
We received additional federal funding from the Strengthening Institutional Programs component of the CARES Act in the amount of $513,425, which was allocated to FY21 budget support (resulting in total FY21 federal budget support of over $3.1 million).
Even though we anticipate having students back on campus in the fall, we face a financially challenging FY21. Many in the higher education sector are estimating a 10 to 20% loss in revenue due to declining/delayed enrollments as a result of families experiencing unemployment, increased financial need by our students, and a volatile economic environment. Simultaneously, we will experience increased costs, and therefore significant financial pressure, as a result of the pandemic.
The following will be considered when planning the FY21 budget:
- Use FY20 revenue total as the base line;
- Due to enrollment concerns, decrease projected revenue by approximately $9.9 million - an anticipated 5% revenue shortfall;
- Reduce state appropriations by an additional $1.63 million, to complete the 2020-21 biennial reduction of $3.265 million as directed by the Governor’s Office (see above); and
- Plan for increases in required expenditures of approximately $3.5 million including retiree insurance, general counsel support, essential software, adjunct faculty budgets, and upfront funding for summer school.
As you can see, this results in a decreased revenue projection of approximately $15 million as compared to FY20. A budget cut of this magnitude would be devastating. Therefore, we looked at all possible ways to close this $15 million budget gap in order to minimize campus disruption, to the extent possible. We also looked to all possible funding pools to close the gap.
As with most organizations, our largest expenditure is payroll, and our primary goal is to avoid layoffs to the extent possible. To develop a balanced budget, we must reduce institutional expenses. The options available include:
- Eliminate vacant positions that have not been contracted or committed, or produce equivalent savings to total more than $6.6 million;
- Implement a firm hiring freeze;
- Greatly reduce travel expenditures;
- Offer a voluntary separation incentive program (details will be forthcoming);
- Mandate a required FY21 12-day vacation furlough for staff employees, totaling approximately $1.44 million (details will be forthcoming); and
- Reduce additional operational expenses
As a result, we will be utilizing the following fund sources to reduce the projected revenue shortfall:
FY21 Projected Revenue Shortfall
|CARES Act Funding||$3,100,000|
|Elimination of Vacant Positions||$6,600,000|
|Institutional Travel Reduction||$1,000,000|
|Mandated 12-Day FY21 Vacation Furlough*||$1,440,000|
|Transition to LEAP Program||$200,000|
|Additional operating reductions||$460,000|
|Total Funds Toward $15M Deficit||$12,800,000|
|New Net Deficit||$2,200,000|
*More information will be forthcoming about the 12-day vacation furlough for FY21
All divisions within the university are participating in the $2.2 million revenue reduction with budgeted expenditure cuts. The budget reductions are based on each division’s budgetary share and will be allocated in rounded values as follows:
|Finance and Administration||$267,000|
|Information Technology Services||$116,000|
|Board of Regents||$2,000|
|Approximate Rounded Total||$2,200,000|
*Pledged Auxiliary funds are not included in the budgetary shares above. University Affairs has also reduced an additional 10%, approximately $6.3 million, from its divisional budgets.
It should be noted, if our revenue shortfall is greater than planned or if the governor’s office requests another biennial budget reduction, additional expenditure reductions will be necessary.
As many of you know, the decreased state tax revenue, COVID-19 costs and oil prices have had a profound effect on the Texas budget. As a result, the 2022-2023 biennial budget could see additional cuts of 10 to 20%. These levels of cuts would make it difficult to protect jobs and earnings. The decisions, efficiencies and savings we create now will help alleviate the severity of any future cuts. We will be working on additional plans for cost-cutting measures that will, to the extent possible, protect teaching and learning and minimize impact on current employees’ jobs and earnings.
Funding for the current construction projects at William R. Johnson Coliseum and the Griffith Fine Arts Building comes from a 2019 bond issue, and the proceeds must be used to pay the debt service on the respective projects. These funds, by state statute, cannot be used for salaries, operating expenses, etc. Departments and offices within the respective units have been relocated as necessary to complete the projects. Based on the bond issuance, proceeds funding, and architectural design and construction activity, it is financially prudent to complete the work on projects that are underway.
It is agonizing to share this information at a time when so many of you are already experiencing personal stress. I thank each of you for your resilience and understanding and encourage you to reach out to me if you have questions or just want to talk. We will make it through this and, working together, I know SFA will survive these challenging times and emerge as an even stronger university as a result – we will be the STAR of the Lone Star State!
Scott A. Gordon
Reminder: The Cabinet will be holding Zoom Town Halls 7/8-7/10 at 3pm each day. You will be receiving email invitations very soon.