My purpose in writing you today is to explain a campus-wide challenge and to outline solutions that will involve the entire campus community. Our primary challenge is that declines in enrollment and credit hour production have led to revenue shortfalls for both the previous and current biennia. These shortfalls have been analyzed and we will proceed with processes that are least invasive of departmental funds as follows.
UNK had a revenue shortfall of $988K at the close of FY 2014-15. It was necessary to balance our accounts by July 1st, which required an immediate infusion of funds from available resources. Short-term, we used accumulated cash from non-residential tuition and POE accounts. We are currently identifying and allocating funds from non-academic areas to partially replenish these accounts with a goal of more equitably distributing mitigation of the shortfall across campus.
FY 2015-16 and 2016-17
In both years of the current biennium we anticipate shortfalls of $1.16M. This amount includes $989K in projected revenue shortfall due to declines in enrollment/credit hour production plus $177K — UNK’s portion of the system-wide shortfall. It is important to realize that this situation does not represent a crisis. However, with lower than anticipated enrollment and credit hour production, the gap between revenue and budgeted allocations may likely increase. In short, in the coming weeks and months our campus must immediately identify ways to reduce planned expenditures by $1.16M in the current fiscal year, and we must reduce our base budget permanently by that amount starting in the next fiscal year.
While not overstating the magnitude of our task, I think it is fair to say that UNK, through several cycles of reductions of the past many years, is operating lean. We are already very efficient and cost-effective given our current mission. On one hand, in order to achieve the present reductions we must reexamine both structure and operations in all functional areas. On the other, resources devoted to core functions are so thin that disturbances in investments can have possible adverse impacts. Our challenge is to proceed together, while cautiously, with a strong concept of institutional mission. Our guiding principle will be that University leaders will not compromise quality in core, mission-essential functions, while continuing to invest in strategic priorities that advance our mission.
For FY 2015-16, reductions have been assigned by percentage across campus and we have asked deans and major unit leaders to identify “temporary” reductions. Three areas have been necessarily exempted from reductions including need-based aid, benefits and utilities. To provide departments with flexibility we have: (1) allowed departments to carry-forward accumulated cash balances from last year, (2) infused a one-time allocation of $500K to academic units hit hardest at the close of FY 2014-15, and (3) allocated an additional $400K from funding for special projects, which will unfortunately delay construction of a new Child Development Center.
For FY 2016-17, as we have done in the past, we have assigned reductions by percentage across campus and asked deans and major unit leaders to identify permanent base reductions. Plans are to be submitted by November 2nd and will then be shared with the campus community for review and feedback. Once the campus input has been evaluated and finalized the reductions will be implemented in the second year of the biennium.
For both temporary and permanent reduction planning, we will initially rely on our administrative chain to identify, evaluate, and bring forward proposals affecting units and divisions. We need to hear from our expert perspectives, first, and deans and directors will observe all coordination and consultation requirements in obtaining that advice. This process is now underway. The Cabinet will assemble a comprehensive, aggregate reduction/restructuring package and solicit campus-wide discussions. After considering the advice of all constituencies, the Cabinet will make the necessary decisions/referrals and issue a public explanation. We will, of course, comply with obligations of shared governance and with the provisions of our contract with the UNKEA.
Budget reductions are challenging and surely disruptive to immediate plans. I am confident we can work together to make necessary short-term budget reductions and establish a framework for long-term stability. It is advantageous that strategic planning, and specifically the development of implementation plans around our five priority goals, is currently underway. Everyone on campus, and our collective work, should be guided by two overarching realities. First, we will necessarily ask units across campus to review all programs and activities to identify potential efficiencies. Second, we will seek to enhance retention and enrollment — by capitalizing on our strengths we can grow new enrollment in areas with capacity, that align with institutional strengths, and that meet emerging and ongoing regional needs.
We have great momentum and much to be proud of here at UNK. I look forward to your engagement and campus-wide collaboration in this important work.
Douglas A. Kristensen, J.D.