UConn has absorbed more than $35 million in reductions at the Storrs and regional campuses since its budget went into effect in July and expects to realize another $13 million throughout the fiscal year, leaving about $28 million that the University will request as a one-time COVID bridge allocation from the state.
UConn finance officials outlined the newest financial picture Wednesday in a presentation to the UConn Board of Trustees, explaining ways in which the current $76 million deficit is being addressed and what might be ahead in the future.
Trustees are receiving quarterly updates as part of their vote in June to adopt the FY21 temporary spending plans for UConn Storrs/regionals and UConn Health.
With major uncertainty last spring about fall enrollment trends, UConn adopted the budget for Storrs and regional campuses in June with the expectation that its deficit could range from $47 million to $129 million by fall or winter.
Those estimates varied depending on how many students who would return for on-campus living; whether international and out-of-state students would be willing and/or able to enroll given the travel and health uncertainties; and how much UConn would have to pay in state fringe benefit costs, which the University doesn’t control.
In the end, with the impact of all of those factors now known, UConn faces a projected deficit of $76 million for FY21, of which it hopes about $28 million could be covered by a one-time COVID bridge allocation from the state legislature.
“We want to make sure we’re putting our number on the table, as we know that the state is going to have to work through similar situations with all state agencies this fiscal year,” said Scott Jordan, UConn’s chief financial officer and executive vice president for administration.
With the deficit being $76 million and the state funding request being $28 million, UConn is absorbing the difference through sweeping reductions across all segments of University operations.
Jordan said Wednesday that to prepare for the possibility that the state assistance is not granted, all UConn departments will soon be asked to identify additional areas where that $28 million in savings could be realized through the possibility of using money in their reserve funds, personnel reductions, or other methods.
“We are cognizant that a lot can happen between now and the end of the fiscal year, but we are committed to preparing and implementing a plan that assumes we will need to do this ourselves. We are hopeful for state help, but the clock is ticking for the fiscal year,” Jordan said.
“We know that we have already cut substantially over the past several years, and this $28 million additional round of cuts will cause pain at the University,” he added, noting that hiring and spending freezes also remain in place from the earlier rounds of reductions.
That $28 million could rise as high as $49 million if the pandemic worsens to a point at which UConn would have to close early and provide students with housing and dining refunds, as it did last spring. Jordan called that “the greatest risk to our budget.”
UConn has limited on-campus housing at its Storrs and Stamford residence halls to about 40 percent capacity, which has helped fight spread of the virus but also caused a significant loss of housing and dining revenue.
At the same time, however, there was good news: Expansion of online course offerings and the creation of innovative online partnerships to serve overseas students helped UConn avoid a feared enrollment dip, which would have been even more costly.
In June, UConn projected that enrollment could decline across all student groups due to the pandemic, ranging from a 5 percent drop in Connecticut students to about a 40 percent drop in international students. But with help from strategies developed by UConn Enrollment Planning & Management and UConn Global Affairs, enrollment fell only 4 percent for international students and increased 2 percent and 5 percent for in-state and out-of-state students, respectively.
For the first time, UConn was able to establish programs in which hundreds of its international students are taking a full load of courses while living on or near the campuses of two partner institutions: East China Normal University in Shanghai and the University of Nottingham’s campus in Ningbo, a few hours to the south.
In all, UConn’s fall 2020 enrollment headcount on the 10th day of classes – the point at which each year’s figures are locked in and made official – was 32,023 students, up from the fall 2019 figure of 31,687.
That included a 2 percent increase in undergraduates to a current total of 24,371. Growth was particularly strong at the regional campuses, especially among first-year students.
But despite the strong enrollment trends, other COVID-related financial factors such as the decreased revenue from room and board continue to make FY21 a difficult financial year. And in a worst-case scenario, if pandemic conditions worsen and the University must return to fully remote coursework as it did last spring, the deficit is estimated to rise to $109 million.
UConn also faces another significant financial hurdle unrelated to the pandemic: the annual state unfunded pension and retiree healthcare liability that is built into employee fringe benefit rates.
UConn pays a portion of these costs itself, with the state comptroller determining the rates. Those costs – projected at $31 million in FY21 – required UConn to make cuts even before the arrival of COVID-19.
Of the $76 million deficit for FY21, about $35 million has been mitigated through cuts and another $13 million will be achieved throughout the year based on the strategies already in place, leaving the $28 million deficit yet to address with state officials.
UConn plans to submit the request for the $28 million one-year COVID bridge to state officials in coming days, along with a request for relief from the 10 percent reduction that otherwise could be made in the amount it receives from its annual state block grant allocation.
That 10 percent decrease would cost $39.7 million — $21 million plus fringe costs – and lower state support per Connecticut student from $11,000 to $9,000. That would be particularly concerning given that the financial pictures of many UConn students and their families have changed during the pandemic, creating additional demand for financial aid.
As part of UConn’s mitigation measures, it has already absorbed $25 million in department-level cuts and savings, about $9 million in capital funding reallocations, and almost $525,000 through management furlough days.
Throughout the rest of the year, UConn expects to absorb another $10 million in department-level savings as part of its mitigation plan, along with almost $3.5 million in payroll savings through management furlough days.
Under those furloughs, some management-level employees are required to take 12 unpaid days over the coming fiscal year, or the equivalent of a 5 percent pay cut; while President Katsouleas and other upper-level administrators must take 24 unpaid days, or a 10 percent pay cut. UConn Athletics Director David Benedict has gone a step further, taking a voluntary 15 percent pay reduction.
At UConn Health, the reduction of net patient revenue has been the main driver in its FY21 deficit, which is now estimated at $114.9 million. Of that, about $53.8 million represents unfunded legacy costs. The Governor’s proposed FY21 budget includes $33.2 million to help offset some of those pension legacy costs.
Last spring, UConn Health officials estimated the FY21 deficit could fall between about $115 million and $188 million, depending on patient revenue, unfunded legacy costs and other factors, including whether pandemic-related hospitalizations would increase again and require delays again in elective procedures.
UConn Health expects to request $76.9 million in state assistance. It is also addressing the deficit through management furloughs that will save $2 million, deferring about $5 million in capital costs, reducing expenses by about $15 million through a Financial Improvement Plan (FIP), and through the receipt last summer of $10 million in federal assistance.
Andrew Agwunobi, UConn Health chief executive officer and executive vice president for health affairs, said they have used a FIP each year for the last six years. It includes a matrix that accounts for revenue changes, expenses, and other variables that can be examined to help find savings or increase income.
Agwunobi said they have achieved $10 million to $20 million in financial improvements each year since starting the FIP process, and that clinical practitioners this year have been especially dedicated to generating revenue through extending office hours, increasing the availability of some procedures, and other actions.
UConn Health has lost more than $60 million in COVID-related expenses, including a period last spring when it was losing more than $1 million per day while treating coronavirus patients and halting all other surgeries and non-urgent procedures. Had the pandemic not occurred, UConn Health was on track to end FY20 about $7 million in the black.