The Friday Letter Archive

TO:  University of Idaho Faculty and Staff
FROM:  Scott Green, President
DATE:  Oct. 30, 2019
SUBJECT:  Budget and Financial Planning Update

When I came to the University of Idaho in July as the 19th president, I pledged to our students, faculty, staff, alumni, friends and supporters that I would bring my passion for my alma mater and my experience in business and shared governance to support the work you do every day. I also said collaboration, transparency and informed decision-making are my guiding principles. It is time to put those principles into practice under the most difficult of circumstances.

The university is facing significant budget challenges that must be addressed in a thoughtful, deliberate way to most effectively fulfill our land-grant mission of teaching, discovery and service. We must elevate our institution to be the very best version it can be, and to do that, we must work together to improve our financial position. None of you put us here, but nevertheless we must work together collaboratively to put our university back on solid financial footing. That collaboration starts with communication.

We will communicate using a variety of methods over the next few months as we develop and implement strategies to address our budget challenges. We will be as transparent as possible. I realize that sharing more information may cause stress at times. With that said, it is university leadership’s job to provide you with the most complete and up-to-date information available and to provide reasonable and effective solutions to fiscal challenges.

I will provide periodic written and video communications to keep you informed. College and unit-specific communications will be coming as well as communications from members of the leadership team on other budget-related topics at a more local level.

We will host an open forum next week on the Moscow campus (also via Zoom, separate announcement to come) to discuss these issues as a community and I plan to meet with colleges and units in the coming months to talk about the budget challenges and plans to address them.

The Budget Challenges Defined

The university has two primary financial goals:

1. Balance revenue and expenses
2. Rebuild and maintain adequate reserve funds

The bottom line is this: we have been living beyond our means, and we don’t have enough resources in reserve. As you know from managing your own personal finances, if you’ve got more money going out than is coming in, you’ve got two choices: increase revenue or reduce expenses. The same is true for U of I. To increase revenue, we need to either increase the amount of money we get from state appropriations and taxpayer dollars (49% of our general education budget), or increase what we bring in from tuition (45% of our general education budget). We are not expecting increases in either of these areas so our only other option is to reduce expenses.

Balancing Revenue and Expenses

I recognize before my arrival at the university, you went through budget cuts. But these cuts did not fully address the coming deficits and additional, new issues have emerged that required our attention.

During FY19, the university community completed a $5 million one-time reduction across all units of the institution. In addition to these one-time cuts, we implemented base budget reductions for FY20 to start the process of bringing our expense budget into alignment with our revenues annually.

You may wonder about whether funding for projects like the ICCU Arena or the CAFE initiative adds to our budget challenges. These are capital projects and are financed by gifts, funding from the State of Idaho and student fees, not through operations or budget cuts. Our budget shortfall issues would still exist even if we weren’t moving forward with these projects.

Rebuilding and Maintaining Reserve Funds

In FY18, several factors diminished the university’s net position (our reserves) including changes in accounting standards ($33 million impact) and operating losses ($21 million impact). We also recognized about a $19 million shortfall in FY19. The university used its reserves to cover its expenses, which is not a sustainable way to operate. In fact, we not only needed to leave those balances untouched, we needed to increase them.

Last spring, university leadership including deans, vice presidents, Faculty Senate, Staff Council and ASUI began considering ways to recover cash and keep our reserve balance from falling. This group agreed upon a distributed and collaborative approach, rather than a centralized approach, to stop further erosion of our reserve balance.

What Cost-Cutting Have We Done So Far in FY20?

As mentioned above, the university completed $5 million in budget cuts for FY19 before I came on board as president. When I started in July, we anticipated an additional operating shortfall of $14 million for FY20. This shortfall adds to the financial challenges we have seen in seven of the past 10 years in the general education fund. We had work to do.

To reduce costs and continue to bring expenses into alignment with revenues, each vice president was asked to make one-time reductions in their general education budgets effective July 1, 2019. These budget reductions were strategically passed down to the colleges and units with the expectation that they manage to those targets. This approach allowed flexibility in how reductions are met.

In addition, to slow and reverse a further decrease in our reserve balances, unrestricted fund types are also being monitored and spending controlled with a goal of maintaining existing cash balances (i.e. balances on June 30, 2020, must be equal to or greater than cash balances on July 1, 2019).

In July, I began meeting monthly with all who report directly to me — including vice presidents, other leaders as well as the dean of each college — to review the budget plans each college and unit diligently compiled. I am proud that, almost without exception, our team put the interests of the university first. We are now almost four months into implementing these plans, we are on target, and I appreciate the commitment our community has made to meet this fiscal year’s budgetary goals while also maintaining the quality education, outreach and research for which we are known. This is not easy work and I am grateful to our community for stepping up and making the tough but necessary decisions that are keeping us on the right path.

FY21 and Beyond

The $14 million budget reductions we put in place for FY20 will become permanent base budget cuts going forward. In addition, the student enrollment mix and current enrollment trends suggest that tuition will likely decline another $8 million over the next two years. With this in mind, we estimate the budget shortfall will total $22 million by FY22. This figure includes the $14 million in budget reductions already in process plus $8 million in anticipated additional cuts. We are using this estimate to inform our long-term cost reduction plan.

Using the same approach we took last spring to implement the $14 million budget reduction, the vice presidents, deans and unit leads will guide decision-making regarding how to meet the additional $8 million budget adjustment in a collaborative and systemic way. Consistent with our commitment to shared governance, Provost John Wiencek is working collaboratively with Faculty Senate and Staff Council leadership to develop a strategy to reduce expenditures in Academic Affairs, Student Affairs, Strategic Enrollment Management, etc. This strategy will likely include forming task forces/ad hoc committees as well as reinstituting the Institutional Planning and Effectiveness Committee to guide the work.

I will add that correcting our current course will require strategic investment in some areas of the university to grow enrollment and continue to build brand equity. We will invest in enrollment management and recruitment, communications and marketing and advancement/development because we must. Increasing revenue is in large part dependent upon how well we market to and recruit new students and how well we maintain strong and meaningful relationships with our alumni, donors and friends.

Next Steps

We will continue working closely with university leadership and campus shared governance groups on the details of the steps to be implemented as the budget reduction plans are implemented across colleges and units. While this is a difficult thing to communicate to our university community, in order to correct our current course and reduce expenses, we are expecting, among other things, to make reductions in our workforce. Following are some of the strategies we may consider in order to reduce costs. This list is by no means comprehensive and is not in order of priority. It is subject to change and colleges and units may employ different strategies to reach their goals:

• Academic program eliminations
• Centralizing services across the university
• Contract non-renewals and layoffs
• Early retirement and voluntary separation incentives
• Not filling vacant positions
• Organizational restructuring
• Outsourcing/contracting some services
• Salary reductions and furloughs

Working Group Update

So far, the university’s focus has been on resourcing our activities in the short-term while working on a sustainable plan for balancing our revenue and expenses. These discussions have not been easy, but are vital to achieving the goals we have set for ourselves. In order to meet our mission, we must meet the expectations and needs of our students, our communities and our state.

As the university community works together to reduce costs and hold our reserves steady, we have convened a Sustainable Financial Model Working Group that will work together using their collective expertise, experience and research to develop a sustainable financial model for the university. This working group is broad-based and includes representatives from faculty, staff, students and content experts outside the university. This group met for the first time on Oct. 4 and will meet again Nov. 12. The group will focus on high level financial modeling options that will build in the ability to invest in strategic priorities and initiatives. While the details are yet to be developed, the goal is to create a model that aligns budgets with enrollment. The right model will benefit the University of Idaho long term and ensure its financial health. I expect this group to report its conclusions and recommendations in early 2020 with implementation of a sustainable financial model to follow.

Our Challenges Don’t Define Us. How We Meet Them Does.

Every problem has a solution. Our financial position must be improved for the long term and it will take discipline, strength and persistence to do that. We did not get here overnight so it will take some time to correct our course and I am confident we will be successful. We have big goals for the University of Idaho so we simply must take firm action now to deliver on our top priorities:

1. Support student success by striving to be an innovative, outcomes-oriented institution for our students. We must bolster how we grow our enrollment, enhance our retention efforts, improve our graduation rates, and ensure career success. We must deliver the breakthrough experiences our students deserve and our state demands.
2. Ensure excellence across our research, scholarship and creative activity. We are Idaho’s premier research university. We will continue to connect research to the student experience, and we’ll continue to do work that makes a difference in our world.
3. Champion the University of Idaho. We have incredible stories to tell. Lives changed. Discoveries made. Impact generated for communities, organizations, and industries. I am proud of this university’s excellence, and will continue to ensure our story is told in the media, in our communities, and in the corridors of power in this state.

We must develop a spending reduction plan that will allow us to provide the resources we need to ensure that we are delivering an exceptional educational experience to all of our students and driving our research and outreach programs forward. At times, the path we are on may leave you feeling discouraged. But please remember we are putting our fiscal house in order so that we can fulfill our mission and continue the great work you do every day.

The challenges we face do not define who we are. But the way we show up and manage through them does. We have much to be optimistic about. We are making progress in our enrollment management and outreach programming. Attendance at our recruitment events is increasing. Our FY20 marketing efforts are vibrant and gaining traction. And our commitment to our students is as strong as ever. The important, impactful work that happens every day on our Moscow campus and at our centers, extension and research sites across the state, matters and makes a difference. We have much to be proud of. Together we will work through this challenge and come out braver and bolder for our efforts.

president@uidaho.edu
uidaho.edu/president