University addresses budget challenge06/19/2013
The Board of Trustees approved the Fiscal Year 2013-2014 budget proposal recommended by President Luis Proenza and presented by Chief Financial Officer David Cummins during its public meeting on June 19, 2013. The budget planning process that has taken place over the last several months addressed a projected budget shortfall totaling nearly $30 million, allowing CFO Cummins to present a balanced FY14 budget.
This budget is based on both flat state revenues and flat student enrollment. The FY14-15 biennial state budget remains under consideration by the legislature and should be finalized by June 30. Actual enrollment will not be known until later in the fall semester.
The following highlights help to explain how the $379.6 million budget was achieved through a combination of reduced spending across all campus units and colleges, staffing reductions, controlled compensation, increased tuition and fees, and an increase in student support through scholarships:
- Tuition/fee increase of 2 percent for undergraduate and graduate students at The University of Akron. Tuition remains the largest revenue source for the University: the 2 percent increase generates about $3.5 million in revenue.
- Tuition at Wayne College is frozen at the current rate. Tuition for associate programs at Summit College is frozen at the current rate. Each of these actions is intended to move the cost structure of associate degree programs and degrees to be more in line with costs at community colleges.
- The budget includes $48.7 million in scholarships, a 5.5 percent increase over FY13, to support student academic success.
- The largest component of the budget is personnel and compensation, accounting for nearly 60 percent of expenditures. The FY14 budget projects no salary increases. Increased costs associated with benefits are offset by savings in group insurance management.
- Staffing reductions include the elimination of about 100 positions, more than half are already vacant. Many of the other staff reductions come from attrition and retirement. Part-time and summer faculty expenditures will be less as the result of reduced enrollment and changes in teaching schedules.
- The Achieving Distinction program that invests in innovative research and program development will continue to move forward with $1 million budgeted for FY 2014. However, $3 million in previously anticipated investment for the program will not occur at this point in time.
- Technology, library and career advantage fees (TLC), which were previously assessed during sophomore, junior and senior years, will be assessed during freshman, sophomore and junior years. The change in timing more accurately reflects usage of these services, and helps students anticipate expenses through their college career.
- The FY14 budget is based on an average occupancy rate of 90.3 percent in residence housing. We have reconfigured housing options and dining plans to respond to student demand and preference. Quaker Square is now fully dedicated to student housing; Grant and Gallucci Halls will be off-line in FY14 as we determine options for the most appropriate usage.
CFO Cummins called the development of the FY14 budget “exceptionally challenging,” given limited resources. Cummins noted that Ohio remains one of the lowest-ranked states in the nation (46th out of 50) in total state appropriations per student for higher education. He cautioned that the budget proposal should be considered “interim or continuing” as the University evaluates ongoing enrollment reports and their impact on revenue projections.
Cummins said the budget was developed with an assumption of flat enrollment, but could absorb a 2-3 percent decline in enrollment due in part to a $4 million enrollment reserve set aside to adjust to enrollment fluctuations. The leadership team is working on a contingency budget—with associated spending reductions—in anticipation of any further decline in enrollment.
Both Moody’s and Fitch services recently issued reports reaffirming strong bond ratings (A1 and AA- respectively) and stable outlook for the University, noting historically strong operating performance. Both reports acknowledged the budgetary challenges posed by declining state support and dependence on enrollment.
Change in enrollment strategy affects budget
Worth noting: recent enrollment declines can be traced to intentional changes in enrollment strategy to admit academically-prepared students who are more likely to succeed in a four-year university program, and direct less-prepared students to community college settings where they can develop and improve their chances of academic success at a lower cost and eventually transfer to the university when ready. This publicly announced strategy had an impact on both applications and admissions for 2013 as well as 2014.
“Throughout this budget planning process, and going forward, our focus remains our students’ success,” says President Proenza. “We must provide an affordable education and an extraordinary Akron Experience that supports our students year after year so that they graduate with the skills and knowledge they need to succeed in the new economy.”