Budget update: Jan. 27, 2021

January 27, 2021

— by Dan White, chancellor

Across the university we continue to work through the FY21 budget and prepare for FY22. FY22 will mark the third and final year of the compact agreement that the Board of Regents signed with Gov. Dunleavy. ��Ϻ��Ƶ’s FY22 budget plans were set in motion a year ago, then approved by the BOR in September 2020 and then submitted to the governor in December 2020.

As part of the compact agreement, ��Ϻ��Ƶ’s state general fund budget reduction shares amounted to $12.5 million, $12.3 million and $9.9 million for FY20, FY21 and FY22 respectively, for a total of $34.7 million over the three-year period. Since the budget did not get settled until midway through the first year of the compact, some reductions from FY20 were bridged to FY21 and FY22.

Since the start of the compact, ��Ϻ��Ƶ’s budget has been impacted by a number of challenges and opportunities, and some additional changes are in the works. In FY21, we refinanced debt ($2.9 million savings) and applied reductions to central facilities maintenance ($1.5 million savings) for a total reduction of $4.4 million. This left $12.2 million to be addressed in FY22 through further general fund reductions and new revenues.

COVID-19, of course, added to the challenges, but also opportunities. While revenues were lost and some costs higher, we saw more interest in our eCampus programs from outside ��Ϻ��Ƶ as our outstanding academic programs offered through eCampus drew in new students. This had a significant impact on new enrollment at the Troth Yeddha’ campus. In the end, units appear to be on target to meet reductions, and some areas of new revenues have been realized.

To meet the FY22 target of $9.9 million plus the remaining $2.3 million balance from previous years, we strive to generate roughly $3 million in new revenues or vertical reductions followed by a 10% reduction to each of the areas overseen by the vice chancellors.

In the FY22 guidance, the vice chancellors are afforded the discretion to apply reductions to their individual units accordingly, or to use a mix of across-the-board or vertical reductions. To meet the $3 million in new revenues or vertical reductions for ��Ϻ��Ƶ, we are working on a power purchase agreement for excess power from our new heat and power plant, monetization of land and facility assets, and new initiatives aimed at increasing enrollment.

Additionally, we have several committees working on ideas around reductions and revenue generation. Active groups are the Expedited Administrative Review Committee, Budget Options Task Force, the Child Care and Early Childhood Development Services Task Force, Strategic Planning Committee, Strategic Enrollment Planning Steering Committee, and the Tuition and Fee Committee. With so many of our faculty and staff committed to generating new ideas and revising earlier strategies, I am looking forward to reviewing final reports and considering the options presented.

One revenue change we are certain of is ��Ϻ��Ƶ’s approved differentiated tuition structure for FY22. Starting in fall 2021, the Board of Regents approved differentiated tuition that will increase upper-division tuition by 2.5% and graduate-level tuition by 5%, holding lower-division tuition flat. This is an important step to keep Community and Technical College tuition rates affordable, maintain academic excellence, and bring ��Ϻ��Ƶ’s research university tuition closer to our peers. We will continue to shape our tuition approach in future years through guidance from the Strategic Planning Committee, Strategic Enrollment Planning Steering Committee, and the Tuition and Fee Committee.

Last week I sent out a note in collaboration with the UAA and UAS chancellors seeking a joint, positive message. President Pitney will be working on three important capital budget items in Juneau that could have a significant impact on our FY22 budget picture. They are debt service relief for ��Ϻ��Ƶ, deferred maintenance funds and a general obligation bond. Although ��Ϻ��Ƶ pays about $19 million out of our operating budget each year for debt service (significantly constraining our ability to reduce budgets), roughly $7 million per year was originally intended to be paid by the Legislature.

At the time of construction of the heat and power plant, $7 million was added to our base budget to pay this annual cost. However, that same amount and then some has been subsequently cut from our budget. Restoring just this $7 million for a period of time through the capital budget would, in the president’s perspective, be consistent with the compact and meet the original intent of the Legislature. Although we are not budgeting for it at this time, it would have a significant impact on our FY22 plans and would allow ��Ϻ��Ƶ to continue to focus on revenue generating and enrollment efforts. Furthermore, the deferred maintenance and general obligation bond would allow ��Ϻ��Ƶ to make many repairs and refurbishments on campus that would reduce operating costs. Having a positive message with our counterparts in Anchorage and Juneau will support President Pitney’s efforts.

To wrap up, in FY22 I continue my commitment to preserving programs and people to the greatest extent possible while finding savings from reducing our footprint, utility costs and deferred maintenance costs. On the revenue side, it is clear that our steadfast focus on enrollment growth is a key part of our effort to strengthen ��Ϻ��Ƶ’s financial resilience, maintain and grow our academic and research vitality, meet our strategic goals, refresh and renew our facilities, and embrace our future.

Thank you for choosing ��Ϻ��Ƶ.

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