I send this message to provide you with some additional information about our University’s finances and how we are developing our operating budget for next fiscal year, which begins on July 1, 2020. As you know, we face unprecedented uncertainty in many respects, including our budget and finances. Fortunately, we face these challenges on a strong foundation of fiscal prudence and long-term planning.
As we approach the end of the current fiscal year, we presently project a modest positive margin in our operating budget. This likely outcome is primarily the product of substantial cost savings in several operating categories, including supplies, utilities, and travel expenses. We are also realizing substantial savings in salaries and benefits by having delayed or canceled some searches for new personnel. Assuming that we conclude this year with some additional one-time savings, we will have some resources to invest in additional supplies that we will need to ensure the safety of our campus this Summer and Fall.
We are also fortunate that our long-term financial position is sound. Over many years, we have accumulated adequate financial reserves that have enabled us to maintain our facilities and to save for emergencies. Well, it’s clear that this pandemic is an extraordinary event, so we may need to draw upon these financial resources over the next year or two to help us weather the storm. We are also securing a line of credit, which will provide us with some additional financial resources on a temporary basis if the fiscal impact on our University is even more pronounced than we presently predict.
But there are two significant threats to our operating budget: the potential for a reduction in tuition revenue if our student enrollment declines; and the potential for a reduction in our state appropriation for next fiscal year.
We are closely monitoring our enrollment, and the current statistics are modestly encouraging.
- Our Summer 2020 enrollment has held up reasonably well, notwithstanding the challenges that our students and their families are facing during these difficult times. I am grateful to our faculty who, with the support of our staff, transitioned nearly all of our courses online. I am also grateful to our colleagues in Marketing and Communications, who helped to encourage students to take advantage of these educational opportunities.
- Our returning students, both undergraduate and graduate, are also registering for Fall 2020 courses at comparable levels to last year. While that information is encouraging, we know that our advisors must continue to engage and inform these students to ensure that they are able to enroll in a few months. In the next few weeks, we will distribute 50% of our CARES Act funding—more than $7 million—to eligible students. I anticipate that these funds, which will reimburse our students for the additional expenses that they incurred this past semester because of the transition to remote learning, will relieve some of the financial burden that our students are presently carrying.
- One area of concern, though, is freshman enrollment. The number of admitted applicants who have confirmed their intent to enroll in Fall 2020 is trailing our record-setting Fall 2019 class. But this year is an extraordinary one. Because of the unprecedented challenges that are affecting high school seniors and their families, we have delayed the usual confirmation deadline from May 1 to June 1, so we will not have a good projection of freshman enrollment for at least a few more weeks. Until then, and throughout the Summer, our team will continue to engage and inform these prospective students and their families.
We are also actively monitoring the state’s fiscal condition. Last Friday, as you may have heard, the state budget agency reported that April tax collections were substantially less than had been budgeted. Much of that deficit is probably due to the delayed filing date for individual and corporate income tax returns. Nevertheless, the rapid and significant decline in economic activity in Indiana may mean that our state appropriation will be reduced for next fiscal year.
While we anticipate receiving some funds from the CARES Act that we can use for institutional purposes—approximately $7.6 million—we will not have much flexibility to use those financial resources to support next year’s operating budget. Under the preliminary guidance that we have received from the United States Department of Education, we can only use those funds for expenses that are related to the COVID-19 pandemic. For example, we may be able to reimburse ourselves for some of the housing and dining credits and refunds we provided to our students, and we may be able to use the federal funds to purchase equipment and services needed to facilitate remote learning.
On a related topic, the TRUST working group is developing recommendations for precautions and protocols that we must implement over the next few weeks in order to ensure the safety of our students, faculty, staff, and campus visitors. Undoubtedly those safety measures will require us to incur some unusual and substantial costs for supplies and equipment. We must incorporate those extraordinary expenses into our operating budget for next year.
As we continue to monitor the risks to our revenues and contemplate some additional, extraordinary expenses, the provost and the other vice presidents are finalizing their proposed budget plans based on several different expense reduction scenarios. By the first week of June, we will select the most likely scenario upon which to build our University’s operating budget for next year. We will present our proposed plan to the trustees for their consideration and approval at a meeting of the Board on June 19.
In the meantime, we will meet with the members of the Support Unit Allocation Committee, which consists of two academic deans, several other administrators, and a representative from the Faculty Council, the Staff Council, and the University Senate. During this meeting, the committee will have the opportunity to review and comment on the draft budget plan. As we prepare for the meeting of the Board of Trustees, we will also meet with the leadership of the University Senate to review our proposed budget plan. I value their input and guidance in these challenging times.
At the June meeting of the Board of Trustees, in addition to asking the Board to approve the operating budget for next fiscal year, we will also recommend that the Board expand the existing phased retirement plan. The current program exists only for full-time faculty. In June, we will recommend that the Board provide eligible professional employees and staff employees with the same opportunity to reduce their service while phasing into retirement over a period of a few years. This phased retirement program, if approved by the Board, is a voluntary arrangement between an employee and our University. It will enable the institution to reduce some personnel expenses, while retaining the experience and expertise of our valuable employees.
We are also interested in working with other full-time employees who, although they are not yet eligible for phased retirement, may be interested in working a reduced schedule. If you are interested in agreeing to work fewer days or fewer hours per week, or working fewer months per year, please contact your supervisor to explore whether a permanent reduced work schedule is feasible for your position. I encourage the vice presidents to think creatively in evaluating these requests, which can reduce our personnel expenses and allow our employees to continue contributing to our mission in meaningful ways.
Finally, beginning July 1, 2020, our University will offer the leave sharing program that the Board approved in March. Under this program, eligible employees will be able to donate a portion of their accrued, but unused vacation days, sick days, or paid time off to other employees who need some additional paid leave because of a medical emergency. This voluntary program provides you with an opportunity to help a colleague who, after exhausting all of his or her available leave, might suffer a loss of income as a result of taking unpaid leave. Given that our Temporary Extraordinary Leave Plan will expire on June 30, I hope that you will join me, the members of the cabinet, and the academic deans in making contributions to this donated leave bank.
In conclusion, this new leave bank is another tangible manifestation of our commitment to our enduring values, which distinguish our exceptional University. One of those values is gratitude, which we define as both expressing our appreciation to others and demonstrating our appreciation through our actions. Even during this time of stress and anxiety, I hear expressions of gratitude every day. And I frequently observe—both personally and virtually—acts of service and sacrifice. We are faced with unprecedented uncertainty, but I have abiding hope in our capacity to fulfill our mission because of your unwavering commitment. And for that commitment, I am profoundly grateful to you.