Budget Reduction Framework Memo to APC

MEMORANDUM TO: Professor Kurt Geisinger, Chair Academic Planning Committee

FROM: Ronnie D. Green, Chancellor

DATE: August 20, 2020

SUBJECT: Budget Reduction Framework

Dear Chair Geisinger and Members of the Academic Planning Committee,

I’m writing to provide an overview of our budget planning process, including an account of the need to reduce our budget, the scope of the reduction, and the desired timeline for completing the review and consultation process and implementing the changes.

As I stated recently to our COVID-19 Budget Advisory Committee (CBAC), it is evident that the COVID-19 pandemic will have dramatic effects on our world and on our university community. These effects include the serious financial impact being felt locally, nationally, and globally. Over the past six months, the university has experienced significant short-term losses in revenue and increases in expenses. While the longer-term financial ramifications of this pandemic remain hard to predict with certainty, we anticipate that the impact of COVID-19 will create budgetary challenges for UNL in FY21 and into the next biennium (FY22, FY23).

As an institution, UNL is in a very strong position. We are, and will be, continuing to achieve across all our mission areas in ways that are inspiring and important. I truly believe that we will emerge from this period with a clear re-affirmation of our purpose and value as an institution. It is nonetheless important that we also plan in a thoughtful and responsive manner for the period ahead of us. The APC is an important partner in this planning process.

Need for and Scope of the Budget Reduction, System-wide and campus-level budget actions

On June 19, 2020, NU System President Ted Carter announced that, system-wide, NU would face a $43M state-aided budget shortfall over the next three fiscal years, due to the COVID-19 pandemic. To address this issue, a number of system-level decisions have been made.

These include:

• no salary increases in FY2021 for non-union campuses
• voluntary FTE reduction and furlough options
• the elimination of “NUCredits” for those earning more than $130,000 annually
• 10% funding cuts in the NU System Administration

The System-approved budget includes assumptions of:

• continued state funded in the second year of the current biennium and two percent increases in FY2022 and FY2023
• conservative enrollment projections, particularly with respect to international and non-resident enrollments
• salary increases of 1.5% and 3% in FY2022 and FY2023 for non-union campuses
• no tuition increases through FY2023 unless state funding changes
• funding for Nebraska Promise and Strategic Priorities
• modest increases in general operations and utilities in FY2022 and FY2023

Beyond these central actions, each of the campuses has been asked to develop and implement campus- specific “significant permanent cuts” in state-aided funding to address the projected funding shortfall. In his June 19, 2020 budget letter, which was disseminated to the NU community in conjunction with the University’s proposed 2020-21 operating budget, NU System President Carter outlined “significant permanent cuts” for each campus in the state-aided funds that include both state appropriations and tuition revenue. At UNL, our total annual budget is just under $1.3B, of which approximately $465M, or about 36%, is state-aided revenue. Within this larger budget, UNL is responsible for a 5.5%, or $25.8M, reduction in state-aided funds over the next three fiscal years. Since the university had an existing carryforward shortfall, described below, the total shortfall for UNL over the next three years is estimated at $38.2M, or 8.2% of UNL’s current $465M state-aided budget. This budget process will need to address both the pre-existing and projected budget shortfalls.

Of the three-year $38.2M shortfall discussed above, UNL is projected to have a $15.7M, or 3.4% deficit for FY2021. This percentage was apportioned to Vice Chancellor areas, with a slight variation based on where enrollment and net tuition revenue declines were historically manifested. Specifically, Academic Affairs was assigned a FY2021 reduction of $9.96M, due to lower than budgeted net tuition revenue and higher than budgeted remissions amounts in colleges reporting to the EVC over during the previous two fiscal years.

Campus Process

As NU worked to develop the 2020-21 budget, UNL also began the process of planning for these expected reductions. On April 28, 2020, Vice Chancellor Nunez and I issued a call to all senior administrators with budget authority to develop contingency plans for possible 5%, 7.5%, and 10% reductions. I also brought together the CBAC, charging them with reviewing university data and making recommendations for possible central/campus-wide budget actions. Further, in keeping with the recognition that senior leaders have high levels of knowledge and understanding of their units, programs, and the disciplines they serve, the Vice Chancellors consulted with college Deans and other senior academic administrators and unit-level budget directors to undertake scenario planning, in proportion to their state-aided funding levels. It was my expectation that this process reflect the shared values that define us as a community and align with the aspirations of the N2025 strategic plan. I also stressed that our system of shared governance would be essential as we move forward to identify and implement these budget reductions.

On July 1, 2020, once the system-level budget was approved, Vice Chancellor Nunez and I issued a budget reduction letter to the Vice Chancellors, assigning budget reduction targets across campus. In order to minimize the negative impact on our missions, this reduction will be spread over three fiscal years, cutting approximately $15.7M in FY2021, $8.8M in FY2022, and $13.7M in FY2023. Each major division (led by Vice Chancellors and the Chancellor) was given a target reduction to meet the overall campus goal. This schedule was shared with the campus at Town Hall meetings in July 2020 and with members of the Academic Planning Committee on July 20, 2020 and August 10, 2020:

The recommendations that I am bringing to the APC themselves emerged out of a significant and substantive multi-stage review and consultation process. While I have been impressed with the care and thought that the university’s vice chancellors brought to this difficult process, I would like to detail here, in particular, the department- and college-level processes undertaken by both of the academic vice chancellor areas (Academic Affairs and IANR). To meet the Academic Affairs target reductions of $22.06M (9.1% over three years), the eight academic colleges, the library, and the other research, outreach, and academic units that report up to the Office of the Executive Vice Chancellor were each allocated budget reduction targets in equal proportion to each unit’s existing state-aided funding levels. (The same level of reductions was also allocated to service and academic administrative units within the EVC Office.) The colleges were asked to develop recommendations for a 9.1% budget reduction, and they were each asked to do so in a manner that aligned with the N2025 plan, with their existing unit- level strategic plans, and through a consultative process that reflected a shared commitment to faculty governance. The colleges developed this process in keeping with their individual governance practices and established culture. The College of Engineering, for instance, developed its recommendations after a consultation process that involved two standing leadership committees, the Dean’s Office Executive Council and the College Leadership Committee, with additional input from the College’s External Advisory Board. The College of Business expanded their standing Executive Committee, by adding three additional faculty members, from different ranks, as well as two additional managerial and professional staff members, to gain a fuller perspective and wider range of expertise as they developed their recommendations. The College of Arts and Sciences developed its plan through input from each department chair and then consulted, on multiple occasions, with the College’s Budget Advisory Committee. Each of the Colleges were asked to ensure that their recommendations aligned with the university’s established core values, as articulated in the N150 and N2025 plans; a number of them were also quite explicit about establishing key criteria to inform the realization of those values: the College of Architecture, for instance, specified that their strategic plan “would guide reductions and redirections of budget to support our aspirations and initiatives.”

A similar, iterative process of consultation, input, and review informed the process established within IANR for the departments and academic programs within CASNR and the CEHS programs shared between Academic Affairs and IANR. Within IANR, proportional shared targets for state-funded reductions were shared with the Expanded IANR Leadership Team, which includes all 90 academic unit leaders. Leaders were expected to engage faculty and staff in their units with open discourse about how best to achieve reduction targets. Those recommendations were blended with those of the IANR Senior Leadership Team, resulting in the final recommendations.

As you know, the University is structured around and foundationally committed to the process of shared governance. This foundation reflects, in ways that are articulated within the Procedures to be Invoked for Significant Budget Reallocations and Reductions, a shared “recognition of the importance of the faculty voice in matters of academic decision making and long-range planning.” These Procedures place a consistent emphasis on core academic decisions, particularly those that might relate to the closure or elimination of an academic program, broadly understood. The Procedures “are only invoked in case of significant reduction to the university revenue and/or a significant reallocation of funding.” Further, any budget shortfall or reallocation that is “severe enough to propose the elimination of a[n academic] program ... triggers these procedures” which “shall be invoked by the chancellor when the chancellor, in consultation with the Chancellor’s senior leadership team and the Faculty Senate Executive Committee has determined that a) significant internally or externally driven budget shortfalls have occurred or are imminent, or b) significant budget reallocations are contemplated.” Likewise, as a standing Committee, the APC is asked to serve this important governance role on behalf of the faculty as part of a reaffirmation of the ongoing responsibility and established expertise of the Academic Planning Committee “in reviewing and proposed the change or elimination of [academic] programs” that is established in UNL Bylaws 1.10.1. and 1.10.2A-G. These assumptions likewise inform the detailed articulation of prioritized choices for budget reallocation and reduction (IV.F.1-4), which concern academic programs. At the same time, it is clear that academic programs both depend on and are integrated into a range of other support and service units across the campus, and the APC may be in a position to provide important insights into the impact that budget reallocation and reduction proposals in these areas also might have on the university’s academic programs (II.B.5). Additionally, engaging with the APC allows faculty the opportunity to participate more broadly in the shared governance process.

In keeping with these assumptions, the senior campus leaders and I have divided the budget reduction proposals into two categories: Phase 1 (totaling approximately $16M) and Phase 2 (totaling approximately $22.5M). All of the reductions will necessarily affect the missions of our university; however, we have attempted to categorize them into these two categories so that the "Phase 1" (defined as administrative unit reductions and operating budget reductions), which by definition are less-central to our academic mission, can be implemented as efficiently as possible. In part, this distinction reflects the assumptions that inform our established Procedures in the ways that I have suggested. There are also two practical considerations here. First, at a cost of nearly $1M per month, it’s critical to not increase our deficit position; doing so will have a significant adverse affect on the core academic missions that we are trying to protect. Second, it seems prudent to allow the APC to prioritize its time and provide its considerable expertise in consideration of those reductions which are most central to our academic mission, and for which it is essential that the APC be able to provide thoughtful and substantive input and consultation.

Desired Timeline

In follow-up to the discussions at the APC meetings on July 20, 2020 and August 10, 2020 meeting, I propose the following timeline for completion:

I very much appreciate your service on the Academic Planning Committee and look forward to working with you through this important process.

Sincerely yours,

Ronnie D. Green
Chancellor