The University of Minnesota plans to take out loans to cover about half of an expected $166 million budget deficit this school year.
The Board of Regents on Thursday talked about how to address the problem, but a decision on whether to borrow, and how much, is months away.
When regents approved a $4 billion operating budget in June, they anticipated the coronavirus pandemic would be somewhat under control and campus life would be almost back to normal by September.
Instead, many instructors and students are doing school from home, and football and basketball games are being canceled or played in empty venues.
It’s those non-academic functions that have suffered the most financially:
- Athletics, housing, dining and parking account for $123.5 million of the U’s expected shortfall.
- Declines in clinical income and various types of sales will cost around $24.5 million.
- Another $16 million is the result of decreased tuition revenue. Although enrollment was fairly steady, a greater share of new students are Minnesota residents, who pay lower, in-state rates than those from other states and countries.
- The U also is spending about $2 million on extra cleaning and related services because of the pandemic.
Julie Tonneson, the U’s associate vice president for finance, sketched out a plan for filling the budget hole, including $82.3 million in loans that could be issued near the end of the fiscal year.
The plan also includes:
- The use of $56.2 million in rainy-day funds.
- Saving $34.1 million from furloughs and temporary pay cuts already in place this school year.
- Saving $3.4 million from a variety of departmental cuts.
These actions are in addition to cost-cutting efforts that have been underway for months. The U says it will save over multiple years:
- Around $56 million by withholding merit-based salary increases this year.
- A total of about $45.3 million from furloughs and pay cuts, including voluntary reductions by senior leaders.
- Roughly $31.3 million from a retirement incentive, which was taken by 12 percent of eligible employees; that savings figure assumes new people will be hired for 40 percent of those jobs.
The U did not put a dollar figure on the amount saved by a hiring freeze, but officials said they hired 36 percent fewer employees in 2019-20 compared to the year before.
At 26,630, the total faculty and staff headcount is down 572 people, or 2 percent, from last year.
STATE HELP
Regent Steve Sviggum on Thursday suggested asking the Legislature to help cover its shortfall rather than borrowing $82.3 million, in light of the state’s unexpected budget surplus.
President Joan Gabel said she’d do as the regents instruct, but her plan is to ask for what lawmakers gave the U last time, plus inflation. She said the U wants to demonstrate fiscal responsibility and the request reflects that during the pandemic, “it hurts all over right now.”
Meanwhile, the U plans to hire a firm soon to study ways it can modernize and streamline its administrative and support functions through increased use of technology and shared purchasing and other services. That effort is not expected to help with their near-term budget challenges.
“This is something we’ve talked about for 10 years, we’ve never acted on, and I think there’s some real upside,” Regent Richard Beeson said. “There’s plenty of examples of how it’s been done differently around the country.”
CHEAP LOANS
The U is not alone in looking to the future to cover today’s losses. Moody’s Investors Service this week said that some universities have accelerated their borrowing, taking advantage of low interest rates.
Moody’s in October assigned the U an excellent Aa1 credit rating for its latest round of borrowing.
This week, Moody’s reiterated its negative outlook for the higher education sector as a whole, warning of continued revenue declines related to enrollment, housing and dining, state funding and philanthropy, as well as high fixed costs.
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December 11, 2020 at 04:40AM
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Short on revenue during pandemic, UMN considers loans to cover half of $166M deficit - TwinCities.com-Pioneer Press
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