April 29, 2020
K-State addresses budget steps regarding pandemic
Dear K-State Community:
I come to you today with a spirit of hopefulness and gratitude. Hopefulness about the future of our great university. Gratitude for your unwavering determination to continue our land grant mission in the midst of this global health and economic crisis. Please know I am humbled by your continued resiliency during an unprecedented time in our history.
We have taken extraordinary actions to maintain our mission, such as the transition to remote teaching and student services, all while others work diligently to keep our university operating. We've also worked to mitigate the financial effect of the pandemic on our students, including paying student employees through the semester, refunding parking and housing fees and allowing employees who could not work to take administrative leave. These were the right decisions at the time.
We are now at the point we need to make excruciating financial and budget choices. We will talk about numbers, but these aren't numbers really, they impact people. This passage was in a Korn Ferry memo: "Not to contradict the Godfather, but it isn't 'strictly business.' It's also highly personal — impacting people's lives." There are no perfect choices in our budget planning, and we will rely on our key principles to guide us.
Key principles guide our decisions
Our actions and decisions during this state and national emergency have been based on five principles:
- Preserve the health of our university community and our host communities.
- Maintain and deliver the land grant mission of education, research and extension/outreach.
- Preserve and maintain university operations necessary to support mission-critical activities during our reduced operations status.
- Preserve the financial capacity of the university to deliver on mission critical activities for the long-term fiscal health of the university.
- Honor our unique university culture. Students, faculty and staff are at the heart of our university.
We must face our fiscal reality head on
Our efforts from the outset of the pandemic have been to ensure the continued education of our students while protecting the health of our communities. For the near and mid-term future we anticipate greatly reduced revenues with an unfavorable financial picture certain to persist for months and that could stretch into years. To guide our financial planning, we have constructed various budget scenarios related to state and tuition funding within our new budget model for Fiscal Year 2021. These scenarios include an assumed worst-case situation that goes well into the FY 21 school year.
The COVID-19 pandemic has economic implications for our state tax revenues. That means uncertain state funding. Near certain enrollment declines and continued losses from operations threaten our ongoing financial viability. For example, by July 31 we will have lost $35 million in revenue from the move to remote instruction and limited operations. We issued over $8 million in refunds to students from Housing and Dining and lowered our tuition and fee structure to help students with costs this summer. As we look to the fall semester and beyond it is imperative we move with urgency to take even more difficult steps to protect the financial state of the university.
I've asked our deans and vice presidents to submit plans based on these scenarios to maintain our financial stability. We've already taken some actions that will result in significant savings or cost avoidance:
- Instituted a universitywide hiring freeze and process for supporting mission critical positions. Any exemptions to this freeze must be approved the president, provost, or appropriate vice president. We expect the hiring freeze will produce $2 million in savings over the next year.
- Student worker appointments will end on May 16, with the exception of those required for mission critical work.
- Centrally pulled back general use savings resulting from the travel ban to generate cash balances, totaling $800,000 this fiscal year. We've asked unit heads to reduce travel and professional development budgets in FY 21.
- Used utility savings to generate cash balances for this year and reduce utility costs to the colleges and revenue centers for FY 21 by $2 million.
These steps alone will not keep us financially solvent, there other levers that must be pulled. In the near future, this will include:
- President, provost, cabinet members and senior administrators are voluntarily taking a 10% reduction in salary for the next fiscal year, which will generate at least $800,000 in savings.
- Our athletics staff will implement salary reductions for 42 coaches and staff members, designed to save $1.5 million over the next year. Planned departmental budget cuts will save approximately $2 million in operating costs.
- Implementing targeted emergency furloughs for areas where there is an immediate or imminent lack of funding to continue operations. We have asked Human Capital Services to provide updated information about how this will function in conjunction with state and federal aid for employees
- Phasing out the use of administrative leave for employees who are unable to work due to limited operations by May 30. We have asked deans and vice presidents to develop plans on how to move forward with employees in this situation.
Planning for a recovery is underway
Last week we announced the formation of an executive leadership recovery team tasked with developing plans and timelines for resuming full operations. This team will work within federal, state and local health guidelines to chart a course forward. We hope to have classes on campus in the fall, but there are certain conditions that must be met, including the widespread availability of testing, a sustained reduction of COVID-19 cases in our communities, and the ability to maintain physical distancing in work environments. We anticipate sharing plans with the campus community soon.
I ask you to have courage and hope as we move into the future. The health precautions we have all taken over the last six weeks are working. I am very confident K-State will emerge from this situation as a stronger institution serving its many constituents.
Richard B. Myers