June 24 FY21 Budget Adjustments

Thank you to everyone who provided recommendations, consultation, and feedback as we work to align our FY21 budget with available resources and in adherence to our principles to guide decision-making. The exceptional experience that Puget Sound provides would not be possible without such a committed faculty and staff, and we have sought to make adjustments with the wellbeing of our institutional mission and our people at the heart of every decision we make.

The Board of Trustees met yesterday afternoon to act on a revised FY21 budget, taking into account updated enrollment and financial projections and the unprecedented impacts of the global health crisis. This message outlines the processes we have used to adjust the budget and a summary of the adjustments that will go into effect beginning July 1.

The scope of the budget challenges required a number of difficult decisions and I am sure that you will have questions about the adjusted budget, the rationale for these decisions, and the impact on your work going forward. You also may have questions about the emerging operational plan for the fall. A town hall meeting has been scheduled for faculty and staff members to meet with me and members of the President’s Cabinet on Tuesday, June 30, 2 – 3 p.m. Similar to our previous virtual town hall meetings, the log-in information will be posted at pugetsound.edu/covid19internal in advance of the meeting.

Process

I appointed a fiscal year 2021 Budget Adjustment Group, chaired by Executive Vice President and Chief Financial Officer Sherry Mondou, that included Provost Laura Behling, and faculty, staff and student representatives. This group was charged to provide input and make recommendations to me and the President’s Cabinet to guide decision-making under a range of potential enrollment and revenue scenarios. Faculty and Staff Senate leadership, LEAD members, and the Board of Trustees’ special advisory committee on COVID-19 were invited to offer input on the principles to guide budget decisions. The Budget Adjustment Group prioritized potential reductions based on available information and revenue and expense projections as of May 28, 2020. These recommendations were vetted with Faculty and Staff Senate leadership, and campus members were invited to provide feedback. Upon review of updated enrollment and financial projections in June, I consulted with Cabinet to bring forward a recommendation to the Finance and Facilities Committee of the Board of Trustees, which was approved by the full board on June 23.

Overview

We look forward to welcoming our new and continuing students to campus in the fall, but know we will have fewer than planned. FY21 annual enrollment is projected to be 2,185 compared to the initial budget of 2,399--a difference of 214 students--largely the result of fewer new undergraduate students. While Puget Sound remains a financially strong institution, this lower number of students directly affects our projected revenues.

The adjusted budget reflects projected revenues that are $8.9 million less than the initial budget approved by the Board of Trustees in February, representing a reduction of 9.5% from the initial FY21 budget and 15% from the FY20 budget. To offset this lower revenue projection, the adjusted budget includes a combination of cost reductions throughout all areas of campus totaling $6.9 million, and also reflects $2 million in support from university operating reserves. These reductions are in addition to the $5 million in reductions in the initial budget.

Financial projections and public health operating requirements may change, for better or worse, over the course of the coming months and years, and we will need to respond accordingly. We believe this iteration of the budget is an appropriate response at this time and consistent with our guiding principles. We also believe that it is not practical or prudent to make deeper reductions at this time without compromising the high quality, rigorous, and engaging experience that a Puget Sound education provides.

FY21 Budget Adjustments

Non-compensation
About 25% of the university’s budget is for non-compensation expenses, including funds for maintenance, departmental or office operations, travel, technology and equipment purchases, and other expenses. FY21 reductions in this area are $2.1 million, and include $1.035 million in facilities major maintenance, and $1.018 million throughout all areas of campus operations, including elimination of cell phone allowances and reductions in travel and professional development, among others, as determined by the provost and vice presidents.

Department heads can expect to receive their approved educational and general budget allocations from the finance office by early July, along with instructions and deadlines for submitting detailed budgets for loading into PeopleSoft.

Reductions in overall faculty and staff FTE
The budget anticipates a reduction of 25 staff positions during FY21, 18 of which are currently vacant. We are minimizing reductions to the greatest extent possible in areas that provide direct student support, as well as revenue-generating areas.

There also will be a reduction of the equivalent of 19 full-time faculty (FTE) in comparison to the current year’s budget. This will be accomplished through a combination of not replacing several positions due to retirements, resignations, or sabbaticals; reducing teaching units in some non-tenure-line faculty positions; voluntary reductions; and reducing the budget that supports part-time adjunct courses. These reductions also serve to better align the size of the faculty with the smaller student body.

Faculty members will receive their salary letters or contracts later this week, as previously communicated by the provost. Staff members directly affected by these reductions will be notified prior to the beginning of fall semester.

The budget also reflects a reduction in the student employment budget as we will have fewer students next year.

Compensation
About 75% of the university budget supports compensation for faculty, staff and student-staff members, including both salaries and benefits. The Cabinet considered a number of different options for faculty and staff compensation budgets, the advice of the Budget Adjustment Group, and suggestions from members of the broader campus community. Ultimately, we committed to prioritizing and protecting take-home pay for faculty and staff members to the fullest extent possible. To achieve that goal, the approved budget reflects the following:

• There will be no salary or pay reductions for faculty and staff members (who retain the same FTE level).
• Effective July 1, the president’s salary will be reduced by 10% and the provost’s/vice presidents’ salaries by 5%.
• Salary increases will be limited to: 1) faculty promoted to associate or full professor this year, 2) any staff member appointed to a different position that represents a promotion, and 3) staff members who will receive minimum wage adjustments in January 2021.
• To minimize the reduction of faculty and staff positions and preserve salaries, the retirement contribution for all faculty and staff members, including the president and Cabinet members, will be reduced to 6% (from 10% in the budget originally approved and 12% in the previous year for faculty and exempt staff members). This reduction will be in effect as of July 1 for the foreseeable future due to the sustained revenue pressure the university will experience as a result of the nationwide reduction in the numbers of undergraduate students and the economic repercussions of the pandemic. We understand how important the retirement benefit is to our faculty and staff members and did not arrive at this decision easily.

These are unprecedented times and I am grateful for the countless ways in which this campus community has come together to support our students and one another. It has not been easy, and I want you to know that your many selfless efforts over these past several months in particular are noticed, valued, and deeply appreciated. I am confident that we will successfully navigate our way through the challenges that are before us as this great institution has done throughout its history, and will emerge stronger as a result.

Above all, I hope that you and your families are well and I look forward to being in community with you at our town hall meeting next week.