UConn has 4 percent budget shortfall; considers additional tuition increase, other cuts

The University of Connecticut's main campus

CT Mirror file photo

The University of Connecticut's main campus

The University of Connecticut is facing a $46.2 million budget deficit for the fiscal year that begins July 1 — a 4 percent shortfall in the funding needed to continue its existing programs.

Further tuition increases, cuts to research funding, scaling back financial aid and stalling faculty hiring have not been ruled out to close the gap, a university spokeswoman said.

“This is a particularly hard year,” UConn spokeswoman Stephanie Reitz said during an interview on the looming fiscal challenges facing the state’s flagship public university. “This one is more challenging for sure.”

University officials are looking to close about three-quarters of the anticipated deficit through cuts, according to a one-page “confidential” budget update prepared for staff. It was provided to The Connecticut Mirror following a series of Freedom of Information Act requests.

A breakdown for where the $33.5 million in “expense adjustments” and $5.3 million in “revenue adjustments” will come from was not available last week or Monday. But Reitz said, “Everything is on the table. Nothing is off the table.” Reitz said details on those funding and expense adjustments will not be made public until late June, a few days before UConn’s governing board will approve its budget.

UConn President Susan Herbst last month told state legislators that the university would struggle to make further cuts without affecting the quality of the education it provides to some 30,000 students.

“We are pretty much down to the bone,” Herbst told members of the Appropriations Committee. “We’ve made about as many cuts on the non-academic side as we can. We are going to have to start in the academic side, and it’s very, very worrisome. It’s dangerous.”

The shortfall is largely the result of the huge increases the university must pay to provide mandatory pay increases for union employees (a 6 percent increase for each employee) and the amount the school must pay to cover its employees’ health and retirement benefits following years of the state under-funding its pension obligations. Between fiscal year 2010 and 2016, UConn union employees had their wages frozen three of those years and saw their salaries increase on average by 20 percent during those seven years.

Between fiscal 2011 and 2015, UConn’s spending is expected to increase by about $200 million, a 20 percent increase.

Much of these increases are mandatory following an agreement Gov. Dannel P. Malloy entered into with all state employees in 2011 that guaranteed pay raises, no layoffs and allowed higher education employees to switch from a 401k-type retirement plan to a pension, a move that cost the university significantly more.

To help the university come up with ways to shed costs, UConn paid the private consulting firm McKinsey & Company to assess where savings can be realized. “While the university supports this [labor] agreement, it does limit the University’s options for addressing declining state support,” the consultants reported in fall 2011.

Reitz said there are still “a variety of options” for closing the budget gap.

The cost to attend UConn is already set to rise by $678 next school year for students living off campus – a 5.6 percent increase – and by $1,022 for students living on campus. Research spending has also taken a financial hit in recent years, and the number of students receiving financial aid has stalled, as just 54 additional students received aid this year, a 0.5 percent net increase.

When approving a four-year tuition plan that increased the cost of attending UConn by 26 percent, university officials promised to use much of that additional revenue to hire 290 additional faculty members to help reduce class sizes and offer more courses so students could graduate on time. Now heading into the third year of that tuition plan, UConn will need to hire 56 new faculty to reach the benchmark it promised students.

When the Board of Trustees approved those increases in December 2011, the trustees built in an asterisk to the tuition schedule. It provided that, in the event state funding decreases, tuition could be increased another 2.1 percent.

Confidential UConn budget memo 3-10-14

“If the State appropriation decreases or the current fiscal climate worsens, the University may revisit the approved tuition increase amounts,” a  board resolution from 2011 reads.

And it looks like further tuition increases may be planned, as UConn’s financial aid website currently lists tuition $90 above the adopted level ($9,858 in annual tuition vs. the $9,768 approved). This is an additional 1 percent increase on top of the already scheduled 6 percent tuition increase for next school year. The board also last month raised student fees by $76 for next school year.

State funding for UConn since 2011 has decreased by $55.3 million a year, UConn reports. And even with an expected $27 million increase in state aid for next year in — aid largely tied to the governor’s new “Next Generation” initiative to boost enrollment and research activity — the university is still lagging in the amount of state funding it was receiving when the tuition plan was adopted. UConn officials also say that the extra funding is earmarked to implement the new initiative, and cannot be used to close any structural deficit.

Reitz said the university is not expecting, or asking lawmakers for, further state increases for next fiscal year. She also said officials are hoping to avoid further increasing tuition and fees. State law requires state legislators on the Higher Education and Appropriations committees to get an annual budget update from the UConn Board of Trustees and the state’s other public college by Feb. 14. That meeting has not yet taken place.

“We are doing everything we can to make UConn as affordable as possible,” she said.

But the March 2014 UConn budget update forecasting a $46.2 million deficit only projects an additional $5.3 million coming from additional revenue. However, even after the revenue and expense “adjustments” are made, the university still has a $7.4 million gap to close.

Budget deficits are not a new issue for UConn, but Reitz said the size of next year’s shortfall is unique. For the current year, which ends June 30, the university is slated to use $30.9 million from the $72.5 million in emergency budget reserves it ended the previous fiscal year with. That money will close a 3 percent budget gap.

The reserve fund has not dipped below $40 million since 2004, when the system’s budget was two-thirds the size it is now. The plan to use $30.9 million this year will likely leave the fund at a historically low level.

And UConn’s financial problems are only expected to grow. The $46.2 million deficit for the 2014-15 year is projected to reach $65.5 million for the fiscal year year that begins July 2015.

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