Another $26 million in budget cuts likely at KU next school year, but CFO has plan to make 2023 a cut-free year
photo by: Associated Press
The University of Kansas’ new chief financial officer said Friday that at least two things were needed in the next school year: another $26 million in budget cuts and some type of plan to get KU growing again.
In a campuswide video presentation, CFO Jeff DeWitt said that the days of budget cuts weren’t yet over at KU but that he could see a time when they might be. DeWitt is proposing that KU’s Lawrence campus cut $26.9 million in expenses in fiscal year 2022, which begins in July.
But that might be the easy part. KU has to figure out a way to start growing again, or more financial pain is nearly certain.
“You can cut and get more efficient, but if you are not growing, you will cut again and gain and again,” DeWitt said. “You have to grow.”
DeWitt said he was recommending a plan that he hoped would buy KU a little time to come up with a growth plan. If KU can successfully cut $26.9 million in fiscal year 2022, then DeWitt is projecting that KU will not have to make financial cuts to the Lawrence campus in fiscal year 2023, which begins in July 2022.
But KU had better use that time well. If the university doesn’t start growing again in fiscal year 2023, KU will be facing another $27 million worth of cuts in fiscal year 2024, which begins in July 2023.
That led DeWitt to say KU needs a growth plan that “doesn’t just sit on a shelf,” but rather one that can be implemented “really quickly because 2024 is not that far away.”
Friday’s budget presentation didn’t delve into ideas on how the university can start growing again. But the financial projections show that KU shouldn’t expect increased enrollment to produce much growth next school year. DeWitt said KU was not expecting a big post-COVID enrollment bounce for the 2021-2022 school year. Instead, enrollment is projected to remain flat compared to this year. Fall enrollment on the Lawrence campus has declined four straight years. It is down about 1,300 students, or nearly 6% from a recent peak in 2011.
Future years, though, likely will need to see enrollment growth. DeWitt is budgeting for tuition revenue to grow by 4% in both fiscal year 2023 and 2024. He said that growth could come through a combination of greater enrollment and higher cost tuition. But DeWitt also acknowledged that KU likely would have difficulty passing along tuition increases, even if the Kansas Board of Regents does approve higher tuition rates.
“We don’t have a lot of runway here to raise tuition and still be competitive because students will go elsewhere,” DeWitt said.
He showed a chart that has KU’s tuition and fees already as the second highest of any public university in the Big 12. He said KU was running the risk of tempting students to go to less costly alternatives.
DeWitt also said he, the chancellor and the provost all recognized that KU needs to increase pay at the university to remain competitive. His projections call for a 2% pay raise for university employees in both 2023 and 2024.
DeWitt joined KU as its chief financial officer last month, after having served in the same role for Washington, D.C., where he oversaw a much larger budget than KU has. In his budget presentation Friday, he said KU would improve its transparency with how it presents financial data to the university community and the public. The Journal-World this month ran an article highlighting how KU was not producing many of the standard monthly or quarterly financial reports that are commonplace in the business world.
Friday’s presentation also provided a glimpse at one of the key financial philosophies DeWitt emphasizes: multiyear financial planning. Historically, KU — and many other universities — have done financial budgeting only one year at a time. DeWitt wants to do at least three- to five-year plans going forward, he has said.
When looking at KU’s financial picture over the course of the next three years, it becomes clear KU could take a more aggressive approach that likely would not require any cuts in the next school year.
DeWitt said revenues in this school year — fiscal year 2021 — have come in better than expected during the pandemic, and expenses also have been lower than expected. That will allow KU to move $20 million of funds over to the 2022 budget. That money combined with a few other savings would allow KU to balance its 2022 budget without any major cuts.
But DeWitt is calling for $26.9 million in cuts to put KU in a better position for fiscal year 2023. DeWitt is projecting that if cuts aren’t made in 2022, the Lawrence campus would be facing about $42 million in cuts in fiscal year 2023.
“One-time money can not deal with a structural deficit,” DeWitt said.
That gets KU back to the need to find a growth plan. DeWitt did say KU may ask KU Endowment to help provide some additional funding for some strategic growth initiatives. The Journal-World last week reported how KU Endowment has a $137 million fund of unrestricted money that technically can be used to help KU fill budget gaps. DeWitt said he did not support the idea of using such money to address the structural budget deficits KU currently has, but said the money could be appropriate for “startup” funding for growth initiatives.
Those initiatives haven’t yet been developed, but DeWitt said he’s encouraged by what he’s seen so far in his first weeks on the KU campus.
“We have so much potential here,” DeWitt said, listing KU’s presence in the growing Kansas City region, a medical center that is performing well, land available for growth in Lawrence and research programs with strong national reputations.
“There are so many things we can deploy here to turn this around … I’m optimistic this can work.”