KU budget cuts for new year total about $22 million for employee expenses, about $2.5 million for all other spending

photo by: Chris Conde/Journal-World File Photo

Strong Hall on the University of Kansas campus is shown on Sept. 13, 2018.

When it comes to budget cuts at the University of Kansas this coming school year, almost all of them — roughly 90% — are going to land on university employees.

KU chief financial officer Jeff DeWitt told the Kansas Board of Regents Tuesday that KU has planned for $24.8 million in budget cuts for fiscal year 2022, which began in July. Documents presented to the board show that $22.3 million of the cuts are coming in the form of reduced salary, wage and employee benefit expenses, driven by past employee layoffs, early retirements and positions that have been left unfilled.

Most of the cuts already have been made, and the new numbers aren’t an indication of new layoffs to come. While those cuts have already been made, DeWitt said more will be needed in future years, if KU can’t come up with a way to grow its revenues.

“If you are not growing, you are going to have to keep cutting,” DeWitt said.

The employee and wage reductions equate to about 165 full-time positions, DeWitt said. To be clear, KU has had far more than 165 positions that have been vacant during the pandemic. KU has never released a number of positions impacted by the pandemic and the hiring freeze that resulted, although a payroll analysis by the Journal-World in April showed there were about 1,200 fewer paychecks issued during one payroll period in 2021 than there were in the same payroll period a year earlier.

The figure of 165 positions listed in the most recent budget documents represents how many positions are being permanently eliminated from the Lawrence and Edwards campuses, even after KU starts hiring again now that its hiring freeze has been lifted, DeWitt said.

Even that number, though, comes with a caveat. The total number of positions may be significantly higher because the 165 number represents full-time equivalent positions. In reality, some of the positions are part-time, meaning the total number of positions impacted would be higher.

The numbers released Tuesday, though, make it clear the brunt of the budget cuts are coming through employees rather than through other savings such as cuts in supplies, travel expenses, utility costs, debt payments or other such expenses.

KU calls those types of expenses that aren’t related to employee compensation “other operating expenses.” Budget cuts to other operating expenses are projected to total $2.5 million for the year, which represents about 10% of the total budget cuts.

DeWitt said the bulk of cuts needed to come through employee salaries and wages, rather than other operating costs, because many departments decided to not fill positions that had become vacant. That philosophy fit with the direction that deans and department heads were given when compiling budgets.

“We said we want you to cut in a way that least hurts you in the short term but still allows you to grow in the long term,” DeWitt said.

DeWitt said it is difficult to cut other operational costs, unless departments decided to cut entire services or divisions, for instance. Thus far, those broad service cuts haven’t been the way most departments have balanced their budgets.

If there is good news in the picture, it is that DeWitt believes KU won’t have to make another round of budget cuts next year — fiscal year 2023, which begins in July 2022. Instead, the cuts that have been made for this year, combined with additional money the university has received through federal pandemic relief, are being used to create a one-year period where KU shouldn’t have to make budget cuts.

In its primary accounts, KU actually is projecting — mostly due to pandemic funding — to take in $28 million more in revenue than it will spend this year. DeWitt is recommending that money be carried over to next year, which should make it possible to avoid cuts in fiscal year 2023.

But DeWitt stressed it is imperative for KU to use this year and next year to figure out ways to grow revenues or become more efficient in its operations, because KU will run out of one-time pandemic money after fiscal year 2023.

“Our whole strategy is to buy time and get some strategic enrollment growth going,” DeWitt said.

Regents on Tuesday, who were participating in the board’s annual retreat, asked several questions about how KU plans to create enrollment growth in a demographic environment that is pointing to continued enrollment declines.

DeWitt said most of those plans are still under development, and that the university community had recently responded to a call for growth and efficiency suggestions by submitting 200 ideas. DeWitt — who was filling in for an absent Chancellor Douglas Girod at the Regents meeting — said that those ideas are being reviewed, but that university leaders already know success will involve thinking in new ways.

“Maybe your potential students aren’t always 18, but maybe they are 30 and want to come to campus,” DeWitt said. “If you just keep playing the game like it always has been played, you are going to continue to see enrollment declines.”

In comments that could be important to Lawrence, DeWitt said KU also likely will look for ways to significantly grow enrollment at its Edwards Campus in Johnson County.

“Edwards is where a lot of our growth is going to be occurring at,” DeWitt told the board.

If KU doesn’t start seeing growth this year and next year, DeWitt is estimating that KU will need to make about $22 million in cuts in fiscal year 2024 — which begins in July 2023 — in order to balance its budget.

As part of its presentation to Regents, KU released several other financial numbers related to the pandemic and university operations. They include:

• Tuition revenue on the Lawrence and Edwards campuses dropped to $258 million last year, down from $282 million in fiscal year 2020. For the current year, KU is budgeting to collect $252 million in revenue. DeWitt said KU’s goal is for enrollment to hold steady from last year’s totals. He said enrollment of new freshmen is on track, and international student enrollment is showing encouraging signs. However, he said there are concerns about the number of students who attended KU last year who are returning this year.

• State funding actually is faring much better than tuition revenue currently. State general fund money last year totaled $137 million, up from $134 million in fiscal year 2020. For this year, KU is scheduled to receive $140 million in state funding. However, KU is noting that about $5 million of that money has been designated as one-time state funding related to the pandemic. That makes it difficult for KU to use those state dollars for ongoing expenses.

However, Regents also were told that there is a real possibility that universities may receive additional state funding due to spending requirements the state must meet as part of the requirements Kansas agreed to when it accepted federal pandemic relief funds.

Currently, staff of the Board of Regents estimates that Kansas has another $53 million in funding it must provide to higher education in fiscal year 2022 in order to meet the federal requirements. However, Kansas is applying to the U.S. Department of Education for a waiver from the federal spending requirements.

Regents were told that it is far from certain that Kansas will receive that waiver. While the state may not be required to meet the full $53 million amount in increased funding, the Regents staff said some sort of spending requirement was likely given that the state of Kansas ended its budget year with about a $1.8 billion surplus. If Kansas were to refuse to meet the spending requirements, future federal funds not only for higher education but also K-12 education would be at risk.

A decision on the waiver request, which hasn’t yet been filed, could come as late as December or January, when the Kansas Legislature is set to start the next legislative session.

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