FY22 Budget Reduction Targets

Sent on behalf of Provost and Executive Vice Chancellor Barbara Bichelmeyer, Chief Financial Officer and Executive Vice Chancellor for Finance Jeff DeWitt, and Vice Provost for Finance Jason Hornberger.

Colleagues,

As we discussed in our message and video on April 23, our Lawrence and Edwards campuses are facing a structural deficit as a result of:

• Declining state appropriations,
• Generally declining enrollment,  
• Declining tuition revenue, and
• Increasing costs of operations and inflation.

In that video, we also shared that our recovery plan will be a two-stage process over three years, with the first year of budget adjustment happening in FY 2022. We also noted that we will be prioritizing efforts to ensure our salaries and wages are competitive, and we will be addressing significant obligations for deferred maintenance and repair as we engage in fiscal recovery.

Working toward Recovery

This is the time of year when we typically determine budgets for the coming fiscal year, and it is a time of year when we reckon with difficult and sometimes painful decisions that must be made in stewardship of our campuses and to ensure the sustainability of the institution.

During the budget planning cycle, we’ve used the terms “right-size” and “right-fit” as phrases to represent a necessary shift in the process to focus on the responsibility we all bear to demonstrate productivity and efficiency in our work and the return on investment we provide in fulfilling the mission of KU. These principles are the foundation upon which we will build our long-term recovery and stewardship of this university, and are absolutely essential to ensuring Lawrence is as robust a research residential campus as possible. Our finance and analytics teams provided new information to fiscal leaders to help us compare how efficiently KU operates in relation to our peers. We’ve had numerous conversations with deans, vice provosts, and various campus leaders about how we compare as well as how we prepare for change. They are aware that our only option now is to be both strategic and intentional with our funding distribution.

After a decade of cutting, it is clear that KU can no longer apply across-the-board budget reductions without doing even greater damage to our collective viability. We established criteria to help guide our allocation decisions, always with institutional stewardship, and our goals and priorities in mind. Our budget planning has been and will continue to be guided by the repeated asking of a few fundamental questions:

• What revenue does a unit generate to cover the cost of its operations?
• How much do we have at the campus level to cover the gap when unit expenses exceed revenues? and
• How will we allocate funds to create a return on investment that will move us as quickly as possible into an upward climb?

As a result, some units will experience the impact of cuts more strongly than others, and there will be some very good things we’ve done in the past that we simply will no longer be able to do.

Budgeting Process

Unit leaders have received information about their specific reduction targets, and before we share those percentages with you, we want you to know the process and guidelines that drove these difficult decisions.

First, we centrally funded mandatory cost increases, such as employee health insurance, utilities, and faculty promotion and tenure pay increases.

We then worked to determine academic unit budgets with the following considerations:

• Revenues and expenses relative to peers,
• Teaching productivity compared to peers,
• Research productivity compared to peers,
• Ability to generate revenue through other sources,
• Personnel compensation and vacancy rates, including the recent Voluntary Separation Incentive Program.

Additional factors were also taken into account, such as research and degree program strength, degree and research programs in strategic areas, growth potential, and capability to subsidize other areas of the university.

Then we determined budgets for administrative units using these considerations:

• Cost of the administrative functions relative to peers using Academic Benchmarking Consortia (ABC) data,
• Unit alignment with strategic priorities, such as diversity, equity, inclusion and belonging; enrollment growth; or student persistence.

As a result, academic units averaged 8.5% budget reduction across units, while administrative units averaged 5.8% budget reductions. These averages are in keeping with data that show our academic units are funded at a higher-than-average rate (60%) of our peers, and our administrative units are funded at the 25^th percentile compared to our peers.

See the table below for the percent reductions by unit of both the FY 2021 general use budget and their total budget. Units with research funds, endowment funds or course fee funds will show a smaller reduction when applied to their total budget.

Working Together

Though some units have moderate adjustments and others have deeper cuts, in all cases we will need to move swiftly and strategically to address these new circumstances, and we will all need to find innovative and creative approaches to establish new efficiencies, grow enrollment, grow research funding and generate revenue to better support each unit’s operations, our campuses, and the university as a whole.

Two units – Diversity, Equity, Inclusion & Belonging and International Affairs – were held harmless. Operations received a 1-percent budget reduction, due to underfunding as we compare our investment in Facilities Services compared to peer institutions. Facilities Services simply cannot sustain further impact without damage to the physical infrastructure that supports all of our work. 

Now, we need everyone to offer ideas to help the institution become more cost-effective and resourceful. We need everyone to help us find new ways to attract students and keep them on track to graduate. We need everyone to participate in finding our way forward. We are all worn down from the past year, and we can’t work harder, so we will have to work differently and more efficiently in order to reduce our deficit and to grow ourselves into the future. Our success will be determined by our individual and collective ability to think strategically rather than reactively.

We can Transform and Still be Proud

For the past year, campus leaders have worked to keep you informed of what we saw on the horizon. The University of Kansas is a special place with special, talented and caring people. There is no way to sugar coat the impact of our financial situation. After these budget reductions are realized, KU will look and be different. At the same time, we can still be a place that prides itself for excellence in innovation, discovery and learning.

It may seem nonsensical to offer hope when addressing a fiscal challenge of this size, and yet, hope is all around us. There are solutions to our challenges, and we possess the knowledge and the discipline to make the necessary transformation. We have the right skills and tools. Our greatest asset is our exceptionally intelligent and creative people.

Our long-term recovery plan, and right now our FY 22 budget, will require energy, ideas and change. There may be frustration and angst and sleepless nights. In the end we will refine how KU can be the great research university it is called to be. We are capable of doing the hard work to realize our full potential, both as individuals and as an institution. In the days ahead we will invite you to revisit our strategic plan, Jayhawks Rising. It’s not just about fiscal recovery. It’s not just about COVID recovery. It’s about how we build our future at the University of Kansas.

This past year is not the experience any of us could have imagined or wished for. Still, our staff and faculty rose to the challenge and did their best to research, to create, to teach, to provide service, and did so under extreme circumstances. We’ve shown the world what we are capable of.  Thank you for all of the hard work you’ve done. It gives us faith that we will be able to do the work ahead to build a better future for our students, our staff, our faculty, and for our university.

Respectfully,

Barb, Jeff and Jason

Barbara A. Bichelmeyer
Provost & Executive Vice Chancellor

Jeff DeWitt
Chief Financial Officer & Executive Vice Chancellor for Finance

Jason Hornberger
Vice Provost for Finance

Unit-Level Budget Impact FY 22