Dear Faculty and Staff:
As we shared a few weeks ago, the impact of COVID-19 on our overall financial status in FY2019 (i.e., the fiscal year that just ended) was a significant challenge, absorbing $27M in losses. We were able to close the fiscal year with minimal negative outcomes because we were thoughtful, thorough and worked together as a campus.
We are in the process of working on strategies to address the current projected budget gap for FY2020, roughly $17M, $10M of which is a one-time gap and $7M in recurring expenditures (i.e., part of our base budget). As a reminder, capital building projects that continue to move forward utilize funds that are not allowed to be shifted to annual operational costs, with a mix of private and specifically-allocated state funds. The current estimate of the projected budget gap is based on the following:
- The previously approved FY2020 State of Tennessee budget
- A 0% tuition and fee increase for AY20-21
- Reducing the online fee by 50% (from $50 to $25) by providing direct grants to our students
- Assuming flat enrollments (i.e., enrollments that mirror AY19-20)
As you are aware, I recently appointed a Budget Reduction Committee with representation from across campus. The committee has created a set of draft recommendations/strategies which, once finalized, will serve as the basis of actions we employ to address any budget shortfalls this academic year. We are making every effort to be data driven and align with the latest health guidance available at the national, state and local level. The latest local and national trends are not encouraging. We will continue to monitor the data and adjust our fall plans accordingly, with updates over the next several weeks. Current fall enrollment (headcount) is down approximately 4.5% from fall 2019. We will update future budget projections as enrollment is finalized in the coming weeks. As noted above, the existing projected shortfall of $17M is based on enrollment comparable to last fiscal year. We certainly are not alone in grappling with these issues, as our experience is mirroring national trends.
We are confident we can manage the current shortfall through strategically drawing on our one-time institutional flexibility, strategic reserves, management of vacancies, organizational realignment and attrition. Any additional budget shortfall will require us to evaluate the possibility of furloughs and layoffs. As shared previously, we have already implemented administrative reductions of $750K and also accepted a total of $1.5M in retirements. Our Athletics Department announced $4.4M in reductions several weeks ago.
I remain optimistic in our ability to bridge the current shortfall, but I want to keep you fully informed of our current and potential future challenges, with a commitment to transparency and collaboration. We need to be strategic in our approach in order to maintain our very positive momentum and trajectory. Our leadership team is confident in our ability to successfully navigate one of the most challenging times in our history.
Thank you all you do for our students, our University and our community.
Dr. M. David Rudd, President