The University of Kansas is facing an estimated budget shortfall of $47.6 million in the 2021 fiscal year — a $72 million decrease from the previous estimated deficit — KU leadership announced Friday in a message to campus.
Previously, KU administrators estimated a budget shortfall of $120 million for the 2021 fiscal year, which started in June. The previous estimate was made based on assumptions of enrollment, capacity in the residence halls, dining services and other revenue sources, Chancellor Douglas Girod and Provost Barbara Bichelmeyer said Friday in the message.
Girod and Bichelmeyer said the new estimate comes from their ability to refine those numbers and from the cost-saving measures already implemented this semester.
“Please note, this revised shortfall continues to rely on assumptions about the above-mentioned revenue sources, all of which are still in flux,” they said. “We will continue to update the shortfall amount and keep you posted throughout the remainder of the fiscal year.”
The cost-saving steps taken in recent months are one-time savings that can only be applied to the current fiscal year, according to the message, and will not help to address the budget shortfall projected for the next fiscal year, which begins July 1, 2021.
Without the one-time savings currently in place, KU’s operating deficit would be $80.7 million — including a $44.5 million deficit for general fund academic operations, according to the message.
“In other words, these are the projected shortfall amounts that need to be addressed for the next fiscal year budget,” Girod and Bichelmeyer said. “Therefore, we must continue to make difficult and painful cost-savings decisions in the months ahead.”
The $47.6 million deficit is divided into three categories:
- $11.4 million from general fund academic operations, including tuition and state appropriations
- $19.7 million from auxiliaries such as KU Student Housing, Parking, Watkins Health Services and Recreation Services
- $16.5 million from affiliates such as Kansas Athletics and the Memorial Union
Enrollment was a key factor in decreasing the shortfall, leadership said. Enrollment decreased 2.8% in the fall semester after administrators previously predicted it could drop by roughly 8% to 10%.
But KU risks losing more students than usual in the spring semester, according to the message.
“While our fall enrollment represents a bit of good news, there is reason for concern about the spring,” Girod and Bichelmeyer wrote. “Given the financial hardships the pandemic presents students and families, as well as this fall’s non-typical on-campus experience, we are at risk of losing more students during winter break than we normally would.”
Throughout the fall semester, KU has implemented a number of "cost-saving measures," including a voluntary buyout program, temporary salary cuts for executive staff and a university-wide hiring freeze. In total, these steps brought $33.1 million in savings, according to the message.
Auxiliary and affiliate units such as Housing, Athletics and the Memorial Union are expected to solve for their own shortfalls, leadership said in the message.
“We must continue to make difficult decisions and explore innovative solutions that ensure the long-term viability of these auxiliaries and affiliates so they can continue performing their crucial roles,” Girod and Bichelmeyer said.
No KU funds will be used to address budget challenges in Athletics, according to the message.
In addition to the projected budget shortfalls, KU incurred $30 million in expenses related to COVID-19 testing, personal protective equipment, isolation spaces for students and other costs. About $20 million of these costs was covered by federal funding, and the remaining $10 million was covered by gifts from donors through KU Endowment, according to the message.
To address the financial challenges, Girod and Bichelmeyer said they plan to provide as much on-campus education as possible, grow enrollment and evaluate low-enrolled programs, among other initiatives.
“KU has no choice but to adopt new business models, to find efficiencies in our operations, to restructure and to implement cost reductions,” Girod and Bichelmeyer wrote. “All options must be considered, including changes in sourcing and procurement, operations and organizational structures, as well as personnel changes such as furloughs, layoffs and salary reductions.”