UNC System releases report on “worst case” budget cut scenarios

Late Friday the UNC System released a 66 page report summarizing how its 17 campuses would react to budget cuts due to enrollment drops ranging from 2 percent up to 50 percent due to the impact of the ongoing COVID-19 pandemic.

The report comes after UNC Board of Governors Chairman Randy Ramsey directed the school’s chancellors to prepare “worst case scenario” planning documents earlier this month.

Policy Watch obtained a copy of the email calling for the plans, was first to report it and has been pursuing the documents since.

Ramsey’s original email to chancellors called for “a plan from each chancellor to reduce their budgets by between 25% and 50%, to account for the reduced revenue resulting from reduced enrollment under various degrees of closure.”

The 66-page summary report is more complex.

It is accompanied by a statement from the UNC System on its preparation, describing seven potential scenarios by which the schools would see drops in enrollment due to various reactions to the worsening COVID-19 pandemic in the state.

“The seven potential scenarios assume various enrollment decreases, ranging from a minimum of 2% through a maximum of 50%, with an emphasis on the -2% through -10% models,” the statement reads. “Variable decreases in revenue and expenses were also incorporated into each financial model.”

The seven reaction scenarios in the document include:

* New Normal (status quo)

* Social Distancing Only

* Online Fall 2020 (enrollment -2% + Mandatory fees)

* Online Fall 2020 (enrollment -5%)

* Online Fall 2020 (enrollment -10%)

* Online Fall 2020 (enrollment -25%)

*Online Fall 2020 (enrollment -50%)

The 66-page report also includes summaries from each university of the potential impacts. Most emphasize that they do not anticipate the dramatic enrollment drops and spending cuts in the “worst case scenario” plans to be necessary in the coming year.

Under the highest-impact scenarios most schools anticipated extreme actions like the furloughs of all non-essential employees, elimination of positions, salary reductions for those who remain, increased teaching loads for faculty, the closing of residence halls to all students except those with nowhere else to live, the spending down of university fund balances to pay debt service.

UNC System sources and administrators at individual UNC schools were not available for comment late Friday. But several of the chancellors did send messages to their faculty and staff commenting on what they would see in the report, most again emphasizing how unlikely the worst scenarios are in reality.

N.C. State University is the UNC school with the largest enrollment. The provost and vice chancellor for financial administration at N.C. State sent the following message to faculty and staff:

First and foremost, under no foreseeable circumstances do we expect to see budget reductions anywhere near 25%. State support remains strong, our enrollment for the fall remains solid, our research enterprise is performing well and beginning today several thousand students are moving into on-campus housing. At this time, we do not anticipate campuswide reductions to be necessary for the fall semester.

Of course, NC State will look different this fall, which may create financial challenges in some areas. To ensure physical distancing, campus will be much less populated than normal, and as a result some of our auxiliary services areas (those that rely on sales and receipts for their funding) may be negatively affected. We don’t yet know what the full cost of these impacts will be, but each of these areas — such as University Housing, Dining and Transportation — has been preparing for these changes since March and will make budget adjustments as needed.

Some units have been able to adapt in-person services to alternative online services. Most are also working with suppliers and contractors to renegotiate purchasing agreements. Unfortunately, because higher education is a personnel-intensive endeavor, any significant reductions in auxiliary services units will result in reductions to personnel. Several units are already limiting the number of service positions typically rehired for a fall startup.

Over the next few weeks we expect to have a clearer budget picture. College and unit budget officers will receive regular updates, and we will share any significant changes with the larger campus community. We remain confident that NC State will continue to provide instruction, research and extension services at high levels and will be able to make any necessary adjustments the pandemic might warrant.

Our priorities remain doing all we can to protect the safety and health of the NC State community while ensuring this university continues to achieve its mission for the benefit of our students, our state and the world. Thank you for your hard work, your passion and your commitment to NC State.

Warwick Arden, Provost and Executive Vice Chancellor
Charles Maimone, Vice Chancellor for Finance and Administration

Appalachian State University Chancellor Sheri Everts also addressed the budget scenarios in a message to the university’s community.

From that message:

“As we receive new information and guidance from the UNC System, state and local public health, the state legislature and other key oversight agencies, we work to determine what it means for our campus and share with the Appalachian Community as quickly as possible any new guidance and information, as well as any steps we take in response.

As I mentioned in my message to campus on July 18, the UNC Board of Governors has asked all UNC System institutions to conduct financial scenario planning exercises. This afternoon, the UNC System released scenario planning documents for all campuses. While we are not facing 25%–50% budget cuts at this time, I want to emphasize it is important to responsible fiscal planning that we engage in budget scenario planning.

Decisions made by the Board of Governors have a direct impact on our university, and Appalachian’s leaders work diligently to ensure our priorities are heard and considered. My positions on the budget and finance and capital construction committees give me insight and a voice in these important areas. The recent Board of Governors meeting resulted in decisions that are important to our university: A motion was approved for the 2020–21 Operating Budget Allocations, which included $5 million for Appalachian for enrollment change funding. Vice Chancellor for Business Affairs Paul Forte and Vice Chancellor for Student Affairs J.J. Brown presented to the strategic initiatives committee about Appalachian’s approach to student health services, particularly our decision to begin billing our students’ insurance companies to gain additional revenue we can re-invest in further resources for students, such as telehealth options.”

Read the full report here.

Policy Watch will continue to cover this ongoing story over the weekend and in the coming week.