I write to update you on the status of your university’s budget for this year, next year, and beyond.
This short update provides a high-level summary that necessarily leaves out low-level details. Dr. Cornelius Wooten and I will be happy to talk with you further if you have questions.
As you have probably heard, last week Governor Wolf allowed the latest legislatively approved 2015–16 budget to become law. This budget provides a 5 percent increase in appropriation to the State System of Higher Education, about $20.6 million. Of that amount, IUP receives an additional $2.91 million for the current fiscal year.
I am thankful to the legislature and governor for providing the first reinvestment in IUP in seven years, and I am thankful for your great work in containing costs, increasing revenue, and meeting performance funding targets. We had initially planned to spend $9 million of reserves to balance this year’s budget. But now, when we put all the pieces together, it looks like IUP will balance this year’s budget without dipping into our reserves—and that’s great news for the moment.
Assuming that the 2016–17 state budget will maintain the increased appropriation from this year and that our fall 2016 enrollment meets our projection 13,200, we face a deficit of about $12 million, caused by a continued decline in enrollment and cost increases that far outpace the increases in appropriations and revenue.
Covering a $12 million deficit, an amount larger than the entire operating and personnel budgets of most of our academic colleges, presents a major challenge that will only worsen if we don’t address it now. As I said in my remarks at the beginning of the academic year, it is imperative that we address the realities of the time and redesign how we do our business. We must act now and in a way that secures IUP’s financial future [Strategic Plan, Goal 3] and that focuses on the soul of the institution and IUP’s most important resource: its people [Strategic Plan, Goal 4, Strategy 6 and
Middle States Self-Study Key Recommendation 3].
President’s Cabinet and the University Budget Advisory Committee (UBAC) are working together to design a plan that will balance next year’s budget and reset our budget model for the future. Vice President Wooten is fleshing out the details in partnership with cabinet and UBAC. What follows gives a short summary.
Just as in fiscal year 2014–15, the approach has three prongs.
We will reduce projected expenditures to match historical actual spending. Specifically, the fiscal year 2016–17 budget will be set at actual expenditures from the 2014–15 fiscal year. In 2014–15, we served 1,169 more students than we will serve in 2016–17. This reset of our basic budget will likely cover about $8 million, or two-thirds, of the projected deficit and provide some amount to invest in strategic priorities. As I stated, we still are working on the details, but we believe that the budget reset will enable us to protect current employees. To ensure that we have the flexibility to meet our obligations next year, we will implement a spending chill for the rest of this fiscal year by keeping some positions unfilled and deferring large operating expenditures wherever possible.
We will establish a transparent, public process to make investments in IUP’s future. Using published criteria directly tied to the
Vision for IUP, the
Strategic Plan, and performance funding targets, UBAC will review investment proposals and make recommendations to the cabinet and me. UBAC is developing the details of the proposal process.
This action requires our students to pay more for their education. An increase in overall tuition revenue will generate a net increase of $4 million, or about one-third of the $12-million deficit. After a great deal of review, we have decided that the
per-credit tuition model—with its initial discounts, added financial aid, equity, flexibility, and accountability—is the best way to generate the revenue. I emphasize that none of us wants to charge students more, but the financial reality requires it if we are to maintain the high-quality breadth of programs that define the IUP experience.
While it will present some challenges—as change always does—I strongly believe that this new budget model will help secure IUP’s financial future by investing in our most important strategic priorities and keeping the focus on our most important resource, our people.