Budget update from Chancellor Watson
Dear Campus Community,
It is time we take a moment to review once again the university’s budget situation. I’d like to break this message into two parts. First, let’s focus on the extraordinary work to date done to manage our fiscal year 2020 budget shortfall, and then let’s discuss the impact of COVID-19 on our financial health.
FISCAL YEAR 2020
As you may recall, we started fiscal year 2020 faced with diminishing revenue, and we coalesced around administrative and operational effectiveness as a key tenet of long-term viability. Balancing our budget required changes in operations. As much as possible, we minimized the impact of those changes on students. With the collaborative support of many, we were able to implement operational efficiencies and build a sustainable financial model to carry UW-Whitewater forward.
We have been able to generate significant savings in the current year, along with cost avoidance and savings from our central-funded requests. We are projected to end the fiscal year with a positive balance. As we begin our financial closing process, we look forward to providing you with additional information on our year-end outcomes.
Thank you to the governance groups and other campus volunteers for their engagement, consultative advice and collaboration in this year’s budget process. Governance members and volunteers continue to contribute by engaging with Administrative Affairs on spend analytics, volunteering time and expertise to understand our data and transforming our practices to save costs and maximize efficiencies.
We now find ourselves facing another wave of financial challenges. The financial impact to date from COVID-19 is $10.2 million, which was paid out primarily from reserves. These reserves are typically used for our financial liquidity and supporting our operations.
We have mitigated some of that $10.2 million loss through contract negotiation and other tactics, leaving us with a projected net loss of $7.74 million. This does not include the expected loss of $2.15 million in state funding due to COVID’s impact. We must immediately address these losses.
We have applied for $8.2 million in CARES Act funding and have already received $4.1 million to be directed to students. An additional $4.1 million, which will be directed toward the institution, is pending. The CARES Act institutional funds will be needed to restore reserves to ensure our financial liquidity for debt service obligations, critical infrastructure including utilities, and the cost of shifting to remote and online instruction. These relief funds are helpful for providing emergency financial aid to students and for reimbursing the institution for unexpected costs, but they will not cover all of the refunds required, make up for the lost auxiliary and other revenues, or pay for payroll cost for operations that have been reduced and are not producing revenue.
Therefore, we have to continue to make further reductions in our expenses in both salary, supplies and services. These reductions include savings from furloughs. The furlough savings will be used to address the loss of reserves.
The budget for fiscal year 2021 has already been submitted to UW System. However, the expected revenue and state funding is uncertain given the dynamic nature of the state and nation’s economy. We are working with System on scenario planning and we will be sharing the results of that work in the coming weeks.
While the news of further reductions may be difficult to receive, I hope you will also focus on how much we accomplished this year in terms of managing our initial budget shortfall. We are in a stronger place than we would otherwise be without the work of all of you. We are, indeed, “even better together.”
Dr. Dwight C. Watson