I write to provide you with an update on the state’s budget and the potential subsequent impact on the University’s budget. As I recently shared with you, the Governor’s proposed budget has mixed news for our University. The very good news is that the proposal includes the necessary funding – $97 million – to construct a new health innovations center.
The mixed news is that, to balance the budget, the Governor’s proposal includes funding for only half of the nearly $5 million recurring increase the University will have to pay to KERS -- the state pension system -- as a result of legislation passed last year to address the pension shortfall. This increase is the largest for any university in the Commonwealth. While we appreciate the Governor’s effort to provide some relief, his budget proposal leaves a shortfall of nearly $2.5 million for our University.
The unfortunate news is that the Governor’s proposal includes a 2.5% recurring operating reduction for all universities and the Kentucky Community and Technical College System. For NKU, this amount is approximately $1.2 million.
The unfunded KERS obligation coupled with the proposed budget cut represents nearly 8% of the University base appropriation from the state.
If there is no relief from our $5 million KERS obligation and the 2.5% budget cut stands, our University will need to reduce our budget next year by approximately $6 million. This amount is in addition to other fixed costs, which we cannot eliminate, and it reflects our slightly reduced enrollment for this current year.
The Governor’s proposal to the General Assembly begins the process; there are many more steps to go, including both the House and Senate budget proposals and the final passage of the budget bill in late March. Nevertheless, this fiscal environment means that we need to prepare our University for an unfavorable budget reality. This news comes at a time when the University has committed to invest resources in the new strategic plan, and also at a time when significant tuition increases to cover these reductions are untenable.
Under the current scenario and assuming flat enrollment, we need to reduce expenses in order to balance the University budget in the coming fiscal year. To do so, I presently project that we need to reduce our expenses by approximately 5%, excluding fixed costs and revenue units. If we can increase our enrollments through strong recruitment efforts and improved student retention and persistence rates, we will be much better positioned to avoid additional reduction measures, to minimize tuition rate increases, and to make investments in our strategic plan.
I have asked every vice president to submit to me, by April 2, a 5% budget reduction plan that preserves our core mission and operations, and positions us to execute our strategic plan. By that date, we will know much more about the results of the state’s budget process. No division is exempt, and each vice president has the flexibility to develop intra-division targets that vary from the 5% collective target.
I know this news is disappointing. I also know that each of our talented faculty and dedicated staff are working hard to do more with less. I am confident that, together, we will make our great University even better during these challenging times.
Over the next few weeks, I will continue to keep you apprised of significant developments. And, on April 30 at 10 a.m. in Greaves Hall, I will discuss the University’s proposed FY15 budget.
In the meantime, I will continue to advocate strongly for critical support for our students and our mission. To read the text of my presentation last week to the Budget Review Subcommittee on Postsecondary Education, click here: http://president.nku.edu/content/dam/President/docs/BudgetReview20140213.pdf. To read the letter I sent to Governor Beshear on December 20, 2013, explaining why I declined to support the CPE’s budget request for the 2014-16 biennium, click here: http://president.nku.edu/content/dam/President/docs/GovBeshearLetter.pdf.
Thank you for your support and encouragement.
Geoffrey S. Mearns
Northern Kentucky University
800 Lucas Administrative Center
Highland Heights, KY 41099