A committee of UConn's Board of Trustees examined the University's proposed FY20 budget Tuesday, scrutinizing details of a spending plan that focuses on protecting UConn's academic and research strength while contending with funding challenges.
The board's Financial Affairs Committee voted Tuesday to send the proposed budgets to the full Board of Trustees, which will consider them at the June 26 meeting.
The spending plans propose $1.46 billion for Storrs and regional campuses, and $1.24 billion for UConn Health.
The University's overriding goal in crafting its budget is to protect and build UConn's academic and research strength, which draws talented students and faculty, helps foster economic development for the state, and has kept UConn among the nation's top 25 public universities for eight years in U.S. News & World Report's annual ranking.
The most significant fiscal hurdle faced by the university stems from the state's unfunded pension and retiree healthcare liability that is built into employee fringe benefit rates. UConn pays a portion of these costs itself, with the state comptroller determining the rates.
"UConn's core functions of education, research, and clinical care are clearly healthy and stable, which this budget reflects," said Financial Affairs Committee Chair Andy Bessette. "At the same time, the serious and growing burden of the unfunded pension liability is the most significant fiscal challenge the university faces. UConn's leadership is appropriately working with the state to try and identify ways to address these costs going forward to help keep UConn successful and competitive."
In FY20, UConn will have to pay $31 million toward the legacy unfunded pension and retiree healthcare liability, which built up statewide over many years. UConn Health would have paid an additional $53 million next year, but the General Assembly and the governor allocated $33.2 million in the next state budget to help reduce that amount, as UConn Health could not have closed the budget deficit this created without assistance from the state.
This funding will help UConn Health remain solvent in FY20, although spending reductions and other actions will still be needed to close the remaining deficit.
UConn and UConn Health have significantly cut costs across all campuses in recent years and UConn Health has increased the revenue it generates through clinical care by 59 percent since FY13.
If not for the costs associated with the unfunded pension and retiree healthcare liability, both UConn and UConn Health would have been fiscally stable in the year ahead - even running modest surpluses.
The deficits of $19.6 million and $7.1 million for UConn and UConn Health, respectively, that are caused by the legacy unfunded pension and retiree health liabilities will be covered in the coming year by cost-cutting through employee attrition - leaving open positions unfilled when possible - and other possible actions such as dipping into the University's fund reserve, said Scott Jordan, UConn's executive vice president for administration and chief financial officer.
The issue is not limited to the FY20 budget, which starts July 1. In FY21, the cost of the unfunded pension and retiree health liabilities paid with non-state funds is estimated to grow to $34.1 million for UConn and $58.3 million for UConn Health.
UConn President Susan Herbst said the University appreciates that the governor and lawmakers "gave us the tools we need this year in a really tough (financial) environment," and that UConn is working to ensure that budget difficulties this year and into the future have no impact on the University's academic enterprise, healthcare services, research and other parts of its mission.
"If the enormous cost of the unfunded pension liability were not part of our budget equation, both UConn and UConn Health would be running small surpluses next year instead of closing deficits," Herbst said. "Both have implemented millions in spending reductions, and, in addition, UConn Health has done its part to work toward fiscal stability by dramatically increasing the revenue it generates from patient care.
"Even so, UConn Health could not have closed the deficit created by the unfunded pension costs next year without help from the state," she added. "We are incredibly grateful that the governor and the General Assembly acted to assist us in addressing those costs in the year ahead, which will go a long way toward keeping UConn Health solvent in FY20."
Elsewhere, UConn is increasing its financial aid budget in FY 2020 to $194.7 million - with $139 million directly from UConn institutional funds - to help support talented students, with the best packages provided to in-state, low-income students.
University-supported financial aid has increased 24 percent over the past three years, and three-quarters of all UConn undergraduates receive some form of financial aid.
UConn contributes $3.4 billion annually to the state's economy, employing one out of every 90 jobs in the state. UConn's success provides direct, tangible returns to the state for the investment it has made in the University's academics and campuses.
Administrative jobs have consistently remained between only about 2.2 and 2.5 percent of the UConn workforce for the past 25 years, despite a significant growth in the University's enrollment and academic scope.
