Carolina could see a budget deficit of $300 million — 8% of the University’s revenue — from the COVID-19 pandemic, Nate Knuffman, interim vice chancellor for finance and operations, told Faculty Council during Friday’s virtual meeting, the first full Council meeting of the academic year.
The pandemic has led to $54 million in losses this fall from housing, dining, parking and campus health, along with significant losses in patient revenue and athletics, he said. Those losses combined with potential losses in the Spring 2021 semester create the potential for a $300 million shortfall this fiscal year.
Knuffman explained that prior to the pandemic the University’s budget was already under pressure from the greater transparency required by the UNC System Board of Governors and scenario planning requests, along with a cap that limits the amount Carolina can charge for tuition and fees. Carolina’s decentralized and fragmented operating environment, with no central budget to outline the use of revenue and planned expenses, adds to the challenges.
The University’s strategic plan, Carolina Next: Innovations for Public Good, will also require investments, creating more budget pressures, Knuffman added.
The University has worked to mitigate the budget shortfall since the pandemic began last March. Knuffman said he expects to have a better understanding of the broader financial impact at the end of September, when the state will release a revised revenue forecast at the end of the fiscal year’s first quarter. Carolina’s fiscal year runs July 1 to June 30.
He and his team are closely monitoring the state’s budget situation to see how losses in wage withholding and sales taxes will impact the state budget, which impacts the University’s state appropriation.
To offset the losses, the University has put in place limitations on hiring and salary adjustments, reviews on all budgeted non-personnel expenses, postponement of capital projects along with auxiliary unit-specific management plans, Knuffman said.
To date, tuition has not been impacted because Carolina has seen a small increase in enrollment, with this year’s first-year class the largest in the University’s history. The University also benefits from a successful research enterprise, with funding up 14% over last year at this time.
Budget meetings with all units across campus are set for the coming weeks. Chancellor Kevin M. Guskiewicz said he is having “difficult conversations” with deans and considering scenarios for possible cuts, whether those would be across the board, which he called horizontal cuts, or vertical cuts, such as cutting programs.
“We’re going to balance keeping our campus safe while trying to keep everyone whole,” Guskiewicz said. “We’ll be faced with some difficult decisions in the coming months.”
Becci Menghini, vice chancellor for human resources and equal opportunity and compliance, talked about the impact of the pandemic on Carolina’s workforce, based on the budget update.
Menghini explained that there are many considerations for making personnel decisions, including the size of the budget impact, the types of programs that might be reduced or discontinued and the units affected. She listed steps the University might take to meet a budget shortfall, including temporary base salary adjustments, reductions in force, furloughs and reduced hours.
While many steps are available, she said, many restrictions apply to each action, including approvals that may be needed from the UNC System or the General Assembly.
A voluntary early retirement program is not planned at this time, though 35% of Carolina’s employees are eligible to retire in the next five years, Menghini said. If a voluntary plan were put in place, it might lessen the impact on those remaining.
Any personnel action will be shared in advance, Menghini said, adding that “Carolina has an obligation to ensure employees know what’s coming.”
HR is focused on making sure our guiding principles are aligned with those of finance as they make budget decisions. “We will prioritize our people, reduce operating expenses and put our focus on the teaching, research and service — the mission of the University,” Menghini said.
Spring semester planning
Planning for the spring semester is underway and includes multiple scenarios around the spread of the virus and the availability of a vaccine, balanced with providing a safe Carolina experience.
A new 25-member campus and community advisory committee is planned and will be co-chaired by Faculty Chair Mimi Chapman, Employee Forum Chair Shayna Hill and Student Body President Reeves Moseley. The committee will include seven to eight faculty members, six to seven staff members, three to four students and representatives from the Chapel Hill community.
The committee will provide feedback to the chancellor and to the Roadmap Implementation Team chaired by Executive Vice Chancellor and Provost Robert A. Blouin. Additional details on the Committee are expected to be shared this week.
In other actions, Faculty Council recognized these award winners:
- Dr. Ada Adimora, professor of medicine, division of infectious disease, UNC School of Medicine and a professor epidemiology in the Gillings School of Global Public Health, received the Thomas Jefferson Award for her work in HIV research in heterosexual transmission among African Americans in North Carolina and across the South. The Thomas Jefferson Award, Carolina’s highest award for faculty, was established in 1961 by the Robert Earll McConnell Foundation and is presented annually to “that member of the academic community who through personal influence and performance of duty in teaching, writing and scholarship has best exemplified the ideals and objectives of Thomas Jefferson.”
- Four faculty received Hettleman Prizes for Artistic and Scholarly Achievement, awarded for groundbreaking and innovative research from promising early-career faculty. One was Angela Smith, associate professor, department of urology, UNC School of Medicine. The three others are from the College of Arts & Sciences: Mohit Bansal, associate professor, department of computer science; Andrea Bohlman, associate professor, department of music; and William Sturkey, associate professor, department of history. The award was established in 1986 by the late Philip Hettleman, Class of 1921, and his wife Ruth. Recipients each receive $5,000.
A recording of the meeting is available.