UNC Board of Trustees addresses budget shortfall

After hearing a gloomy report about the $200 million negative impact the COVID-19 pandemic could have on the University’s budget, Board of Trustees members said it was time to address that shortfall as well as a previous $100 million deficit.

“It’s time to rip off the Band-Aid and let’s fix this thing instead of just coasting it down the road,” said Charles Duckett at the board’s Sept. 24 meeting, held at the Carolina Inn with several trustees joining by Zoom.

“I strongly echo that, and going forward I’m going to be looking to see what sort of recurring cuts there are,” said trustee John Preyer. “Given the changes in higher education, everything might be more dire than is even forecast today.”

In his presentation, interim Vice Chancellor for Finance and Operations Nate Knuffman explained the reasons for the projected shortfall of $300 million, 8% of the University’s revenue.

Before the pandemic hit, the University already had a $100 million deficit, partially caused by a lack of centralized budget planning. Then the shift to remote instruction last spring because of COVID-19 cost $54 million in lost revenue from housing, dining, parking, campus health services and athletics, he said. Combined with potential similar losses over the summer, this fall and next spring semester, the total COVID-related costs would come to $200 million, a figure that’s in line with other universities, he said.

In the short term, the University has been able to save some money by restricting spending on items like travel and consulting, a pause on filling vacant positions, postponement of capital projects and emergency furloughs in the athletics department and at the Morehead Planetarium and Science Center.

Knuffman said that, in making these decisions, his office would follow these guiding principles: Prioritize the core mission of teaching, research and service; value and support the University’s workforce; avoid a one-size-fits-all approach; and engage stakeholders across campus.

Vice Chancellor for Human Resources and Equal Opportunity and Compliance Becci Menghini pointed out that about 80% of Carolina’s budget is “represented by people” in her update for the board. Steps like the hiring pause and emergency furloughs have a short-term impact, but the tool that would likely have the greatest impact on the long-term deficit would be to offer early retirement, something the University doesn’t have the authority to do on its own, she said.

Early retirement could be a popular option for employees, considering that 227 applications for retirement have been received so far this year, 72% of last year’s total, Menghini said. Of the University’s employees, “36.5% are eligible to retire in the next five years,” she said, but the General Assembly would have to authorize an early retirement program.

In his remarks, Chancellor Kevin M. Guskiewicz talked about plans for the spring semester. “Our hope is that we will bring students back to learn and live on campus this spring semester,” he said, and provide an on-campus experience “for as many students as we can safely accommodate.”

One of the first decisions will be the first day of classes, currently set for Jan. 6 but likely to move to Jan. 13 or 20, Guskiewicz said.

In other action, the trustees:

• approved changes in the faculty promotion and tenure policy to give more flexibility in the four-year probationary period for assistant professors and to eliminate the requirement for a faculty member to have been employed for 18 months before being promoted;
• received the first report from new Vice Chancellor for Student Affairs Amy Johnson; and
• learned from Vice Chancellor for Development David Routh that Carolina has reached 80% ($3.4 billion) of its fundraising goal.