Budget Planning Update Shared with Campus Community

In a memorandum to the campus community, Andrew Mangels, vice chancellor of administration and finance, gave an update on the 2022 fiscal year and budget planning assumptions for 2023. These are projections that can evolve and change as the year progresses. The UMass Board of Trustees makes the decision on setting tuition and other fees. No decision has been made yet for the coming year. Typically, the board sets tuition in late spring or early summer.

That memorandum is as follows:

TO: UMass Campus Community

FROM: Andrew Mangels, Vice Chancellor Administration & Finance

DATE: November 23, 2021

SUBJECT: Fiscal Year (FY) 2022 & 2023 Budget Planning Update

As the campus emerges from the impacts of the pandemic, we continue to carefully plan and manage our finances to ensure both balanced budgets and the eventual return to the success and financial stability we experienced pre-COVID. While the federal stimulus programs (HEERF) are an important source of one-time funds, they will expire in Fiscal Year 2022 and therefore cannot be relied on as a long-term source of base funds.

As we begin to plan for Fiscal Year 2023, our projections reflect growth in tuition net revenues and student fees in both our traditional and UWW learning environments. These increases must be achieved in an increasingly competitive environment, influenced in particular by declines in the number of 18-20 year olds in the Northeast. The campus has committed to returning to a 2% operating margin (surplus of revenues over expenses) by FY2025 which will require steady growth in margin towards that goal over the next two fiscal years.

Fiscal Year 2022 (July 1, 2021 – June 30, 2022) Update:

• The campus continues to manage toward a balanced budget while also utilizing stimulus funds to cover the FY21 deficit of -$11.9M.
• Tuition revenues reflect a smaller than expected first year class with approximately 500 students fewer than budgeted and the second year of a tuition freeze (against an increase of 2.5% during normal years). The campus-funded, need-based financial aid budget increased by $6.5M to ensure access and student success at a time when students and their families have been under financial stress.
• State appropriations are expected to cover collective bargaining increases when finalized but the campus will need to fund non-state funded salary and fringe benefit increases. The 1.9% increase in the FY22 State appropriation provides for planned strategic growth in student success, diversity & inclusion resources and other initiatives, but is nowhere near enough to offset the impacts of lower revenue and increased costs mentioned here.
• Auxiliary revenues (primarily from our housing and dining programs) remain below pre-pandemic levels due to continued safety precautions and declines in some activities such as conferences and hotel occupancy.
• This year the campus restored approximately 50% of base budget reductions from last fiscal year for non-academic units and 70% of budget reductions to academic units. Spending is being carefully managed to meet these budget targets.
• The campus has committed $30M from borrowing within our existing expenditure pool for debt service as a match for the state capital investment of $75 million for a College of Information and Computer Science (CICS) building. See below for more on Capital spending.
• Federal stimulus funds are still needed to cover the FY21 deficit and provide for a balanced FY22 budget, creating additional stress in the base budget for FY23.
• The projected FY22 operating revenues and surplus reflect a portion ($11M) of the recently announced Marieb and Manning gifts to the School of Nursing and the College of Information and Computer Science (CICS), respectively. However, because these funds are restricted, they cannot offset general funds revenues shortfalls and must be retained for future year’s use.

Fiscal Year 2023 (July 1, 2022 – June 30, 2023) Planning Assumptions:

Given the need to provide a balanced FY23 budget without any additional stimulus funding and uncertainties regarding enrollments, the campus is planning to operate at current base budget levels into FY23. Funding of strategic priorities will need to result from re-allocation of existing resources.

The following factored into our planning assumptions:

• Tuition increases of 2.5% for in-state students and 3% for out-of-state students, and 3% increases in dining and housing fees. These increases will require off-setting financial aid increases for need-based students.
• Achieving our usual target of about 5,300 first-year entering students, compared to 4,800 this fall.
• State appropriations which are only sufficient to cover collective bargaining increases for state-funded positions and not other mandated costs or strategic investments.
• Continued support for planned investments in Advancement (to ensure success in the new fundraising campaign), DEI and faculty start up.
• Inflationary cost increases for utilities, labor, and goods and services critical to servicing the overall mission of the campus.

Capital Building and Infrastructure Investments:

The campus continues to address our aging buildings and other capital infrastructure to support academics, research and student success. Significant planned investments (subject to Board approval) in the next cycle include expansion of the CICS building ($75M from the state, $20M external sources and $30M from campus), partial renovation of the Totman building for SPHHS ($25M campus and $5M external sources) and a new Engineering building ($80M campus  and $20M external). In the recent past we have spent $65M on the renovation/expansion of South College, $13M for the interior renovation of the Fine Arts Bridge studio space, and $19M for the Old Chapel restoration among others. We received no capital funds from the State for these projects.

The campus is able to fund these capital investments within the existing capital infrastructure budget through existing annual transfers to Repair & Replacement (R&R) funds and debt service reductions resulting from the retirement of previously issued  debt.

In summary, the campus will need to continually monitor current and projected budget planning assumptions during fiscal years 2022-2023 in order to achieve a full recovery from the impacts of the pandemic. We appreciate the hard work and financial management occurring across campus necessary to achieve these goals.