Tough times for UA – big budget hits; enrollment drops and now its president may depart

These are tough times for the University of Alaska. There are large back-to-back budget deficits, enrollment is declining and now the university’s president may be leaving.

President Jim Johnsen announced last week he is on the “short list” for candidates to become president of the University of Wisconsin.

Meanwhile the university is being hit with reductions in state funds – $20 million last year, $25 million this year and $20 million next year – thanks to budget vetoes by Gov. Mike Dunleavy.

Now the unexpected impacts of the COVID-19 virus on university revenues are requiring deeper cuts.

The total reduction in FY 2021 expenditures is $35 million under the plan agreed to by the university’s Board of Regents on Friday. More than $4 million is being taken in academics program cuts and $29 million in administration and other areas.

This is the sixth year for reductions in state funds for UA, but the cuts are now deeper. Between Fiscal Year 2014 and Fiscal Year 2020 state general funds to three universities in the UA system have been reduced $101 million a year, from $378 million in state fund made available in FY 2014 to $277 million in FY 2022.

Budgets have been reduced at University of Alaska Anchorage by 19.4 percent between those years, at University of Alaska Fairbanks by 18.3 percent, and at University of Alaska Southeast by 23.3 percent. The budget for UA’s statewide administration group is down by 29.8 percent since FY 2014.

Those reductions have resulted in a reduction of more than 1,700 UA employees.

What could be added is a 20 percent decline in enrollment for the coming academic year, which starts in September, Johnsen told reporters in a briefing last week.

The drop in student count is a long-term trend that has been happening since 2011, but it has accelerated over uncertainties in state funding for the university, and it is continuing because of COVID-19. UA enrollment statewide peaked at 34,832. In 2012. It was 24,943 last year, according to information given the regents last week.

Johnsen said the long-term trend downward is due to factors in the state’s economy, such as a large number of well-paying jobs in past years didn’t require college degrees (this is now changing) along with declining Alaska high school enrollment, which reduces incoming students at the state university.

Things could still improve for September, however. The university’s projected enrollment drop may wind up less than 20 percent because would-be students appear to be waiting to see if the university will be able to open its classrooms for teaching this fall or will have to offer mostly on-line courses.

Johnsen told the regents UA is planning now for a physical reopening but that chancellors at the three universities in the statewide system have the final say on when and how it will happen.

Being able to physically open is important for the university because enrollment affects tuition revenues as well as income from student housing and campus activities and events.

Meanwhile, the university was able to develop a plan to cover the shortfall for Fiscal Year 2021, the financial year beginning July 1. A $25 million budget reduction had already been absorbed through a combination of administrative savings, elimination or reductions in 45 course offerings and refinancing of debt.

Another $25 million in unexpected COVID 19 expenditures and revenue losses were covered by funds taken from reserves.

The university’s FY 2021, effective July 1, budget totals $832.3 million including $277 million in funds appropriated by the state Legislature, the rest being income from tuition, federal funds, mostly for research, and a small amount of revenue from lands owned by the university.

The FY 2021 budget is now finished but issues facing the university in Fiscal Year 2022 are greater. The shortfall in FY 2022 could reach $36.3 million including another $20 million reduction in state funds and continued lower revenue from tuition and other income caused by COVID-10

Discussions on FY 2022 have to start now so that a plan can be in place in October, the target date for the budget proposal.

Filling the FY 2022 hole may require major structural changes for the university system, and among options Johnsen presented to the regents was a possible merger of two of the three separate universities in the UA system. This could involve combining the University of Alaska Southeast, which is based in Juneau, with the University of Alaska Fairbanks.

At the June 4 meeting the regents agreed on an in-depth review and a conceptual plan to merge the University of Alaska Southeast with the University of Alaska Fairbanks. The motion was offered by Juneau Regent Dale Anderson.

The conceptual plan is due on October 15, 2020, which is when the regents will take up a FY 2022 budget.

Development of structural changes will be painful; Johnsen told the regents last week.

“You asked for options for how to address our budget challenges. In response, I have brought them to you, without (my) recommendation,” he told the regents.

“It breaks my heart to bring these options to the board and I know it is hard for you. We don’t just sell widgets. We discover new knowledge. We change, we transform people’s lives,” Johnsen said.

“We reach out from our classrooms and labs to help the people in all corners of Alaska. The harsh cuts to our budget by the state mean that our ability to play that critical role is hurt.”