A Budget Crisis at UConn? Not So Fast

Share

TwitterFacebookCopy LinkPrintEmail

The headlines have been alarming and there have been student protests, faculty letters, and campus outrage over the planned budget cuts to UConn. Those cuts come in response to the loss of $47.3M in federal COVID relief money and the fact there’s a projected $70M shortfall for fiscal 2025.

Faculty, staff, and students are pleading with Gov. Ned Lamont to restore the $47.3M, even though the federal subsidies were never earmarked to become permanent and don’t disappear completely until fiscal 2026.

The cries of desperation are loud. For example, on Feb. 19, 49 of UConn’s Endowed Chairs and Distinguished Professors penned an open letter to the governor. The letter denounced what were described as “drastic” budget cuts, citing the severe “draining” of money that will do “irreparable harm.” The letter warns of the dystopian future UConn is facing should these cuts go through, including the destruction of almost all graduate programs, research, scholarships and ultimately, UConn’s crown jewel, its athletics program.

Is this really the case? The open letter from faculty does not actually mention what would be cut.

A simple top line analysis does not paint the same picture. The plan would start with a 3% cut to the operating budget for fiscal year 2025, which begins in June 2024. This 3% cut equates to roughly $70 million of UConn’s current $1.6 billion budget. Then in the years to follow, the cuts would be  4%, 3.5%, 2.5% and 2% respectively to total a 15% cut in fiscal 2029. 

The operating budget consists of operating revenues and operating expenses. The lion’s share of operating revenue comes from student tuition and fees, net of grants and contracts. And guess what? UConn is celebrating the highest enrollment numbers in the school’s history. That’s right, UConn is bucking a nationwide trend of a downturn in enrollment and thus far in 2024, applications are up over 18% vs 2023. 2023 had also been a record year for applications and admittance, with applications up over 12% vs 2022. As such, operating revenue will be impacted favorably. Last year’s increased enrollment upped tuition revenue 8% vs year ago, which equated to a $33.7 million increase. That is almost half of the amount of the projected 2025 $70M shortfall. Given that applications in 2024 are even higher than 2023’s record levels, the revenue generated by enrollment should cover a nice chunk of the budget deficit.

As far as operating expenses are concerned, almost 50% of the $1.4 billion in 2023 expenses were salaries and wages. The exact expense for fiscal 2023 was $685.2 million. As reported, a portion of the faculty and staff at UConn are some of the highest paid employees in academia.  Some athletic coaches annual compensation packages exceed $1M and more than 56% of the faculty make between $93k to $279k. The faculty salaries cited are as reported by the Connecticut Office of the State Comptroller and do not necessarily include fringe benefit packages which can add up to another $45k.

Connecticut is an expensive place to live and competition for great faculty is stiff, but these salaries are higher than many other schools offer across the country. UConn also ranks within the top 100 schools for salaries in the US, among both public and private schools, according to Academic Influence Rankings service. So while we hear grumbling that academic quality and the ability to attract top talent will be compromised with any kind of cut, that may not be accurate. Operating expenses would only need to be shaved 2 percent, to result in another $30M in savings. Combine both the revenue from increased enrollment and a small operating expense cut and your $70M deficit may be covered.

One other thing to note: UConn’s ambitious capital plans are proceeding according to schedule and UConn’s Fitch bond rating for a portion of bonds was increased in December to an all time high of AA- (from A+.) This may help offset increased borrowing costs for the future.

From this topline analysis, UConn looks like it’s in strong financial health. Perhaps school administrators can prioritize, strategize, and reevaluate spending decisions. Such actions, coupled with aggressive management of increasing revenue, captured through robust enrollment trends, could successfully fund the $70M projected deficit. This could happen without Lamont’s reinstatement of $47.3M in Covid funds and the “destruction” and “destabilization” of UConn as purported would not occur.  

Elizabeth Hoffmann
Old Lyme, CT

Hoffmann has been published in the Wall Street Journal, Motley Fool, Yahoo Finance and Reuters. She has also written corporate white papers as a consultant for numerous Fortune 100 companies.

Besides writing, Liz has held management positions at Disney, CBS and ABC networks, Nabisco Brands and Unilever. She has a BA and an MBA.