In an LMU town hall meeting on Aug. 19, LMU Executive Vice President and Provost Thomas Poon presented the University’s budget plan in response to the revenue loss due to the COVID-19 pandemic.
The University is expecting around a $48.6 million loss in total revenue for fiscal year 21. To balance the budget by making the expense reduction equal to the expected loss, budget cuts have been taken. However, expense reduction still falls $15.8 million short, and the University continues to look for other possible financial reductions.
In the town hall, Poon outlined four different budget response scenarios: “Virus contained with moderate social distancing,” “Virus contained with severe social distancing,” “Virus recurrence” and “Pandemic escalation.” Each scenario has its own distinct budget cuts.
The first scenario, which assumed that students, faculty and staff would be allowed back on campus for the fall 2020 semester, was expected to have a net revenue shortfall, or a gap between the actual and expected revenue, of $8 million to $20 million. The budget cuts in this scenario included a salary hold for all employees and a temporary hiring freeze. The president, cabinet, vice presidents, vice provosts and deans all received a 10% pay cut, which amounts to about $1 million in savings for the year, according to Poon. There has also been a 4% budget reduction for managers of schools, colleges and other divisions, which includes layoffs and furloughs.
Since the majority of students, faculty and staff have not been able to return to campus for the current semester, the University has surpassed the first scenario, and the listed budget cuts have already been implemented.
Scenario two, the current scenario, accounts for online classes through the fall semester. The University expects to have a net revenue shortfall of $20 million to $50 million. The increased revenue shortfall is largely due to the inability to house the normal number of students on campus this fall. Additional budget cuts in this scenario include the suspension of retirement contributions for all employees. The University had originally planned to reduce retirement contributions 50%, but once the housing situation became clear, the administration decided to suspend contributions entirely.
If classes continue online for the spring 2021 semester, the University will reach scenario three, “Virus recurrence,” during which net revenue is expected to fall $50 million to $100 million. The administration predicts that online classes going beyond summer 2021 would result in a revenue shortfall over $100 million. These two scenarios do not yet have any planned budget cuts.
The University expenses for fiscal year 20 (FY20) added up to $531.2 million. 48% of this total went to employee salaries and benefits, 23% went to financial aid, 17% went toward operating expenses including facilities management and utilities, 7% to auxiliary expenses, 4% to depreciation and 1% to pay interest expenses.
The University’s revenue for FY20 also added up to $531.2 million. 83% of revenue came from student tuition and fees, 9% from auxiliary enterprises such as room and board, dining and parking, 5% of revenue came from investment income, 2% from gifts and grants and 1% listed from other sources. With 92% of University revenue accumulated from student tuition and the auxiliary enterprises funded by students, enrollment is proving vital to financial stability this year.
On an optimistic note, Poon expressed that student enrollment in the University this year is good compared to other statistics. New first year undergraduate students totaled 1,592, which converts to 105% of the target number, there are 472 new transfer students, which is also 105% of the target and 4,765 returning students, 100.3% of the target. He stated that if enrollments in the University continue to stay strong, the implemented budget cuts may be able to be rolled back.
Lindsay McCarthy, the assistant vice provost of financial aid, emphasized that the University has prioritized its students throughout its response to the pandemic. There has been almost a 20% increase in student financial aid this year, according to McCarthy. This includes the $10 million of need-based financial aid approved in April and the additional $6 million in COVID Tuition Relief Grants for undergraduate students.
“The increase was only possible because of the shared sacrifice among faculty, staff and administrators working to keep the university cost effective,” said McCarthy.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, allocated $14 billion as the Higher Education Emergency Relief Fund. The University was provided with $4.7 million of relief funding with $2.3 million of it going toward emergency grants for students.
There have been several propositions in Congress regarding a second stimulus package. The most recent "GOP skinny bill" would provide $105 billion in funding for education with most funding going toward reopening schools, according to CNN.
Until another stimulus bill is passed and signed into law, however, the University will continue to rely on student enrollment and financial reductions to keep a balanced budget.