Board of Trustees Reviews Preliminary FY23 Budget
May 12, 2022
The University of Northern Colorado’s Board of Trustees Finance and Audit Committee met on Friday, May 6, to discuss the fiscal year (FY) 2021-22 third quarter (Q3) financial report, an enrollment update and the FY23 preliminary budget preview.
Fiscal Year 2021-22 (FY22) Third Quarter Financial Report
Dale Pratt, UNC’s assistant vice president of Finance provided the FY22 Q3 financial report, informing board members that the university is currently anticipating a $20 million surplus above and beyond the FY22 budget. This marks the fourth consecutive year the university has seen a budget surplus.
Third quarter projections for FY22 reflect an anticipated $22.7 million operating surplus compared to the budgeted surplus of $2.9 million. The university’s cash position is projected to be at $77.1 million in reserves at fiscal year-end, the highest since 2013 and an increase of $20.6 million over last fiscal year’s ending cash position of $56.5 million.
According to Pratt, there were two significant revenue sources contributing to the sizable surplus, including $4.8 million in proceeds from oil and gas lease royalties and $10.9 million from the institutional portion of the supplemental federal relief package, also known as HEERF III. Those two sources combined helped to offset the net revenue shortfall of $3.2 million, primarily from enrollment-related sources. In addition, there was significant underspending of the FY22 budget mainly due to challenges with recruiting and retaining faculty and staff, an issue in line with nationwide trends. The university saw an overall reduction of $8.2 million in expenditures compared to the budget.
It’s anticipated that the positive FY22 operating results will provide the financial strength necessary to support UNC’s strategic initiatives and priorities.
Pete Lien, UNC’s assistant vice president of Enrollment Management, reported that the university is anticipating a 10% overall decline in undergraduate enrollment for the next academic year. While the university is on track to hit their projected target for new, first-time degree seeking students, numbers are below initial projections for transfer students. The university is also estimating a slight decrease of 1.8% in graduate enrollment.
Lien attributed the declining enrollment to a number of factors, including the increasingly competitive and shifting marketplace in Colorado and the fact that college-going rates remain lower than before the COVID-19 pandemic. He provided the board with an overview of ongoing and new efforts to address the decline. Some of those efforts include providing prospective students with financial aid award notices earlier, updating confirmation and enrollment marketing campaigns and continuing to engage with high school and community college students.
Complementing the efforts from Enrollment Management, the board also heard an update about the university’s continued strategic efforts related to improving recruitment, admissions, retention rates, graduation rates and the overall student experience through its Students First Framework. Lisa Vollendorf, UNC’s outgoing interim provost, reviewed some of the recent highlights including plans for a new Transfer and Transition Center to assist transfer students and improved service to culturally and linguistically diverse students. Vollendorf also discussed ongoing strategies to strengthen and diversify the university’s academic portfolio, including analyzing popular programs nationwide compared to UNC’s offerings and creating new programs in response to workforce needs and student demand. While improving enrollment, retention rates and graduation rates will be an ongoing effort, the university has seen a positive trend in retention among first-time, full-time students. The persistence rate among this group from the fall 2021 semester to spring 2022 semester was 91%, up five percentage points from last year.
Fiscal Year 2022-23 (FY23) Budget Preview
Discussion regarding FY23 focused on the importance of normalizing after two years of pandemic-related effects that significantly disrupted the budget as well as the university entering FY23 in a very strong cash position. The university is intentionally setting aside $15 million of its projected $77.1 million surplus for strategic investments to drive growth and capitalize on opportunities in the next couple of years and to offset the FY23 projected operating deficit of $8.9 million.
According to UNC’s Chief Financial Officer and Senior Vice President for Finance and Administration Michelle Quinn, part of the normalization process is recognizing the need to invest in people, compensation and support systems and retention efforts. To that end the budget allows for a 3% pool for compensation increases and restores some one-time cuts, pay-equity adjustments and mid-year compensation increases implemented in FY22. The university expects to see continued vacancy savings above normal with higher turnover continuing through FY23.
While UNC will see an increase of $5.3 million in funding from the state in FY23, as compared to the $2 million increase initially proposed by the governor’s office last November, it is anticipating decreases in net tuition and fee revenue due to lower enrollment. Undergraduate net tuition and fee revenue is projected to be down 7.9% compared to FY22, while graduate tuition and fee revenue is projected to be down 2.6%. Additionally, oil and gas royalties are projected to be much lower in FY23 at $1.5 million. The FY23 budget includes a tuition rate increase of 2% for resident undergraduate students, 3% for non‐residents, 2% for graduate students and a 3% increase in student fees.
A draft of the preliminary FY23 budget is available in the Fiscal Year 2022-23 Preliminary Budget Review.