Letter to the Kutztown University Community Concerning our Budget Challenges
Dear KU Campus Community,
As we approach the end of a very successful year at Kutztown University, it is necessary that I share a series of concerns regarding our budget situation for the next academic year.
As you all know, we have had many financial challenges in recent years - a major drop in commonwealth funding, falling enrollment (we have gone from 10,700 students in 2010 to around 8,300), rising costs in all areas, and modest tuition increases (our tuition rates, which are not set by us, continue to be among the lowest in the state). We have implemented budget reductions of nearly $14M since my arrival and more than $17M over the last five years. Additionally, we have invested millions into deferred maintenance projects. Faculty, staff, administrators, and students have worked tirelessly to continue to accomplish our mission with diminishing resources.
I was delighted to report at the convocation last August, that we stopped the downward spiral in our enrollment this year and essentially broke even for the first time in eight years. In addition, for the first time in nine years, we balanced our budget --- without using our reserves.
This success resulted from our improved enrollment, a 2.99 percent tuition increase, a 3.6 percent appropriation increase, the new Campus Support Fee, and income from other areas. We also made significant budget reductions, exceeding $2.5 million across the university. As I have pointed out in past communications, Middle States and other governing bodies have made it clear that we must have a balanced budget, without relying on reserves, as we go into the future. However, various factors are coming together that will make our budget situation very difficult as we look at next year.
While we anticipate an overall increase in new students for next year, we are currently projecting a small decrease in overall students. This is because we are graduating another large senior class and our retention rate is projected to dip slightly.
Last year, we had an increase in state support and an increase in tuition. This year we may not see any new money coming from these sources of income. Yet, costs continue to rise (for example, mid-year raises and benefits increases are nearly $1.5 million) and there may be additional costs resulting from new collective bargaining contracts currently under negotiation. In a recent press release from the State System, you would have read about the opportunity for increased pricing flexibility in the future. This tuition modification opportunity will not affect the budget challenges for the 2019-2020 academic year.
Therefore, it is necessary to prepare to take precautionary actions in anticipation of possible budget shortfalls that will fall into these areas:
- Hiring freeze - there are currently 43 non-faculty open positions on campus; nearly all of these will be frozen. The vast majority will be eliminated from our base budget.
- We must continue to hire faculty to teach our classes, but all efforts must be made to ensure all classes being taught are fully enrolled. The temporary faculty budget will be reduced and all efforts will be made to rely on existing faculty to teach our classes.
- Beginning July 1, a 10 percent across the board budget cut will be implemented to all base operating budgets next year (these would be non-personnel dollars).
- Many physical plant projects will be cancelled for the coming year. (note: this will not affect state or foundation-funded projects)
Although these actions have brought us closer to a balanced budget, we still need to identify more than $1 million in expenditure reductions or revenue enhancements for 2019-20. Although we are considering position eliminations as a potential budget balancing strategy, we are hoping to avoid layoffs.
Our projections are data-based largely resulting from past performance and do not take into account the many "value added" factors that have been implemented to raise retention and recruit additional students. It is our expectation that these many factors may result in higher enrollment numbers than expected. In addition, we have numerous activities and programs in place to raise our retention and persistence rates and, if we are successful, our overall numbers will increase. I have said many times that if we can only retain three additional students per academic department, this would bring in over $1 million in tuition and fees.
We have shared our budget projections with the Strategic Planning & Resources Committee, the University Senate, and have briefed university faculty and staff leaders. We will continue to work with governance groups throughout this process. Please contact Matt Delaney, the assistant vice president for Finance & Business Services, if you have questions about any of the budget-related information in this correspondence.
Despite this challenging fiscal situation, I remain convinced that, working together, we will all ensure that Kutztown University remains vibrant and continues to provide the environment to make a difference in each of our student's lives.
Dr. Kenneth S. Hawkinson