University of Kentucky has $70 million budget shortfall, will furlough, layoff staff
The University of Kentucky will lay off and furlough some staff, freeze all hiring and decrease employee retirement contributions to make up for a coronavirus-driven $70 million shortfall in next year’s budget, officials said Tuesday.
In a message sent out to campus Tuesday, UK President Eli Capilouto said the university has ongoing expenses that still must be met but is struggling with a drop in revenues, including a more than $40 million loss in institutional investments and tuition revenues.
“We have to make reductions in our operating budget. There’s no way around that. Every college, department and unit —including my office and all those that report to me — will face budget cuts,” Capilouto wrote in an email Tuesday morning.
Staff members that have had reduced hours because of limited activity will be furloughed, he said. The university will continue to pay health insurance for those furloughed employees for 90 days, according to the email.
Some staff will be laid off, he said.
Jay Blanton, a spokesman for UK, said it’s not known how many people will be furloughed or laid off. Each division or department head will be given an amount to cut. How those cuts are achieved will be up to those supervisors.
In addition, the university will decrease contributions to employee retirement from 10 percent of employee’s wages to 5 percent. No merit raises will be given on July 1. Merit raises have been given for the last seven years. A previously-ordered hiring freeze will remain in effect. The university will not increase health care premiums or parking costs in 2021, the university said.
The UK Board of Trustees will meet in May to approve some of the above personnel changes.
“Many of these decisions will cause pain.,” said Capilouto. “They will require shared sacrifice. But they are necessary, if we are to meet our financial obligations, honor our principles of education, research, service, and health care and lay a foundation for the future,”
The $30 million in expenses that the university must continue to meet — expenses contributing to the $70 million shortfall —include money for scholarships, health premiums for employees, and a pledge to raise starting wages for workers to $12.50 an hour, Capiluoto said.
Blanton said no decision has been made yet on tuition increases. That decision is typically made in June.
“But again we understand the affordability and accessibility is an issue,” Blanton said.
Blanton also said all universities and colleges are concerned about enrollment in the fall, given the uncertainty surrounding when coronavirus-related restrictions on large group gatherings and social distancing will be lifted. That’s one of the reasons why the university took steps now to address potential shortfalls in the next budget year.
“There are more unknowns than knowns,” Blanton said. “We are cutting deeper than the $70 million with hopes that we will not need to cut more down the road.”
Blanton said the hope is employees of departments or areas that are being furloughed will eventually return if the economy, and the university’s budget, improves.
Other Kentucky universities have also slashed salaries, furloughed employees and made other cuts to make up for unexpected revenue shortfalls. On April 9, the University of Louisville announced it will furlough some employees and cut pay for those making more than $100,000, including men’s basketball coach Chris Mack and football coach Scott Satterfield. In addition, UofL announced Tuesday it was also cutting contributions to employee retirements for at least three months.
Western Kentucky University officials announced last week top administrators and coaches were taking a voluntary 10 percent pay cut. Money from those pay cuts will go to a fund to help WKU students.
UK Athletics, which is self-sustaining and separate from the university’s general fund, has not announced any cost-cutting measures yet, said Guy Ramsey, a spokesman for UK Athletics.
“As a self-supporting unit, the athletics department will make any decisions related to finances in close collaboration with the president and our partners on campus and announce them at the appropriate time,” Ramsey said.
The university’s current-year budget is $4.2 billion, which includes UK HealthCare. UK HealthCare is not part of Tuesday’s cuts. The hospital system has previously announced furloughs and redeployment of staff to address budget woes.
UK’s total annual cost of attendance is $31,000, an estimate that includes tuition, fees, room, board and other costs. That’s up 3 percent from the year before.
UK and most state universities canceled all in-person classes in mid-March to stop the spread of the coronavirus.
UK has roughly 12,000 employees and is one of the largest employers in Fayette County and the state.
The university’s announcement comes one day after Lexington Mayor Linda Gorton warned the city was looking at a $9 million deficit in its current-year budget and was predicting a $40 million shortfall for the fiscal year that begins July 1.
This story was originally published April 21, 2020 at 10:59 AM.
