Enrollment decreases likely to cost the University of Kentucky millions, leaders say.
University of Kentucky officials anticipate fewer incoming freshmen and a drop in investment revenue in the coming months — decreases compounded by millions in revenue losses incurred as the university has adapted to the challenges of the COVID-19 pandemic.
“We expect our freshman class is going to be a lot smaller than anticipated,” Eric Monday, the executive vice president for finance and administration, told the Board of Trustees on Tuesday, while adding that the university is doing what it can to recruit more enrollees.
Pre-pandemic estimates forecasted an incoming freshman class of 5,750 this fall, Monday said, but the number of freshman is likely closer to 4,500 students. That drop — combined with other likely enrollment decreases in other classes — means a $27 million decrease in the university’s projected revenue.
Across the country, many universities and college admission counselors say that many potential college freshmen are considering gap years or are considering taking basic courses online at cheaper community colleges instead of risking paying for tuition for what may be a fully online semester for large universities, Inside Higher Ed reported.
UK’s expected enrollment drop is the largest chunk of the estimated $73 million budget shortfall facing the university in the next fiscal year after the university lost $62 million in revenue in the past three months.
The $73 million projected budget shortfall in the next fiscal year that begins in July is separate from UK HealthCare’s potential $131 million shortfall over the next two fiscal years.
When calculating the budget shortfall, Monday said administrators factored in a planned 1 percent tuition increase for in-state students and 2 percent increase for nonresidents. Those tuition increases won’t be able to be approved by the board until June. For the past year, in-state tuition was $6,180 while out-of-state students paid $15,340.
Along with tuition revenue decreases, the shortfall was created by an $18.6 million expected investment revenue decline and almost $30 million in promised wage raises, scholarship funds, health premiums and fixed costs.
The university has taken initial steps to address the shortfall with a one-year, 5 percent cut to the university’s retirement contributions and with hundreds of furloughs of university staff — especially among service employees working in dining, bus driving or other areas. But as the university looks to reopen the campus, most of those jobs will be brought back, Monday said.
Each department head was in charge of making a range of cuts. Monday said that more salary cuts in the future were possible should financial conditions turn more grim.
“We may have to have a conversation in the coming weeks, or months, or quarters about compensation,” Monday said. “Because that’s probably that last component of options that we have.”
‘Bad publicity for the university’?
Lee Blonder, a board member who was elected by the university’s faculty, said that UK’s decision to not cut the pay of top administrators and the subsequent media coverage of that decision created “bad publicity for the university.”
“We know there are people being laid off, we know there are people losing their salary all together,” Blonder said before asking “what sacrifices” Capilouto and other top administrators were making.
“It would be a real morale booster to the community and the state to know that we truly are all in this together,” Blonder said.
Capilouto said cuts to administrators were not off the table but would have to come with a specific purpose in mind.
“I personally understand the responsibilities I have with the priviledges that come with my office,” Capilouto said. “I plan to meet those and I will do so, and I will ask others at the appropriate time to join me in the way I do them.”
UK has lost $62 million in revenue in just the past few months
Monday told the board — which met on an almost five-hour-long public Zoom call — that the university lost almost $62 million in expected revenue over the past two months while adapting the UK campus to a social-distancing friendly learning institution. The largest chunk of money was $14 million worth of refunded housing and dining credits to students who had to suddenly vacate the campus’ dorms in March.
Additional, unexpected and unbudgeted spending — such as evacuating students who were studying abroad, providing more technology to students who couldn’t work from home without it and payment to employees using new sick leave guidelines— will cost the university $15 million, Monday said.
The university has sent 644 iPads, 233 mobile Wi-Fi hotspots and 57 Windows tablets to students who needed them for online courses, said Kirsten Turner, the university’s associate provost for academic and student affairs.
Lost athletic events this spring — which would have included basketball revenue — cost the university around $4 million. The stock market plunge also resulted in more than $6 million in losses, Monday said. The rest of the lost $62 million is attributable to a combination of discounted tuition for summer school, loss of dentistry clinics and other adjustments.
CARES Act money is headed to UK students
The university’s coronavirus-driven budget troubles persist even though it is supposed to receive about $17.5 million in federal relief money of which about $8.9 million will go directly to students.
About 5,700 UK students will receive emails on Tuesday and throughout the week notifying them that they are eligible for the federal aid, said Turner.
Students, who have filled out a FAFSA and have unmet financial needs, can get up to $1,500, Monday said.
About 77 percent are undergraduate students, 11 percent are graduate students and the remaining are professional students, Turner said. Of those students, 91 percent are from Kentucky and 20 percent of the potential recipients are students of color.
There are 9,000 students who qualify for the aid, and the additional 3,300 students will get aid if the university’s pool of money is not exhausted. Turner said that she expects more rounds of distribution.
In addition to the CARES Act money, the university’s emergency fund for students of need has raised over $100,000 to be distributed. According to Turner, about 200 students have applied to receive aid.
The other relief aid destined for the university has yet to arrive, Monday said.
This story was originally published May 5, 2020 at 3:50 PM.