UK board approves budget, while bracing for potentially more cuts in the future
A significant portion of the University of Kentucky’s now-approved $4.4 billion budget is pinned on the hopes for a sizable incoming freshmen class.
About 11 percent of the revenue generated for the budget comes from tuition. An expected pandemic-driven drop in freshmen enrollment — from an estimated 5,700 freshmen to a 4,500-member class — cost the university millions in potential revenue.
The university currently has just north of 5,000 confirmed freshmen for the university’s “reinvented normal,” Aug. 17 start date. But that number could drop as summer melt — the routine annual drop in confirmed freshmen before the beginning of the school year — takes its toll on the class.
Eric Monday, the executive vice president for finance and administration, said during the Board of Trustees meeting on Friday that the melt could be more dramatic this year than others because of COVID-19 concerns.
The Board of Trustees passed the pandemic-stretched budget, a contract extension for UK President Eli Capilouto and a modest tuition bump for the upcoming year during Friday’s meeting. University officials also announced the first steps in a larger plan to close opportunity gaps for students of color, including making Juneteenth a university holiday in the next academic year. Earlier this week, university officials announced the final campus reopening plans.
Even with a bad summer melt, Monday said officials were still confident in hitting the goal of 4,500 freshmen. He said 100 enrolled students is equal to about $1.7 million in net revenue. If the university were to get more than its goal, then the money would go toward the university’s emergency contingency fund, which was created near the beginning of the COVID-19 crisis.
After bridging the university’s $72 million budget shortfall for the upcoming year with staff reductions, cuts to employee retirement benefits and use of the contingency fund, the university currently has $14.5 million left in the contingency fund.
Angela Martin, the vice president for financial planning and chief budget officer, said during a finance committee meeting that the university is bracing for potential shortages in state funding, as state budget officers in July could announce more reductions in the university’s appropriations.
Earlier Friday, UK HealthCare officials announced that less than 200 healthcare employees were still on furlough out of the 1,500 targeted in April. Dr. Mark Newman, the executive vice president of health affairs, said the goal is to have everyone back by July or August.
CFO Craig Collins said that patient volume — which dramatically dropped as the state went into a pandemic lockdown — has begun to recover as the state has reopened.
At the beginning of May, the hospital saw about 89 discharges per day, Collins said. By the end of the month, discharges were closer to 110 per day — not far from the annual pre-pandemic average of 116. Health care revenue is critical to the university’s budget as the hospital system accounts for 47 percent of the revenue. In April, the hospital system had a net revenue loss of $10.8 million, Collins said, while preliminary results from May show a positive $38.2 million net revenue gain — about $1.6 million higher than pre-pandemic estimates for the month.
Capilouto gets contract extension
The board also passed a three-year contract extension for Capilouto, who has been with the university since 2011. Capilouto’s contract was approved with a 10 percent pay reduction for the coming fiscal year. That 10 percent will be provided to a fund for employees in need of financial aid. His contract now ends in June 2024.
About $85,000 of Capilouto’s $838,334 annual salary would go into an employee assistance fund set up by the university’s human resources department. He was the fourth-highest paid university president in the country in 2018.
Capilouto will also be able to collect an additional $228,000 in deferred payments this year, UK spokesperson Jay Blanton said. For the duration of Capilouto’s contract extension, he’ll be able to collect that same amount in deferred payments every year.
1 percent tuition bump likely
The board approved a 1 percent tuition increase for in-state students and a 2 percent increase for out-of-state students, joining U of L in seeking a tuition bump this year. However, the tuition increase is not yet set in stone, said Martin. The Kentucky Council on Post-Secondary Education has to approve the tuition increase next month, Martin said, adding that there’s no indication that the council will reject the increase.
Many other Kentucky public universities have elected to freeze tuition because of COVID-19 complications. UK’s tuition increase is the smallest in at least the past decade. From 2010-2012, tuition increased by 6 percent every year.
Tuition for in-state, undergraduate students would go from $6,180 this past school year to $6,242. Out-of-state tuition would go from $15,340 to $15,647. Last year, overall enrollment was 30,545, with 22,276 of those being undergraduate students.