University Financial Update

Published October 12, 2020

Dear university community,

I want to take this opportunity to provide a financial update to our university community. As we all know, the COVID-19 pandemic has created serious economic and financial consequences across the world, the nation and here at home in New York State. It is important that we have a shared understanding of these challenges and how we are addressing them.
With New York State experiencing significant revenue shortfalls and consequently projecting an unprecedented budget deficit, the state has imposed a series of financial strategies to attempt to mitigate the negative impact of this fiscal reality. Among these strategies, NYS has imposed 25 percent expenditure reductions on all state funds (including state tax support, tuition and fees, and other university-generated state revenues.) These expenditure limitations went into effect in April and continue today. I know the impacts of these limitations are felt across our university.
In addition, NYS is holding $19.2 million due to UB from the previous fiscal year in an effort to preserve state cash balances. Further, for the fiscal year 2019-2020, the university has not received $900,000 from the state for the Excelsior scholarship program.
With the state’s budget deficit, we have anticipated reductions to our direct state support. Currently, SUNY is projecting our reduction in direct state tax support revenue to be in the range of 20 to 25 percent, or approximately $30-$40 million. This is on top of the $19.2 million due to UB for last year. 
In addition to these projected reductions to our direct state support, we have also experienced a loss in tuition revenue due to the decrease in international undergraduate and graduate student enrollment. Thanks to our strong overall enrollment, we are pleased to have minimized the resulting tuition revenue reduction to a projected $5 million. As a further consequence, we have had substantial revenue loss from our housing and auxiliary services due to the reduction of students living on campus. These losses are compounded by our drastically reduced occupancy in on-campus student housing during the spring 2020 semester, when we issued $27 million in refunds to students—including housing, dining and campus fees—while the vast majority of the costs associated with the services had already been committed.
To date, UB’s response to COVID-19 has resulted in over $32 million in unanticipated refunds and necessary costs including technology enhancements for remote instruction, screening and testing, cleaning supplies, and PPE, including masks and face shields.
Fortunately, the university received $24 million in federal aid from the CARES Act. By federal law, one-half of these funds were designated as aid for students impacted by COVID. The university dispersed the majority of this aid during the spring 2020 semester. The other half, approximately $12 million, has been, and will be, used to help offset some of the financial impact caused by the COVID-19 pandemic—over $32 million, as stated.
While we could not have forecast the pandemic and the ensuing financial impact, we are in a position to proactively mitigate the impact of cuts to our direct state tax support. Measures to protect the financial state of our university include assessing every decanal and divisional unit a one-time, 10-percent reduction to state operating budgets for the 2020-2021 fiscal year. We have also instituted a hiring pause across all funding sources and have directed units to reduce all state expenditures by at least 10 percent. The university also reviewed and prioritized all current and planned projects and contracts and, in many cases, was able to negotiate more favorable payment terms. Overall, these efforts have enabled UB to reduce expenditures by 22.8 percent from the previous fiscal year, starting from the first quarter of the current fiscal year.
Clearly, the pandemic and the ensuing economic downturn have had very serious financial implications for UB. Unfunded negotiated salary increases continue to be the university’s most pressing long-term financial concern. Two years ago, the funding of one-time retroactive costs associated with the new contract helped offset some of the immediate impact. However, we estimate that the new contract will cost UB $50 million in recurring funds when fully executed. This, in addition to the $30.6 million already incurred under the last contract, will bring the university’s total cost to at least $81 million recurring, with no associated increase in recurring sources. In the fall 2020 semester, in an effort to keep the cost of higher education affordable, no increases were implemented to Academic Excellence and Success fee or tuition rates.
Based on what we know today, we anticipate this financial strain to be a reality for the foreseeable future. The good news is that UB entered into this pandemic in a strong financial position. Now, more than ever, we must continue to diligently and strategically steward our resources.

This past spring, under the leadership of Provost Weber and Vice President Hubbard, we established the Strategic Financial Management Advisory Group to ensure the maintenance of UB’s core academic and research functions. This committee—comprised of individuals who represent interests and perspectives across the university—has been charged with exploring and advising on strategic financial plans that account for potential revenue and spending changes in the current academic year. Working from enrollment scenarios, restrictions on state spending and university reserves, the committee is providing advice to the administration on priorities for financial savings and investments. 
While these financial challenges are daunting, I have every confidence that we can emerge from this crisis and persist unabated in our mission-driven priorities. In this way, we will continue to have a transformative impact on the communities we serve.
Satish K. Tripathi