UPDATE: The UVM Board of Trustees approved the budget Tuesday afternoon.
The University of Vermont board of trustees — poised to sign off on a $303 million budget for Fiscal Year 2014 on Tuesday — had to scramble to fill a last-minute $5.8 million budget gap.
Out-of-state enrollment numbers are down, dragging tuition revenue along with them, and that leaves UVM with a $2.1 million shortfall. On top of that, incoming students have higher-than-expected financial aid needs, forcing the committee to graft on another $3.7 million to the financial aid portion of the budget.
Richard Cate, UVM’s vice president for finance and administration, said that by the time the bad news arrived, it was too late to consider spending cuts, so the budget committee opted to lean on one-time funds. It has drawn $1.5 million from endowment scholarships, $2 million from general fund assets and $2.3 million from the continuing education program to make up the shortfall.
The budget committee passed the budget unanimously Monday; on Tuesday it comes up for a vote before the entire board of trustees.
The budget already covered a $2 million shortfall by carrying over one-time funds from FY 2012. The total shortfall of $7.8 million also comes on top of $5 million in cuts already included in the FY 2014 budget. Roughly $4 million of those cuts will be made on the administrative side — by deferring maintenance and equipment (for instance, fewer classroom renovations), keeping vacant positions unfilled, cutting some matching fund grants and reducing athletic programs. The remaining $1 million will be made to academic budgets in an across-the-board reduction.
UVM was already whittling down its student body as part of a deliberate effort to become more selective, but enrollment has dipped 40 students below the benchmark of 9,800 students that was set for FY 2014. The gap sounds trivial, but it’s the breakdown between in-state and out-of-state students that is causing the budget squeeze. About 70 percent of the university’s revenue comes from tuition, and out-of-state students supply the bulk of that. While enrollment among Vermont students has exceeded expectations, 78 fewer out-of-state students than expected have enrolled.
“It’s good for Vermont students but it doesn’t help the budget,” Cate said.
The budget-writers blame a demographic trend for this particular budgetary woe. Enrollment numbers are waning and state appropriations are becoming increasingly measly across the nation. This has created greater competition for students among Northeastern schools. Schools are wooing out-of-state students more aggressively, offering larger financial aid packages.
“It’s pretty clear as state appropriations are going down in other states that public universities are having to behave more like UVM has behaved for centuries, in terms of having a heavier reliance on out-of state students,” Cate said.
That trend has likely drawn out-of-state students away from UVM, and it’s also pushed UVM to step up its own financial aid offers to compete.
Cate said the shortfall is less than 1 percent of UVM’s budget, but declining revenue is a problem that will continue to dog them in the future. The board is already making preparations to patch up an expected deficit for FY 2015, and they’ll likely have to put deeper budget cuts on the table rather than dipping deeper into their reserves.
“We are not depleting them significantly this time. It’s just we can’t repeat it,” Cate said.
The university’s budget difficulties extend beyond enrollment numbers and financial aid needs. The revenue that UVM brings in through research grants has been shriveling, in part to due federal budget sequestration.
The board has been commended for keeping tuition hikes low — rates will increase 2.9 percent in FY 2014, the lowest increase in nearly four decades — but that leaves it looking for other ways to drum up revenue.
On the expense side, the university is shouldering a 2.9 percent salary increase for faculty and a 10 percent increase in health insurance costs. Other than that, costs have stayed constant for the most part, but with declining revenue, just keeping pace with the rate of inflation could be a challenge.
“We don’t really have an expense issue beyond the fact that financial aid has increased significantly. The real problem is how to do we grow more revenue to cover inflation increases,” Cate said.
With traditional revenue streams drying up, interim provost Robert Low said the university will need to turn to more creative revenue sources to offset its losses. Low cited starting a summer semester program, expanding the continuing education course program, setting up distance learning programs, and recruiting more international students (who typically pay a larger portion of their tuition).
“The point is simply that the world is changing and we have to evolve. The bottom line is there are fewer potential students out there, and there is increased competition to get them,” Cate said.
Clarification: This story was updated at 7:55 a.m. The original version did not mention the $2 million shortfall that existed before the $5.8 million tuition shortfall.
