UConn’s Board of Trustees on Wednesday adopted Fiscal Year 2019 budgets that include millions of dollars in spending cuts across its campuses to close a funding gap that resulted from continued reductions in state support and rising fringe benefit costs.

The budgets, which go into effect July 1, include $1.36 billion for Storrs and the regional campuses, and $1.04 billion for UConn Health, including the UConn John Dempsey Hospital and the schools of medicine and dental medicine.

Even with $16.7 million in new revenue from tuition adjustments determined in advance in UConn’s four-year schedule, the University faced a $22.8 million budget gap for Storrs and the regional campuses. That was due to factors beyond its control: the dip in state funding, sharp increases in fringe benefit costs, mandatory payments due to workers covered by a statewide union pact, and that same pact’s no-layoffs clause.

Scott Jordan, UConn’s executive vice president for administration and chief financial officer, told trustees that in addition to the strategic operational spending cuts made to close that gap, UConn made judicious hiring decisions – including leaving jobs open when feasible – and reorganized several administrative areas to achieve savings.

The University’s overriding goal is to continue to protect and build UConn’s academic strength, which draws talented students and faculty, helps foster economic development for the state, and has helped propel it to No. 18 among the nation’s top public universities in U.S. News & World Report’s annual ranking.

“In spite of ongoing fiscal struggles, UConn will continue to focus on protecting academic excellence, providing strong student support, and supporting the research mission of the University,” Jordan told trustees.

For example, UConn is increasing its financial aid budget in FY 2019 to $183.9 million – representing 15 percent of the operating budget for Storrs and regional campuses – to help support talented students, with the best packages provided to in-state, low-income students.

This year’s $183.9 million financial aid budget is almost twice as much as the University provided 10 years ago, and demonstrates UConn’s commitment to affordability and academic excellence even in difficult budget times.

“In recent years, UConn has made significant gains and improved academic quality on every metric, and we stand committed to maintaining and enhancing our academic excellence whenever possible in support of our students and the state of Connecticut,” Jordan added.

UConn contributes $3.4 billion annually to the state’s economy, employing one out of every 90 jobs in the state, Jordan said. UConn’s success provides direct, tangible returns to the state for the investment it has made in the University’s academics and campuses.

Since 2010, state funding for UConn and UConn Health decreased by $163.8 million. The revenue generated by tuition increases – net of need-based financial aid – has made up only 63 percent of that number over that same time period.

Also, the state’s unfunded pension liability has dramatically increased the cost of employee fringe benefits, which are determined by the state, not UConn. The cost of fringe benefits has increased by 73 percent over the past eight years.

If not for the fringe costs, in fact, UConn Health would have been on track to be profitable, as it has focused strongly on building its clinical operations, with about 51.4 percent of its revenue coming from patient care.

“In spite of ongoing fiscal struggles, UConn Health will continue to focus on providing excellent patient care, protecting academic excellence, and supporting the research mission,” Dr. Andrew Agwunobi, UConn Health’s chief executive officer, told trustees in transmitting the budget documents to them.

Information compiled for the budget also shows that:

• Administrative jobs have consistently remained between only about 2.2 and 2.5 percent of the UConn workforce for the past 25 years, despite a significant growth in the University’s enrollment and academic scope.
• UConn is also among the leanest among similar universities in administrative costs, with a faculty to administrator ratio of 14.1 – the second highest in the peer group – and the highest student to administrator ratio, with almost 242 students per administrator.
• The University relies more on tuition than any other revenue source at nearly 31 percent, greater than state support at 25 percent. That ratio tipped in FY 2017; until that time, state support represented a higher amount than tuition.
• The state block grant for FY 2019 – about $190.6 million for operating costs and $156.2 million to pay a portion of fringe expenses – is approaching a 20-year low point.
• The next two years’ budgets are projected to have substantial deficits, driven by the mandatory raises and fringe benefit costs, unless one or more deficit mitigation strategies are considered. They include tuition increases beyond those already forecast in the adopted four-year schedule and freezing hiring and/or restructuring departments, which could lead to the loss of talented faculty and staff.
• The fringe benefit costs are especially difficult because they are unpredictable from one year to the next, they include extra costs imposed by the state to help it catch up with unfunded pension obligations, and the state covers only a portion while UConn has to cover the rest. In FY 2019 alone, for instance, the $2,000 guaranteed one-time payment that each unionized employee gets under the statewide pact represents $20 million in partially unreimbursed costs to UConn.
• UConn’s fringe benefit costs have increased significantly in a short time. In FY 2011, for instance, UConn paid $148.3 million for those costs for Storrs and regional campus employees; in FY 2019, it is forecast at $277 million for those workers, not including the additional $254 million at UConn Health.
• UConn and UConn Health already are working together to combine departments for efficiencies where possible, including in areas such as procurement, public safety, institutional equity, and others.
• While UConn’s drive for philanthropy has been more successful in recent years than ever before, the University cannot look to that as a revenue source for the yearly operating costs. In fact, though the endowment has increased, UConn still only can draw $21.7 million next year from interest income to support its costs – a respectable sum, to be sure, but nothing near the amounts available to private universities with large endowments.