Dear Colleagues,
As I mentioned in several meetings and communications last week, our Winthrop Board of Trustees voted yesterday to approve a 2021-22 budget for the institution. The operating budget totals $118M in annual revenues while expenses total $124M, the difference being covered with one-time Higher Education Emergency Relief Funds (HEERF). Finance and Business Affairs will begin working with budget coordinators to load budgets, and that process should take about two weeks.
To provide you with more information on our financial outlook, I am sharing the following which is the same detailed information that was presented to the finance committee and board members to inform their budget decision.
FY2021 Year-end Summary
For context on our latest budget, we need to go back to FY2021 which was a unique year given the COVID-19 global pandemic and its impact on overall enrollment (tuition related) and auxiliary (largely room and board) revenue:
Total operating revenues ended the year down $6M, just under 5% below FY2020 revenue.
Tuition and fees were down 1.9% or $1.5M, auxiliary revenues were down 24.9% or $3.8M, while other fees/revenues were down $700K.
Unrestricted net position increased to $37.1M, primarily driven by the $12.2M received in federal and state support.
HEERF totaled $9.2M and SC CARES brought in $3M in reimbursements for expenses incurred as the university responded to the pandemic. It is important to note that $7.4M of the $37.1M is committed, which brings the true available balance to $29.7M. Of the committed balance, approximately $4.2M is investments in campus infrastructure and classroom technology.
At this time last year, we were not in a position to know the amount of federal and state support that would be coming to the university related to the COVID-19 pandemic. These funds, now housed in our unrestricted net position, will be used to invest in COVID-19 mitigation, classroom technology, and creation of a funding backstop to help us prepare for FY2022 if enrollment continues to suffer in future semesters.
Fall 2022 Enrollment
As I mentioned in some recent meetings, enrollments have, in fact, suffered, and undergraduate enrollment will be significantly down this fall, upwards of 10%. Total enrollment will be down around 4.8%, and total degree-seeking students are projected to decrease 8.8% for fall 2021, equaling 4,751 total degree-seeking students (3,740 undergraduate and 1,011 graduate). These degree-seeking students are the ones, who, quite frankly, bring in most of our revenue.
FY2021-22 Projections
Based on the above, total operating revenues are projected to decrease 3.6% or $4.2M in FY2022 compared to FY2021.
Compared to FY2021, tuition and fees are projected to be down 9.7% or $8M, auxiliary revenues are projected to increase 14.1% or $1.8M, and other fees/revenues are projected to be up $2.5M driven by $1.9M in additional state recurring allocations.
Given annual revenues are down and expenses cannot be reduced to balance the loss, we are planning to use up to $6M of the third round HEERF funding to support FY2022 operations. The remaining $1.5M in the third HEERF installment will provide a cushion should we need it for unplanned expenditures or further enrollment declines.
Total operating expenses are projected to increase 2.0% or $2.3M.
It is important to note while operating expenses are projected to increase compared to FY2021 due to factors like the FY2021 furlough and FY2022 state-mandated expenses such as the pension increase and employee pay raises, actual divisional non-compensation expense budgets will be decreased from prior years.
Unrestricted net position is projected to decrease $6.5M in FY2022.
The net position decrease will be driven by $5.5M in spending of prior year commitments (capital infrastructure, FY2021 rollover dollars for the Campus Master Plan, course fees, division-approved FY2021 unspent dollars, and classroom/technology upgrades), as well as a $1M deficit in other revenue funds which includes Athletics, bad debt, and vacation accrual funds.
Finally, in addition to the operating budget detailed above, we have received over $19M in one-time capital infrastructure funds from the State. Of this $19M, $7.5M will be spent on roof and mechanical, electrical, and plumbing projects; $2.5M will go toward the dining hall renovation or new construction; $4M will be spent on IT investments for updated Wifi and equipment; and the other $5M will fund infrastructure upgrades in buildings and classrooms (for example, carpet, paint, etc.).
Budget Planning
You have heard me talk about shifting our budget model so we can make sound fiscal decisions that will have a positive impact over time. In fact, CFO Justin Oates has been working on this since well before I arrived. Our FY2022 budget planning has been focused on beginning a two- to three‐year process to reduce expenses to better match current annual operating revenue expectations. This is vital for our future. Gone are the days when Winthrop looked to increasing enrollments to solve endemic budget problems. We are realistic in the knowledge that within five years, demographics will dictate a university more our current size than that found in our Winthrop Plan enrollment goal.
We will continue, in the short term, to rely on vacancies for some of our revenue. The last four years we have achieved $3-$4M in annual vacancies to balance the budget. We must be aggressive in addressing expenses for FY2023 and beyond, including overcutting our budget in order to continue to invest in new programs, technology, etc. We can no longer afford to cut budgets so we can continue to float year to year.
Last August I spoke of levers we have at our disposal to impact budget. We have used some of those, including employee furloughs. Our circumstances dictate looking at additional options. We are planning town halls for faculty and staff to talk more about those options. Make no mistake that 2022 will be difficult financially. It will be a challenging year, but we can and will work through it together. We will continue to hold many positions and see our workforce shrink. The good news is that we will invest in the class and comp initiative, but it will be only the first installment of a multi-year process. We hope to increase that investment in future years. Our board and leadership know as difficult as this year will be, we must look beyond it to ensure Winthrop will ever stand as a shining example of student-centered higher education in the years to come.
Now is the time to right size the institution and prepare for future realities. We must make aggressive moves to accomplish this. Together we can. As always, I appreciate all that you are doing and will do for our students going forward.
Sincerely,
George
George W. Hynd
