The following message was sent to Mines employees on 5/27/20:
Dear Mines Community,
Earlier this month, the State of Colorado released their projection of revenue for fiscal years 2021 and 2022. Largely due to the impacts of the coronavirus pandemic, the state is projecting a revenue deficit of $3.3B in fiscal year 2021. To help offset that shortfall, the state has been given $1.7B in federal CARES Act stimulus funds, which only addresses a little more than half of the deficit.
Last week, the Governor’s budget office and the legislative Joint Budget Committee (JBC) took action to address how to balance the budget. The JBC voted to approve a one-time $493M reduction in funding for higher education. To help higher education offset that reduction, Governor Polis issued an executive order allocating $450M of the CARES Act stimulus funds to higher education. This narrows the funding gap to $43M, but the stimulus funds come with spending restrictions.
For Mines, that means a $1.35M—or 5.3 percent cut—to our state funding in fiscal year 2021. In addition to the state funding reduction (which comprises only about 10 percent of our revenue), we anticipate reductions in tuition and housing revenue (typically 80 percent of our revenue). The total shortfall will depend on many factors. As we noted in our virtual town hall meetings last month, these reductions could result in revenue shortfalls anywhere from $9M (best-case scenario) to $45M (worst-case scenario). The worst-case scenario being considered is one where we have to remain in full remote mode without students living in campus housing for a full semester.
To best manage this uncertainty in revenue loss while fulfilling our core academic mission, we are including the following cost-reduction measures in our 2020-2021 budget proposal:
- A senior leadership pay reduction of 10 percent to be achieved through furloughs
- A salary freeze for all Mines employees
- Travel restrictions, except for those whose travel is paid by an external source
- Continuation of the hiring freeze we have already put in place, with exceptions for hiring into critical positions
- Reductions in operating budgets and elimination of all non-essential spending
- Deferral of most capital projects
These actions are going to be necessary to see us through the 2020-2021 budget year under the best-case revenue projection scenario. In that scenario’s plan, we have tried to shield you—our most valuable resource—to the greatest extent possible from the changing financial situation.
However, it is important that we all recognize there is great uncertainty in our revenue projections, especially related to student enrollment and the occupancy of our on-campus housing. While interest in being at Mines in the fall appears strong based on registration data, we do not know how COVID-19 considerations and the health risks inherent to a campus environment will affect students’ final decisions. We also have little control over directives that may be issued by the state or county that could affect our operations and the associated revenue and expenses.
Thus, the Board of Trustees may instruct us to budget more conservatively and build in contingencies to be activated if we see we are not tracking our budgeted scenario. With this in mind, we feel it prudent to alert you that other actions may still need to be taken, such as reductions in work hours, furloughs, elimination of positions and/or employee contributions to health and dental benefit plans.
We expect to have a clearer picture of the FY2020-2021 budget in the next few weeks, and if necessary, we will build in additional cost-reduction actions beyond the six bulleted items above. We will communicate those decisions to you when we have an approved budget. As a reminder, there has been and will continue to be campus representation in this process through our university budget committee and the faculty and student representatives on the Board of Trustees. We also anticipate involving more of you in the discussion if we have to implement the other actions noted above.
After the budget setting process concludes, we will track our budget relative to the assumptions and projections and may need to continue making adjustments along the way. Fall census will be a key decision point as that will help refine our tuition revenue projections. Housing and other auxiliary revenue components will remain a major uncertainty—possibly for the entire academic year. If, for example, we have to reduce the number of students living in (or even close) student housing for health and safety considerations, that would likely trigger the need for re-budgeting and additional cost-reduction actions.
Though the crisis has made us take a hard look at our expenditures, we continue to move forward on our MINES@150 strategic initiatives. The lessons learned so far during the coronavirus pandemic underscore the great importance of those initiatives to our immediate future. For example, graduate program enrollment typically increases during economic downturn cycles, and—thanks to many of you—we are in the process of launching new online graduate courses and programs to help drive additional revenue, which may help mitigate future need to reduce costs. We also need to continue investing in making a Mines education more distinctive as the events of this spring have made students and families think much more critically about their investments in education. Simply stated, students and families need to continue to see the value in pursuing their education at Mines as compared with less expensive or less distant alternatives.
We are entering the next fiscal year in a stronger financial position than many of our peers, but we know we will not be immune from having to make changes in how the university is operated and budgeted and how we deliver on our core teaching and research missions and protect the health of our community. We will need your help in that and thank you for your input and participation in making these decisions, as well as your understanding and support.
Kirsten and Paul
Kirsten M. Volpi, Executive Vice President/COO and CFO
Paul C. Johnson, President and Professor