Dear colleagues,
I hope your school year is off to a successful start. Like me, I'm sure your schedule has suddenly become very full. There is no shortage of activity around campus and taking a minute to slow down and enjoy it always helps remind me how important our work is.
Last week, the Vice Chancellors and I met with the Strategic Planning and Budget Committee and my Senior Leadership Council to discuss our budget allocation and next steps. At the end of August, I received UMD's final budget allocation letter from President Kaler for the current 2017-18 fiscal year. With that information, I am providing an update on our budget projections.
Our campus made significant progress in addressing our budget deficit last year. We identified $2.3 million in recurring reductions that we are implementing this fiscal year. At the time, those budget reductions along with some one-time budget actions, would have brought our projected fiscal year 2017-18 (FY18) annual structural imbalance (recurring budget deficit) down to $1.3 million. From there, we looked at changes to the budget based on tuition, our budget request, state funding, U of M allocation, and expenses.
This current fiscal year, our O&M (state) allocation has increased by almost $2 million which includes $878,000 in one-time funds for repairs and renovations. The recurring amount of $1.1 million will help fund two additional mental health counselors to provide critical support for our students. It will help fund a scholarship match and Federal Perkins Loan financial aid program. This funding will also provide nearly half a million dollars to address a portion of our structural imbalance and other increased costs. In addition, our positive enrollment growth and one percent tuition increase has resulted in nearly $1.7 million in additional resources.
Another positive outcome of our budget allocation is we will be able to fund the Sports and Health Center renovation and enhancements. This funding comes through a mix of state-allocated HEAPR funding, one-time U of M funds, private gifts, and UMD. That project will go to bid this fall with work scheduled to begin during spring break in March.
However, instead of ending FY18 with a $1.3 million structural deficit, the actual year-end deficit will be closer to $3.2 million. The reasons for this higher than anticipated deficit are FY18 merit pay, increased fringe benefit costs, growth in the cost pool, and lower than anticipated state allocation. Our projected structural imbalance at the end of fiscal year 2016-17 was $4 million, and we are still making progress by reducing that recurring deficit to $3.2 million. However, increased costs have kept us from making as much progress on the deficit as we anticipated. You can read the complete FY18 UMD budget allocation letter.
Adding this additional $3.2 million annual shortfall to the FY18 sequestered deficit (cash balance deficit) means that the projected sequestered deficit will be almost $11 million by June 30, 2018.
This leaves us in a difficult situation and I'm sure that it is as frustrating for you, as it is for me, to not see more progress being made on reducing our deficit. The U of M System did recognize the reductions we made, and we will continue to work with President Kaler and his team at resolving the structural imbalance and sequestered deficit. We will continue to be advocates for UMD, ask tough questions, drive innovative solutions, and work to ensure as minimal negative impact on our students as possible.
The next step in the process is for Vice Chancellor Steve Keto to model an updated budget resolution plan. Then we will provide more information on our timeline to balance our deficit, targeted reduction amounts, and begin work at identifying savings to be implemented in fiscal year 2019.
Thank you for your commitment to UMD. Please feel free to contact me or any of the Vice Chancellors if you have questions.
Sincerely,
Lendley Black
Chancellor
