Budget Cutting Begins With 7.5 Percent in Operating Funds

Posted on Jan. 20, 2021

The University’s financial problems didn’t start with the coronavirus pandemic, but the health crisis has exacerbated the need for budget cutting, UNC’s top administrators are telling the campus community.

They are sharing information about a plan that calls for a 7.5 percent reduction to operating funds across schools and units and a 1.5 percent reduction to personnel funds for the 2020-21 fiscal year, followed by identical cuts for the following year.

“Carolina has operated in a highly decentralized financial environment that is inefficient and is simply out of date in today’s world,” Chancellor Kevin Guskiewicz, Provost Robert Blouin and interim Vice Chancellor for Finance and Operations Nate Knuffman wrote in their message. “The last time we operated with a balanced budget was nearly a decade ago. The imperative now is to find ways to reduce our spending to protect the financial health and viability of the University.”

The University faces three significant financial challenges:

• A roughly $100 million structural deficit in its central funding sources (less than 3 percent of the University’s total budget);

• An estimated $200 million deficit in the current fiscal year directly due to the impact of the pandemic; and

• About $850 million in deferred maintenance of buildings and other facilities.

The plan is the result of 10 months of conversations among South Building leaders, faculty and staff about the budget issues.

It has eight budget reduction principles:

• Reductions should be consistent with the role and mission of Carolina and the University’s strategic plan by protecting activities that are central to the University’s mission;

• Budgets should be cut strategically, not across the board;

• Current processes and procedures must be streamlined to reduce expenditures, eliminate redundancies and mitigate impacts on staff workload;

• Nonrecurring reductions used to meet fiscal 2020-21 targets must be complemented with longer-term budget decisions that convert nonrecurring reductions into recurring adjustments;

• Decisions about cost reductions should always consider the impact on revenue generation;

• Reductions that have the effect of shifting costs to other areas will not be permitted;

• Units should communicate openly, honestly and frequently about their budget reduction process and their reduction decisions; and

• Personnel reductions will be balanced across all layers of the University with a focus on reducing the number of senior administrators.

“Implementing intentional and strategic budget reductions now will enable the University to balance its budget in 18 months,” the message said.

The University plans to offset some of the losses with federal stimulus money related to the pandemic. Of $287 million that the UNC System is expected to get, UNC is expected to receive $25.5 million — $16.8 million in general funds and $8.6 million earmarked for emergency student aid.

The funds may be used to defray expenses associated with the coronavirus pandemic, including lost revenue, for student support activities that address needs related to the pandemic and to provide financial aid grants to students.

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