The COVID-19 pandemic “continues to pose a substantial and indeterminate threat to the financial health and sustainability” of the University, UNC officials have reported to the state system that oversees it. “The University faces significant uncertainty for all major revenue sources and has incurred large, unexpected costs to date as a result of COVID-19.”
UNC responded to a request for anticipated financial consequences from the UNC System Board of Governors based on potential negative impact of enrollment drops at various levels — from 2 percent to 50 percent.
If UNC were to sustain enrollment reductions of 2 to 10 percent due to students’ decisions to stay away from campus and to decline to pay full tuition for online-only classes that would be available if they did stay away, it would rely on its fund balance, reduction in staff and reduction in operating expenses to cover losses of tuition, student fees and auxiliary revenue.
“For housing, dining, parking, and other auxiliaries,” UNC’s report said it “anticipates using fund balances to absorb these losses. This short-term strategy undermines the best practice of maintaining three months of operating reserves on hand, hurts capital and physical plant renovation investment, and significantly limits flexibility in the long-term. However, fund balance depletion allows UNC-CH to forestall more drastic measures in personnel and operating expense reduction.”
Under the worst-case scenarios of 25 percent to 50 percent reductions to enrollment, and without external funding relief, UNC “would be required to implement extraordinary, unprecedented, and wide-ranging actions. These would include complete depletion of fund balances and substantial program and personnel reductions across the University.”
In a public meeting on July 24, Steve Farmer, vice chancellor for enrollment and undergraduate admissions, said a survey of undergraduates in late June showed only 2 percent were considering not enrolling.
“Enrollment reports and tuition and fee collections to date indicate minimal impact to UNC-CH enrollment for fall 2020 and suggest enrollment declines of 25 or 50 percent are extremely unlikely,” the report said. More will be known about that number as students begin moving in this week with classes set to start on Aug. 10.
The University said it already had eliminated nonessential expenditures, restricted hiring and salary adjustments and postponed construction projects.
“As the University prepares to reopen in fall 2020, we anticipate significant additional expenses to ensure the on-campus safety and health of the campus-community,” the report said. “The need for financial aid will also likely increase due to significant losses in income for many of our students and their families. Federal and state relief funds have only partially offset incurred revenue losses and estimated reopening expenses to date.”
On the plus side financially, UNC recently reported record revenues — more than $1 billion — from sponsored research in the 2019-20 fiscal year. “With UNC-CH’s ongoing leadership in coronavirus research and the premium on research activity, this upward trend is expected to continue,” the report said.
In response to a Board of Governors’ question about the financial impact of the potential loss of athletics revenue due to the pandemic, UNC said disruption or postponement would affect each of its four primary sources — ticket sales, media, conference distributions and private funding. A minimal impact would require reduction of operating expenses and personnel. “In scenarios where revenue loss is greater than 50 percent,” the report said, “such financial impacts would require borrowing or gifts to support ongoing operations in addition to the actions taken” under the less serious scenario.