Dear Colleagues:

As we close the Spring 2018 semester, I want to provide you with an update related to the university’s Fiscal Year 2019 budget process. This email summarizes what I discussed with the University Planning Committee yesterday. It also covers the FY19 budget recommendations that we will be proposing to the ASU System Board of Trustees this month.

I want to start by expressing my appreciation to everyone on our campus who participated in looking for ways to reduce our costs while still maintaining our ability to meet our obligations to our faculty, staff, and students. We will start the coming fiscal year (which starts July 1, 2018) with the same basic shortfall as last year, which was directly attributable to relatively flat state appropriations, rising costs, relatively low student retention, and a smaller-than-expected incoming first-year class. We made mid-year cuts of about $3.8M this current year, which are very difficult to manage. Given the uncertainty about our retention and recruiting outcomes, I believe that it is prudent to carry forward our current year’s budget cuts for the upcoming year. I asked the leadership of each division of the university to participate in this process by reducing expenditures of approximately $3.8M to the FY19 budget.

To lessen the impact on our faculty and staff, Len Frey (Vice Chancellor for Finance and Administration) and his team have identified two areas to reduce the total required from our divisions. First, the budget office has projected that total fringe benefits rate for all employees can be reduced by about one percent for coming year, producing a savings of approximately $656,000. To be clear, this is a reduction in the budgeted cost of benefits, not a reduction in benefits themselves.

Second, the Student Government Association, led by President Jon Mark Horton, has supported our plan to redirect the Student Infrastructure Fee into the general budget for the coming year. Redirecting these funds (approximately $1M) on a one-time basis will allow us to keep our pledge to Governor Asa Hutchinson and our students to not increase resident tuition for the 2018-19 academic year.

The remaining budget reductions (approximately $2.1M) were spread across Academic Affairs ($1,458,000), Finance and Administration ($442,000), Student Affairs ($157,000), Advancement ($71,000), and the Chancellor’s Office ($17,000). Based in part on a recommendation in the Huron Study, some of the budget reduction for Academic Affairs will come from a reallocation of some library resources. Finally, our Auxiliary Budget, which includes areas like Athletics and Housing, will also face a similar series of challenges to meet reductions.

We will also propose three fee changes to our board. First, we will be asking for a $1 per credit hour increase in the Academic Excellence Fee. My intention is to use that $1 to build a salary pool that is roughly the equivalent of one percent of faculty salaries, and we will use that money to create the opportunity for merit-based faculty salary increases this year. The second fee is the creation of a $4 per credit hour Security Fee that will generate funds to reinforce and enhance one of our most important duties: insuring the safety of all members of the faculty, staff, and student body. Finally, because we are no longer creating a traditional, printed yearbook, I will be recommending that we no longer collect a yearbook fee.

Friends, as I have said many times, cutting our way out of the current budget situation cannot be our only solution. Indeed, as the Huron Study suggested, we are a relatively lean operation and further cuts might threaten our ability to continue down the path of continuous improvement. So, a huge part of our strategy has to focus on growing our revenue streams. This is part of (but not the only) reason that we have focused so much on recruitment and retention this past year. Our primary concern with degree completion, of course, is the moral obligation to insure that our students have the opportunity to reach their full potential because of the life-altering experience of earning a four-year college degree. But a latent consequence of improved retention and recruitment rates is the effect that they have on our budget. The good news is that we are experiencing significant improvement in both arenas. If our Fall 2018 enrollment numbers exceed those of the past year, I will explore mid-year budget adjustments that will allow us to consider salary increases for faculty and staff in the second half of the fiscal year.

In spite of our challenges, it is important to keep all of this in context – we are very fortunate that that our state funding support has remained constant. States all around us have been divesting from higher education at an alarming rate. The projections for the size of our Fall 2018 first-year class and our retention numbers are very encouraging. We have created a very conservative FY19 budget that I hope will allow us to not have to do mid-year cuts like we have had to do several times in the past few years.

Thank you for everything that you do in every constituent area of our campus to help keep Arkansas State University moving forward.

Kelly