Board Finance and Resource Management Committee endorses preliminary budget to start 2020-21 fiscal year
At the full meeting of the Virginia Tech Board of Visitors scheduled for June 2, the board’s Finance and Resource Management Committee will recommend a preliminary budget for the 2020-21 fiscal year.
Reflecting the uncertainty of the full impacts of the COVID-19 pandemic on university resources, the preliminary budget for 2020-21 will be based on the current 2019-20 base operating budget, adjusted to include revenue contingencies and a 5 percent budget reduction in the university budget. Specific cuts at the unit level will be informed by the Partnership for Incentive Based Budget (PIBB) model and the strategic plan.
The proposed preliminary budget will allow the university to move forward with an understanding that additional budget adjustments may be necessary in the next fiscal year as more information comes into focus.
“Our goal is to fiscally navigate the university through this challenging and unprecedented time and emerge from it financially strong and intact,” said Senior Vice President and Chief Business Officer Dwayne Pinkney.
As discussed at the Finance and Resource Management Committee on May 7, the university asked campus budget responsibility centers to submit 5 percent and 10 percent base budget reduction planning scenarios. These scenarios will help the university prepare for potential future reductions if needed once the broader resource plan for the institution is better understood.
Pinkney noted that while much of the future revenue picture remains unknown, several elements of next year’s budget are currently known to the university. Those include changes in state support for fringe benefit rate increases and changes in revenues from previously approved fee adjustments.
“It will take more time for us to have a full understanding of the fiscal impact of the COVID-19 pandemic,” Pinkney said. “Developing our budget incrementally will enable us to continue operations while providing additional time for us to understand the impacts on our major revenue categories. As information becomes available, the university will be better positioned to react to base and/or one-time revenue fluctuations and the resultant impacts on the university budget.”
As 2020-21 budget planning assumptions are finalized, the university will communicate to the campus community and will bring an update back to the board.
The Finance and Resource Management Committee will also advance a resolution to the full board to temporarily suspend any provisions outlined in the Faculty Handbook pertaining to furloughs or salary reductions and to delegate to the president of the university the temporary authority to institute furloughs and/or temporary base salary reductions affecting faculty and university staff. This temporary authority, which will expire no later than June 30, 2021, stipulates the president must consult with the rector and share with the board a plan for enacting this authority before the delegation of authority can take effect.
“Our commitment to retain and support our greatest asset — our faculty and staff — is strong. This authority involves just one of many potential strategies available to us to help sustain our talent pool,” said Sands. “Should significant budget reductions be necessary, implementation of salary reductions and/or furloughs will be considered together with other strategies, such as use of reserves, continued hiring freezes, and limited procurement. Because the board will not reconvene until August, this delegation of authority must be considered now to allow design and implementation of a balanced and timely plan for managing the university budget.”
Executive Vice President and Provost Cyril Clarke emphasized that consideration of this resolution does not signal that the university currently has a plan in place to implement salary reductions or furloughs for faculty, but that it allows the university to consider all available budget reduction options as it prepares for the future.
In the event that salary reductions or furloughs become necessary, the faculty and academic leadership will be fully engaged in developing a plan that protects lower income earners, is progressive in regard to contributions of higher income earners, and maximizes Virginia Tech’s ability to retain faculty talent over the long term. The Faculty Senate is already engaged with university leadership in the spirit of shared governance as the planning process moves forward.
“In advancing this resolution to the full board, our committee hopes this authority will not have to be used, but we believe it is essential to provide university leadership with all options needed to navigate our current financial situation,” said Letitia A. “Tish” Long, chair of the Finance and Resource Management Committee. “As we have said, we want to emerge from the pandemic financially strong and intact. I’m confident that any actions taken by the president will incorporate those key guiding principles that reflect the university’s commitments to the health and safety of personnel and students, and to teaching, research, and outreach.”
Rector Horacio Valeiras expressed the board's support for retaining and recruiting exceptional faculty and said the board would look at all options before reducing compensation.
The university budget includes the capital outlay program, which for fiscal year 2020-21 is composed of 18 Educational and General projects and 10 Auxiliary Enterprise projects. As part of the resource management process, each project has an annual budget. The total capital program for 2020-21 includes approximately $1.046 billion of authorizations with an estimated annual budget for 2020-21 of approximately $194 million. Projects with secure funding and board approval are moving forward. The remainder will be subject to further board approval.
As part of the preliminary 2020-21 operating budget, compensation for graduate assistants will continue at the 2019-20 base stipend amount, with the academic year stipend supplement increasing by $58, to a total of $458, to mitigate the increase in the comprehensive fee. The university will continue to provide its share of the graduate assistant health insurance coverage of 88 percent and the tuition remission benefit as part of the graduate compensation package.
Likewise, the 2020-21 university budget calls for continuing the 2019-20 faculty compensation plan. Neither the state’s nor the university’s budget for 2020-21 includes any merit or across-the-board salary increase for faculty or staff. Salary adjustments that have been made through the Tenure and Promotion process will be preserved.
The Finance and Resource Management Committee also advanced a resolution for the June 2 full board meeting calling for a tuition freeze for resident and nonresident undergraduate, graduate, and professional students for the 2020-21 academic year.