Board approves university budget revision as financial impacts of pandemic become more clear
The Virginia Tech Board of Visitors approved a resolution today authorizing the university to adjust its 2020-21 operating budget to reflect the financial impact of COVID-19.
The current fiscal-year budget will be amended to reflect a $29 million restoration of the Education and General (E&G) revenue and expense budget and a decrease in the auxiliary enterprises revenue budget by $77.4 million and expense budget by $16.8 million.
“In the simplest terms, the impact of the pandemic on the university budget has been uneven across campus units,” said Senior Vice President and Chief Business Officer Dwayne Pinkney. “Considering the circumstances, our E&G budget is in better shape than we conservatively planned for last spring and summer. Strong enrollment and strong state support have contributed to this.
“However, our auxiliary services face unprecedented financial challenges,” said Pinkney. “We are not alone in facing these challenges, but it will take considerable hard work and sacrifice to bring those budgets in line.”
Virginia Tech’s auxiliary services, which include residential and dining programs, intercollegiate athletics, the Inn at Virginia Tech, Virginia Tech Electric Service, parking and fleet services, health services, and the Steger Center in San Vitale, Switzerland, collectively forecast an $85 million revenue shortfall for 2020-21. Offset by a $25 million savings from reduced expenditures, auxiliary enterprises will accrued a $60.6 one-time net loss this year based on what is currently known.
Examples of revenue losses in auxiliary units include the temporary elimination of meal plan sales to off-campus students, the lack of football ticket sales, holding 513 campus residence hall beds for isolation and quarantine space, making 10 percent housing refunds as residence halls close at the start of Thanksgiving break, and a declining business volume in several auxiliary enterprises. These financial impacts were primarily the result of health and safety efforts to respond to the pandemic.
In addition, Schiffert Health Center has incurred higher than normal expenses due to the need to purchase protective equipment for staff and testing supplies and add staff members to administer medical tests.
State support throughout the pandemic, including no reductions in higher education funding, has taken several forms. CARES Act support, distributed by the state, and state support for COVID impacts and operational losses have totaled more than $17 million to the university in 2020-21. CARES Act funds also provided an additional $9 million paid directly to students for financial assistance.
In June, the Board of Visitors approved a preliminary operating budget knowing of the likely need to adjust it once the financial impact of COVID-19 could be better understood. During the first quarter, the university gathered information so that the budget could be updated for the current understanding of the financial impacts of the pandemic.
In light of the dynamic environment resulting from the pandemic, the preliminary budget was developed to avoid premature revenue and expenditure assumptions while proactively addressing the likelihood of a resource-constrained fiscal year.
The preliminary budget approved by the board in June reflected revenue uncertainty around fall enrollment, state General Fund support, self-generated revenues, and the 2020 fall campus operating model. There were also unknown expense impacts related to the university’s pandemic response.
“Now that we know the outcome of the special legislative session, confirmed enrollment levels, and a refined understanding of the university’s current operational model became more clear, we are now in the position to adjust revenue and expenditure budgets,” said Tim Hodge, associate vice president for budget and financial planning. “The legislative special session did not result in reductions to the levels of state support and while the university’s undergraduate enrollments showed strength in freshman resident enrollments and continuing student enrollments, nonresident freshman enrollment and graduate enrollments were slightly lower than projected.”
The operating budget adjustments for COVID-19 span the Educational and General program (E&G) and auxiliary enterprise activities.
In E&G, the revenue and expenditure budgets will restore $29 million to remove University Division (208 E&G) and Cooperative Extension/Agriculture Experiment Station Division (229 E&G) revenue contingencies.
The restoration of the revenue contingencies provides capacity for the university to restore preliminary expenditure budget reductions by 2 percent in Agency 208 E&G and 5 percent in Agency 229 E&G. This will result in lowering of budget reductions from an average of 5 percent to 3 percent for colleges and from an average of 7 percent to 5 percent for other areas in Agency 208 E&G.
A 3 percent reduction will remain in both college and non-college areas to manage cost escalations, unfunded mandates, the fall enrollment shortfall, and impacts of COVID-19. An additional 2 percent reduction also remains in non-college areas for critical needs.
In Agency 229, the 5 percent budget reductions are completely eliminated.
Moving forward, the university will continue to monitor and manage the financial impacts created by COVID-19 on university operations and will bring updates back to the board as needed.