The University of Connecticut’s Board of Trustees approved its $1.1 billion budget for next year, but some funds may have to be pushed around to address inaccuracies in some of the projections.
The budget, which will go into effect July 1, includes a 6.2 percent increase in spending over the 2013 budget, but the university also expects a 4.7 percent increase in revenue because of a tuition hike and increased enrollment.
The increased spending is, in part, geared toward “laying the groundwork” for the Next Generation capital project approved by the General Assembly this year. “NextGen” will allocate $1.5 billion in bonds to the university in order to expand its faculty and student enrollment.
Financial aid spending also will be increased by $25 million over last year’s budget, and funds were allocated to continue UConn President Susan Herbst’s plan to hire 290 tenure-track professors.
Lysa Teal, the associate vice president of finance and budget at UConn, said the school will have to find a way to close a multi-million dollar budget gap after the state comptroller handed down an unexpectedly high “fringe rate” on Monday.
The fringe rate is the amount the university must pay the state in exchange for its employees’ healthcare and retirement services. But when state Comptroller Kevin Lembo announced the 2014 rate on Monday, Teal said it surprised the budget planners. It means the estimates they used to construct the budget were “way off.”
“We make assumptions and you think, ‘It can’t be that bad.’ Well, come to find out, it’s worse than we ever imagined,” she said. Teal said they assumed the rate would increase by a little over two percent, but the actual rate increase was a little over five percent.
Teal added that the unexpectedly high rate caused a budget gap in the millions for the UConn Storrs campus alone, and, even though the Board of Trustees unanimously approved the budget Wednesday, Teal said they must go “back to the drawing board” to figure out how to come up with the money.
“One of the things about the budget is that it’s a live document. This is the plan we’ve put forward. At this point I’m not sure how we’re going to resolve it,” she said. “[But] at this point it’s early enough in the year that we will [have time] look at it.”
Teal said she will have to wait on the exact numbers, which she expects early next week, before she knows how they will move forward on closing the gap. If additional spending is required, the increase will have to go to the board for another vote.
However, the gap can be closed without increasing spending: either by making cuts or by securing additional revenue. Teal said they have already “cut everything we could,” but additional revenue may be available if revenue projections turn out to be conservative.
“Numbers go up and down, we may end up with more revenue to offset the additional expense,” Teal said. “For example, we may have [additional] students enroll in the fall and their tuition would generate some of that revenue.”
Another option is to the pull the money out of the “reserve fund,” which acts as a sort of savings account for the university. But the board already plans to use a large portion of the reserve fund for the 2015 budget, so they are hesitant to draw down a significant amount.
Teal said on top of the unexpectedly high fringe rate, the university received an unexpected “back of the budget” cut from the state late last week. These cuts are typically spread out between all government agencies when the state budget has a gap.
Teal said a conservative estimate of this cut is $1.2 million. Though Teal said the cut is small in relation to the $1.1 billion budget, she said “it changes literally everything.”
The budget for the UConn Health Center also is in limbo. As of Wednesday, the health center had not finalized budget numbers, so the Board of Trustees passed a resolution to continue current funding rates with minimal, planned increases until the next board meeting on August 7.
But Herbst said budget complications are commonplace, and the university has the flexibility to make necessary adjustments even after the budget has been approved.
“We move money around all the time from reserve funds,” Herbst said. “Most of the university funds are very fungible.”
The university also is preparing for a freshman class with about 300 more students than expected.
