University Departments and Programs

DATE:	February 22, 2021
TO:	University Departments and Programs
FROM:	Dr. Linda Schott
CC:	President's Cabinet Members & URC
SUBJECT:	FY 22 Budget Planning

In January, as you may have read, Comptroller Hegar released revised revenue estimates for the State of Texas, which indicate a decline in state revenues; although not as dire as initially projected, they are lower than those made during the 86th Legislative Session. As the 87th Texas Legislature is now in Session, the University Resources Commission (URC) and the President’s Cabinet are planning in alignment with the FY22 budget calendar. As expected, both chambers of the Texas Legislature have released proposed reduced statewide budgets based on the anticipated decline in revenues. Specific to our institution, the House is proposing a 4% decrease and the Senate is proposing a 9% reduction. Comparatively, the preliminary campus budget plan for FY22 anticipated a 5% reduction in the base budget. It is still early and the final budget is impacted by many variables—some of which the campus controls or influences, such as enrollment growth, retention, and fixed cost increases. Although there is a lot of uncertainty, and other financial planning scenarios will emerge, the State’s early outlook is better than initially forecast. However, to safeguard against uncertainty and dramatic cuts down the road, we must remain prudent in budget modeling; therefore, planning will proceed with no new base allocations for FY 22.

The President’s Cabinet and others throughout the A&M system are aggressively appealing to our elected officials, communicating the importance of A&M-San Antonio and our transformative impact on students and the region. I am collaborating with six other University presidents across three systems (A&M, University of Houston, and the University of North Texas), to preserve our collective expansion funding line items, which is the funding that enabled us to become a four-year institution and is intended to assist universities in building the infrastructure necessary to support being a comprehensive institution. Those funds are endangered by changes introduced during the previous legislative session that both reduce and phase-out that funding. Recently, I and the other affected presidents advanced a uniform testimony strategy to the Legislative Budget Board and our respective delegations, jointly requesting restoration of expansion funding for all three systems. The Senate Finance Committee has scheduled in-person testimony on Tuesday, February 23rd. The House hearings are forthcoming.  

Fortunately, the one-time funds from the Higher Education Emergency Relief Fund (HEERF II) will support incremental costs brought about by COVID-19, such as public health protocols, student support services, and changes or enhancements to academic operations, including workforce development. For the funds not devoted to immediate operational costs, the Cabinet will recommend one-time strategic investments that will enhance services and help prepare us for a post-pandemic future. The HEERF II funds are limited in scope and must be expended by January 2022, and are therefore not base budget allocations. As with all uses of University resources, these allocations will also be made in alignment with our strategic plan priorities. Additionally, in order to offset potential decreases in state funding and in enrollment, at the Cabinet level, I am asking every vice president and division to work together to pursue alternative revenue sources as a critical fiscal strategy.

Although we are dependent on state allocations and will benefit from one-time federal funds, close to 50% of the campus operating budget is based on revenue generated by student credit hour production, more commonly referred to as enrollment. Therefore, a coordinated strategic enrollment management planning effort is underway to develop academic year 21-22 projections. Again, because of the still unknown total impact of the pandemic, a conservative enrollment projection of a 1% increase over fall 2020-21 enrollment1 was used in our base revenue forecast, which also reflects the 2.1% increase in tuition and fees approved by the Regents.

As I said at Convocation, we are really building an outstanding university that makes a difference in lives, in families, and in communities. As a proof-point, it should reinforce your 1 Summer 2020 semester credit hours (SCH) were significantly higher than is typical, so  projections were made using an adjusted, normalized SCH for summer, to which the 1% increase was applied. excellent work to know that in 2020, we had a record-breaking 1,619 students who graduated amid the pandemic, including 81 students from our first freshman cohort.

I ask you to remain focused on our future. I am more convinced than ever of the essential role that our institutions of higher education—all of us—play in the days ahead, albeit in the face of a challenging public health condition and widespread economic instability. We will remain steadfast in stewarding our resources for institutional stability and carrying out our mission. Together, we will emerge as a robust and forward-looking institution in the post-pandemic world of higher education.

Our all-funds budgeting approach and planning updates are on the University Resources Commission website. More information from the Texas Legislature will be forthcoming as the semester progresses and as we move toward finalizing our FY22 budget.

Task and Focus for Current Fiscal Year: FY 2021

As the university embarks on a period of fiscal constraint, the University Resources Commission is even more vital in its role to advise the President and the President’s Cabinet. There are several extenuating circumstances influencing the fiscal outlook for FY 2021: 

• At a minimum, the Governor has requested from the A&M System campus and other higher education institutions a rescission of 5% of the state general revenue appropriated to universities for the current biennium.
• It is anticipated the 87th Legislative session will launch with a budget decrement of up to 10% in state appropriations.
• The campus faces prior budget bill rider language mandating a 25% reduction per biennium of downward expansion line item funding.

There are also positive variables to factor into the overall fiscal outlook including:

• Summer student credit hour production exceeds projections and early indicators for fall enrollment appear steady or flat. With the uncertainty in the economy and public health circumstances, it is difficult to pinpoint within our normal enrollment patterns, but all indicators at this time are positive and not trending downward like many other institutions around the country are seeing. 
• A $5.6M Federal CARES Act distribution, with 50% reserved for direct aid to students and the other 50% allocated to meet one-time institutional needs to mitigate the impacts to instruction and operations during the pandemic.
• An additional $400 thousand for minority serving institutions is also available for institutional needs.
• FEMA-B funding will also be available for eligible expenditures.

As indicated in the University President’s budget memo dated April 24, 2020, aggressive actions have been taken to mitigate possible fiscal impacts due to unforeseen enrollment disruptions, by building up internal reserves to assist in addressing the reductions from the state while maintaining a focus on strategic initiatives.  The URC will have several additional meetings over the course of the next year in preparation for the legislative funding decision cycle for 2022 and 2023.  As we learn more about our still-developing fiscal picture, the university will work to ensure readiness to restore and maintain funding to our highest priorities, which include:

• Student academic progress
• Instructional and research priorities
• Faculty research and travel
• Enrollment