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Dear SDSU Community,

As we have shared through our previous emails, our San Diego State University community has been carefully monitoring the financial landscape and unprecedented impacts of COVID-19. This message serves as an additional update regarding the 2020-21 fiscal year budget for the state, the California State University (CSU) system, and for SDSU.

Gov. Gavin Newsom last week shared updated guidance for K-12 schools and districts, and plans for reopening schools for the next academic year. The guidance does not implicate our university's SDSU Flex plan, which remains in compliance with county, state, and federal guidelines.

We did, however, receive a comprehensive budget update from the State and CSU System, which we detail along with SDSU specific updates below. Notably, we are pleased to share that our university is on track to achieve a balanced budget with one-time solutions for this upcoming year, and are identifying additional solutions to further reduce our budget shortfall due to COVID-19.

California State Budget

Gov. Newsom and the legislature passed the 2020 Budget Act. The budget reflects a net general fund decrease to the CSU of $299.1 million base dollars, compared to the last fiscal year. Should the federal government allocate up to $14 billion to the state by October 15, the cut to CSU will be adjusted downward. It is important to note that even if the federal government were to provide these potential resources, it would be in the form of a one-time allocation and would not address this permanent cut to CSU or SDSU base dollars.

The budget also identifies $6 million in one-time funds to support summer 2021 financial aid for students across the state. It also includes $15 million in one-time funds to support emergency financial aid for undocumented students across the state, who were denied federal emergency aid under CARES.

Finally, according to the state budget, the CSU is expected to use its unrestricted reserves to minimize the inevitable impacts of these reductions from one fiscal year to the next.

CSU Budget

In addition to the $299 million base reduction from the state, the CSU budget also includes an additional $24.2 million in tuition revenue losses from changes in enrollment patterns across all campuses. The documented losses bring the total base reduction to $323.2 million for the system. At this time the CSU does not plan to negotiate a systemwide furlough program for the 2020-21 fiscal year.

SDSU Operating Fund Budget

Earlier this month, the Chancellor’s Office provided budget guidance to all CSU universities. The budget impact to SDSU is a $35 million combined base reduction in state appropriations and unfunded increases in mandatory costs. While this figure is alarming, we have implemented a number of mitigating tactics to reduce the financial shortfall.

Based on current projections, we expect no major reductions in fall resident enrollment. This is excellent news, and we are already welcoming our new students, parents, and families through virtual orientation and other forums. Nonresident enrollment is, however, slightly reduced based on current projections, which is similar to the national trend. As we are continuing to support all students through the enrollment process, we will not know the effect of COVID-19 on final enrollment numbers until the beginning of the semester. In taking a conservative budget approach as it relates to tuition revenues, our initial 2020-21 fiscal year plan is based on a worst-case enrollment projection, resulting in a base reduction in tuition revenue of $13 million.

Additionally, the increase in costs due to the pandemic will continue through the 2020-21fiscal year. A net of $19 million in COVID-19-related revenue losses and unfunded cost increases are projected this year, over and above what the institutional portion of the CARES Act funds could cover. Some examples of these costs include investment in online instruction technology, faculty training that was offered in the summer, and additional health and safety-related costs, such as cleaning, testing, contact tracing, and the bulk purchase of personal protective equipment (PPE).

SDSU’s Financial Realities

In summary, SDSU is facing a $67 million total reduction in its budget in 2020-21, composed of the following:

  • A $35 million general fund reduction, which includes a state appropriation cut and mandatory cost increases. This represents a permanent reduction to the base budget.

  • A $13 million reduction in tuition revenue resulting from declines in enrollment. If we make up the decline in enrollment in Fall 2021, this will be a one-time reduction.

  • A $19 million one-time revenue loss and unfunded cost increase due to COVID-19. This is projected to be a one-time impact, unless the pandemic extends beyond the 20-2021 fiscal year.

Budget Gap Mitigation, Long-Term Solutions

We have worked to mitigate the financial impacts in a variety of ways, many of which have already been put in place to address this year’s $67 million budget gap:

  • $20 million in delayed and reduced costs, to include delayed capital projects, a hiring chill, and travel restrictions imposed across the university.

  • Reliance on $15 million in one-time funding available. As a conservative budgeting practice, every year SDSU sets aside 30% of its non-resident tuition revenue for one-time allocation recommended by the President's Budget Advisory Committee (PBAC). This has been substantially reduced for the 2020-21 fiscal year, resulting in needed funding to mitigate the budget gap.

  • A $32 million use of one-time designated balances and reserves, which are carryforward balances. Over the years, SDSU has grown designated balances and reserves to meet future strategic and critical needs, as well as to prepare for economic uncertainty. While most of these balances are carryforward one-time fund and have been designated for specific future uses, a portion of these fund has been reprioritized and will be used during the current fiscal year, and additional portions may be used in the following two fiscal years to fill the budget gaps. Designated balances and reserves will not be zeroed out and balances specifically encumbered for certain campus priorities will not be redirected.

These are mostly one-time budget solutions. These solutions offer immediate help and give us time to develop long-term solutions to address our permanent budget reduction of $35 million and the expected budget challenges in the next two fiscal years (2021-22 and 2022-23).

Conclusion

Our current year budget is balanced with one-time solutions. This initial budget is subject to change depending on the final enrollment numbers in the fall, and the availability of additional one-time federal funding to the state of California by October 15.

As noted above, this grants us additional time to identify long-term budget solutions for future years. We are committed to receiving input from campus stakeholders, and updating the campus community as more information becomes available. In the coming months, we will engage the campus community using our shared governance structures such as PBAC, to develop permanent budget solutions. Specifically, we are also actively working to identify revenue generation strategies and additional opportunities for cost savings, which we plan to share with you in early August.

This is and will continue to be a marathon, not a sprint. It will also continue to be stressful, and there is much uncertainty still associated with COVID-19. But if we can convey one message at this time, it would be one of strength, and one of optimism. Our community has come together in times of crisis before, and we will join together now to address these new challenges. Our resilience as a collective, our commitment to our students, and our core academic and research mission will continue to guide us through this pandemic.

As always, more to come, and we welcome you to pose questions or leave a comment at [email protected].

Adela de la Torre, Ph.D.
San Diego State University President

Agnes Wong Nickerson, MBA
Interim Vice President for Business and Financial Affairs and Chief Financial Officer

 
 
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