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Dear SDSU Community,

We shared last week that we are expecting to address a $67 million budget gap this year, brought on by the COVID-19 pandemic. We also shared our short-term strategies to address that budget gap, and reach a balanced budget for fiscal year 2020-21.

With this email, we are pleased to share more specific details about our longer-term plans to both mitigate base budget reductions and to improve revenue-generation to support the financial health of the university beyond just this semester, or this year.

Budget Gap Mitigation and Long-Term Solutions

As previously shared, 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, to include delayed capital projects, a hiring chill, travel restrictions, reduction of new budget allocations, and use of carryforward designated balances and reserves. These strategies heavily rely on one-time funds.

Despite this proactive work, one-time dollars do not address permanent base cuts to the university. They do, however, give us time. With our new strategic plan, our campus needs innovative solutions that will not only carry us through the budget downfall of the next three years, but will also help to shield us against future economic downturns. Further, if we are to achieve our aspirations in that plan, we must improve our financial resilience, and generate new resources to support our faculty, staff, and students.

The following permanent solutions have been identified and are under development. We will continue to develop other long-term solutions to address our permanent budget reduction of $35 million. In identifying these solutions, we also considered expected budget challenges in the next two fiscal years (2021-22 and 2022-23) based on current projections.

Some examples of our long-term solutions are as follow:

Revenue Generation

We have already formed a team to explore options for generating new dollars for the university, to include funding for research, academic programs, and student support. The team has since identified solutions for consideration, leveraging the strength and opportunities present at SDSU.

Some examples include but are not limited to:

  • Growing summer enrollment, which is already increasing each year.
  • Developing summer high school academies.
  • Increasing non-resident enrollment.
  • Exploring corporate and public partnerships, leveraging the size of our alumni.

We anticipate that these efforts, if adopted, will contribute positively to the budget in the next several years.

Contingency for Revenue Generating Development in Mission Valley and Imperial Valley

We are activating an additional strategy to expedite the timeline of revenue generation from public private partnerships in Mission Valley through the establishment of a $30 million contingency fund from one-time campus reserves. This strategy also allows us to avoid significant cost escalation from delaying construction and to minimize interest expense by taking advantage of the current very favorable capital market.

The estimated savings will far exceed the $30 million contingency set aside. This fund operates as an internal loan. While it may not be needed, it will be available to support academic, research and innovation district development needs for both SDSU Mission Valley and SDSU Imperial Valley. To be clear, this set-aside would be exclusively used to support academic and research capital development in the Innovation District, and will not support any component of the Aztec Stadium, which relies strictly on stadium-related revenue. This strategy will allow for the university to expedite the timeline of potential public-private partnerships with our colleges and overall revenue generation for the university, and any dollars from this fund that are used will be repaid directly with ground lease revenue.

Given the current state budget and the anticipated reduction in state funding for any capital projects in the next few years, this contingency fund provides additional flexibility for SDSU’s future academic development needs.

Cost Savings

Due to the magnitude of the cuts we are projecting, and because compensation and benefits make up 85% of our base budget, we have opened conversations about the need for personnel actions. We are currently in the process of developing a voluntary Early Exit Program as part of our efforts to reduce base budget costs. The program, if offered, would be designed as a voluntary, first-come-first serve program available to CalPERS retirement eligible faculty and staff on the state-side. The program would offer an incentive payment for eligible faculty and staff interested in resigning from their university position, who are otherwise eligible for retirement. The university has set aside $10 million of university one-time reserves and salary savings from this program to fund the one-time incentive costs . The resulting position vacancies would, then, provide necessary and ongoing base budget savings needed to address the permanent cuts to the university’s budget.

In the coming weeks, we will be seeking input from our stakeholders including union representatives and other shared governance groups on campus to finalize a plan for the potential Early Exit Program. We will also continue to explore other opportunities to increase efficiency and to avoid costs.

Conclusion

There are undoubtedly other strategies and actions that the university and individual departments can explore which will help us to address this base budget gap, and build resiliency and new streams of revenue. Not all ideas will align with our university mission and advance our forthcoming Strategic Plan, and so not all ideas should be pursued. This is a long-term issue that will require long-term conversations, and we will continue to gather input from campus stakeholders to identify other revenue generation and cost saving ideas in the coming months.

As always, we welcome you to pose questions or leave a comment by emailing [email protected].

With sincerity,

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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