Financial impacts from the COVID-19 pandemic have spurred an estimated $90 million in cuts to the University of Virginia’s budget for the current fiscal year, about a 2.3% reduction in the budget officials proposed in June.
The $3.76 billion budget was approved Sept. 11 by the Board of Visitors. That includes operating budgets of the university’s academic division, Medical Center and the University of Virginia at Wise.
The budget includes a nearly 5% cut in services such as travel and cuts in fund transfers between departments, including internal debt service.
The pandemic, and the need for social distancing and limited indoor occupancy, forced early closure of the university in the spring and cancellation of many traditional graduation services, as well as furloughs and layoffs for some employees.
It also led to a temporary delay in the budget approval process. UVa’s board normally approves the budget in June for the fiscal year that begins July 1, but this year, administrators delayed adoption of a final budget to better predict the pandemic’s impacts.
“It’s really unprecedented. The pandemic has affected many parts of people’s lives, and UVa is no exception,” J.J. Davis, executive vice president and COO for the university, said in an interview this week. “Students have had different needs, from safety to loss of summer jobs, and we’ve seen more expenses in health and safety and loss of some income, so we wanted to delay the budget to get a better perspective.”
The pandemic impacts in the spring and summer struck nearly every UVa department, as well as administration and support services.
According to UVa finance information, the university anticipates net tuition and fee income to be reduced by nearly 4% in the 2020-21 budget.
State appropriations for the school are expected to drop as much as 14.2%, externally sponsored research income is expected to decrease 1.4% and all revenue sources are predicted to decline 1.7%, the figures show.
UVa Medical Center this spring shut down all non-emergency operations and medical procedures to focus on possible floods of COVID-19 patients. That forced the furlough of hundreds of employees and an operating income loss of 48.1%, figures presented to the board show.
The UVa board approved a revised $1.83 billion operating budget for the Health System, a 1.3% decrease.
The university previously announced a number of major cost-saving moves, including instituting a hiring freeze and foregoing potential merit increases for this fiscal year. Many UVa leaders, including President Jim Ryan, took 10% pay cuts.
Every school and operating unit has identified budget cuts for the year.
“It’s impacted a lot of our people. There is a hiring freeze, no pay raises and we’re asking faculty to teach with different modalities at the same time,” Davis said. “Our facilities people are not just concerned with maintenance and repair but are looking for ways to sanitize and clean the facilities to help fight the pandemic. Our staff and faculty are really going above and beyond and their efforts are making this work.”
UVa officials said they anticipate financial losses in auxiliary services such as housing, dining and in athletics. Reserve funds will help cover some shortfalls.
Like other universities across the country, UVa cautiously approached the fall semester after shifting to all-online learning for the remainder of the spring semester. Undergraduate students returned to residence halls earlier this month to safety measures that include facial coverings, social distancing and no more than 15 students gathering in one place at a time.
All students living on Grounds or in the area were required to submit a negative COVID-19 test before being cleared for the semester.
The school started classes online for two weeks before allowing in-person instruction last week.
Although enrollment numbers did not decline significantly, the number of students living in dorms decreased by 34%.
Nearly every COVID-19-related decision had a financial impact, officials said.
“As an example, our decision to delay the start of in-person classes also decreased the number of students living in dorms for those two weeks and that affected income because those students didn’t pay rent or lease costs for that time,” Davis said. “That also affected dining because the students who live in the dorms are the ones who utilize the dining halls the most.”
The pandemic is having a financial impact on the athletic department, as well. No spectators are allowed at the university’s sports contests. That impacts the school’s budget, as well as the bottom line of local restaurants, hotels and other businesses.
“Normally, we’re packed to the gills on a weekend for sporting events, and those are not transpiring because of the pandemic,” Davis said. “Depending on how long the pandemic restrictions remain in place, it could have a serious impact.”
UVa officials predict the school will see $55 million in one-time costs and lost revenues in the new fiscal year directly associated to the pandemic, should the fall semester go as planned with online and in-person classes.
That figure includes an estimated $38 million for COVID preparedness, testing and containment; instructional costs; COVID-related support for students, faculty and staff; personal protective equipment; Plexiglas, tents, sanitizer stands and disinfectant; and the Hoos Health Check app for cellphones and call center staffing.
An estimated $14 million in lost revenue is expected in housing and dining due to lower occupancy. The university also will lose $3 million in January term and summer session tuition. Those classes will be offered free to students to help increase academic options.
UVa is offering all undergraduates a January term and summer session course at no charge.
University officials also are preparing to spend about $10 million more in need-based financial aid than anticipated to help students and their families address a pandemic-ravaged economy.
The university received $5.8 million in federal CARES Act funding for financial aid and raised $2.5 million for Bridge Scholarships. Officials have committed to meeting 100% of demonstrated financial need for undergraduate students.
The impacts are likely to reverberate through the community at large. Studies from four years ago showed that UVa contributed about $5.9 billion to the regional economy, including spending on goods and services with vendors; spending by employees, students and visitors; and economic impact generated by businesses that benefit from the school.
UVa employs about 17,000 in its academic departments on Central Grounds with another 12,000 staffers in the Health System.
“Health and safety is our No. 1 priority, but we wanted to reopen because we thought it was the best for our students’ academic performance,” Davis said. “We’re in the middle of a pandemic and there is no manual on the shelf for how to deal with that. We are prepared if we need to change.”
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