The William & Mary Board of Visitors heard detailed presentations on the university’s fiscal year 2022 (FY22) budget last week during its February meeting.
At a public hearing last month, university staff presented that a tuition increase for in-state undergraduates from zero to 3% was under consideration. However, with final action on the state budget still pending, the Board decided Friday to table action until its April meeting in order to better understand the scope of those fiscal impacts.
“Decisions related to tuition are not ones we take lightly,” said Financial Affairs Committee Chair James A. Hixon J.D. '79, M.L.T. '80. “The Board felt it prudent to table this decision until we had a fuller picture of the support from the state and final details regarding state-mandated costs including salary increases and health insurance premiums.”
In a typical year, the state covers about 25% of those costs with the remaining 75% coming from university funds — most often tuition and fee revenue. It appears that the General Assembly has provided state funding to cover a greater share this year — up to as much as 40% with some additional flexibility as to how W&M addresses those mandates, said Chief Operating Officer Amy Sebring.
“Unfunded mandates by the governor and General Assembly, including salary and fringe benefit increases, drive up costs for the university,” Sebring said following the Board’s session. “We still need additional clarity on the proposed actions and an understanding of how those fit within the overall university budget for FY22.”
If approved by the governor, the General Assembly’s actions would allow for salary increases of up to 5%.
“Our employees have worked so incredibly hard this year, under really challenging circumstances. We are grateful for the General Assembly’s recognition of that work,” Sebring added. “With that said, we need to fully understand what those state budget decisions will mean to our own expenses so we can accurately close the pending budget gap we expect for the next fiscal year.”
William & Mary continues to navigate unprecedented financial challenges. Prior to COVID-19, the university had already identified a mismatch between its financial model, which reflects its position as a public research university, and its operational model, which incorporates the virtues of a small, private liberal arts and science institution, Sebring noted.
“The pandemic has accelerated the need to address the university’s financial structure,” she said, adding that in addition to cost containment and budget reductions, the university will also improve efficiencies, maximize expertise and align resources to most effectively meet the university’s business needs and advance its academic mission.
In the current fiscal year (FY21) the university has seen lower revenues across units as well as increases in pandemic-related expenses such as testing, PPE, space modifications, technology and program enhancements (for in-person and virtual formats). The combination left William & Mary facing a $40 million shortfall. The university cannot run a deficit and has continued to work diligently to reduce its spending to close the gap.
Sebring added that COVID-19 relief funds and additional one-time support from the Commonwealth have helped to mitigate that shortfall but noted that post-pandemic shortfalls will be felt beyond this year.
Last year, in response to impacts from the pandemic, the Board voted to reverse a previously approved increase in tuition and fees and hold rates at FY20 levels. During the Board meeting, the administration and Board agreed that tuition alone cannot be the only solution to closing any funding gaps in years to come.
“As we look at the budget challenges for next year, the administration recognizes we cannot rely on tuition funds alone. Establishing the new, multi-year budgeting process outlined before the Board this week is essential for the university’s long-term sustainability,” said Sebring. “Growth in expenses must be matched by growth in revenues and budget reductions. That process is underway and will be implemented beginning in FY22.”
In addition to tuition, Sebring noted that the university will see some incremental revenue through modest enrollment increases as well as reduced expenses through continued efficiency gains and cost containment efforts.
The Board of Visitors will consider a full set of tuition and fee recommendations during its next meeting April 22-23.