Declining enrollment and swelling employee expenses are causing budget woes for the University of Massachusetts and financial help from Beacon Hill may be needed, according to a top university official.
Salary and fringe benefits constitute 60% of UMass's expenses in fiscal 2024, an increase of $186 million compared to the fiscal 2023 projection. Joe Skrzek, assistant budget director at UMass, attributed the figure to an 11% hike to the state fringe rate and an 8% union wage increase.
The costs will need to be funded in future budgets, Skrzek told UMass trustees Wednesday during a virtual Committee on Administration and Finance meeting.
"Addressing these challenges will require active management and continued advocacy for a change to the cost-sharing arrangement with the commonwealth," he said.
Overall enrollment at UMass is slated to decrease by 0.3% in fiscal 2024, capping a three-year downward trend, Skrzek said. That's fueled by a 1% drop in undergraduate students and a 2% drop in in-state students — though the percentage of graduate, out-of-state and international students is projected to rise, as well as those pursuing continuing education.
UMass President Marty Meehan warned the university system is sailing into some "very strong headwinds," with enrollment pressures sparked by lower birth rates, more competition for students, and people questioning the return on investment from a college degree. UMass has managed to save more than $100 million through procurement strategies to prepare for the looming hurdles, Meehan said.
"Our enrollment is certainly stronger than the community colleges, the state universities and the non-elite private," Meehan said. "But we know what's coming. Headwinds are coming."
Enrollment at UMass Amherst is expected to be 29,835 for fiscal 2024, a 1.2% drop from the prior year that also reflects officials attempting to "right-size" the incoming undergraduate class.
UMass Lowell is projected to see a 0.8% decline, while UMass Boston and UMass Dartmouth will see upticks of 0.8% and 1.6% , respectively.
Boosting the volume of applications could alleviate some of UMass's struggles, Meehan said.
Applications for fiscal 2024 fall admissions neared 93,000, which was historically high, said LeeAnn Pasquini, assistant vice president for budget and planning. Yet deposits, an indication of student commitments, so far were lower compared to last year.
All the UMass campuses should maintain a positive operating margin in the coming fiscal year, with the overall figure pegged at 1.8%, Skrzek said.
"Achieving these margins comes with challenges posed by the enrollment decline, sharp increase in employee benefit costs, and historic union wage increase," Skrzek said. "The campuses have had to make tough decisions around staffing and other non-personnel spending in order to achieve these margins. There are difficult solutions embedded in their budgets, and the campuses are actively working on implementing them for the coming fiscal year."
Trustee Bob Epstein said "tough decisions" will need to be made "on all aspects" to ensure UMass reaches a 2% operating margin by fiscal 2025.
UMass's $4.1 billion budget covers 15,601 full-time employees, which is a 1% drop in general operating staff. Officials said it's too early to know which positions will be impacted at the different campuses.
But Skrzek said overall staffing will increase by 0.8% due to grant funding.
"We'll continue to focus on financial accountability and work toward maximizing cost-saving initiatives through shared services to help offset some of the budget challenges that we've discussed and keep the university financially strong," Skrzek said.