APU begins the process of making budget cuts to make up for budget deficit
Azusa Pacific University came out of the 2017-18 fiscal year in a deficit of $10 million.
This deficit, discovered in July, has caused the administration to cut and revise the budget.
“Although the shortfall was a surprise, we’re verifying all the financial results and outlining system changes for a more disciplined forecasting of revenue and expenditures, as well as a 2018-19 revised budget,” University President Jon Wallace said in an email update to faculty and staff.
While President Wallace and the board take responsibility for the error, former Chief Financial Officer (CFO) Robert L. Johansen “transitioned out of his employment at APU,” as President Wallace said in an update. No other faculty or staff have allegedly left their positions at this time.
The new “revised budget” will consist of cutting $20 million: $17 million of spending and $3 million in reduced capital investments this year.
The breakdown of the university’s financial situation looks like this:
- Ended 2017-18 approximately $10 million over the allotted budget
- Capital expenditures of $7 million
- Approved budget of $240 million for 2018-19
- Projections indicate overshooting 2018-19 budget by $20 million
At this point, faculty and staff have been impacted the most. There will be no annual increase for employees this year, all travel expenses have been eliminated to necessity-only, there is no more food budget for faculty gatherings, all cell-phone reimbursements have been eliminated and the President’s Counsel has implemented salary reductions this year.
Additionally, the administration is revising retirement and healthcare benefits for faculty and staff in two phases. For retirement benefits, the first phase will be to freeze the employment retirement contribution. The second phase is reconsidering benefit options. For healthcare, the first phase will take place in 2019 and will focus on lowering the costs. The second phase will take place in 2020 and will look at reconsidering the cost contribution model.
These changes are also impacting students, both directly and indirectly. There is a campus-wide hiring freeze, eliminating any open jobs posted on or before August 20, 2018, making an on-campus job difficult for students to obtain. However, the administration is doing its best to maintain a focus on the student body and student wellness.
In moving forward, according to a Faculty Moderator Blog, the Senate has implemented three resolutions:
- Standing CFO and Executive Vice President (EVP) of Strategy of Azusa Pacific, Ross Allen, will report to the Board of Trustees instead of reporting directly to Jon Wallace (as it was at the beginning of this situation).
- In response to High Sierra being cut, they hope to find a new wilderness learning initiative.
“We know that incorrect assumptions regarding actual tuition revenue in fiscal year 2017-18 and an underestimate of tuition assistance and various expenses, including payroll and benefits, led to our current situation,” current CFO acting EVP of Strategy, Ross Allen, said. “We will incorporate more conservative assumptions and we have taken steps to address these issues and will continue to do so.”
In looking at what programs to cut or restructure, President Wallace is looking to give individual departments the freedom to determine what that looks like. “Our goal is to give individual areas the ability to restructure their teams in the best way to advance the mission and deliver on our promise of a life-changing and life-affirming educational experience for our students,” President Wallace said in an interview.
“Our mission is to provide transformational experience for our students, supporting their development as disciples and scholars,” Vice President of Student Life, Shino Simons, said. “Our intent is to make changes that continue to help us positively impact our students.”
Additional changes are being decided on this week and next, and this article will continue to provide updates as they come.
Updated on Friday, Sept. 28, 2018 at 8:30 p.m.
The language is being changed moving forward from “budget” to “Annual Plan.”
Additionally, the new “revised budget” will consist of cutting $20 million: $17 million of spending and $3 million in reduced capital investments this year.