UT-Austin has largest share of $78 million in system cuts

The University of Texas System’s eight universities plan nearly $78 million in spending cuts in response to a request that state agencies slash their budgets ahead of the 2021 legislative session.

The system’s flagship, the University of Texas at Austin, bears the highest cost with plans to cut more than $28 million through the end of fiscal 2021, according to documents reviewed by the American-Statesman through the Texas Public Information Act. The cuts could mean layoffs or furloughs in the coming year.

The cuts come at a time when most institutions are facing significant challenges posed by the coronavirus pandemic. As campuses prepare for the return of students in the fall, universities are having to rethink class schedules and building occupancy levels, as well as ensure they have sufficient reserves of virus testing and cleaning supplies. In addition to the cost and stress of moving higher education online this spring, universities will continue to face significant costs in the months to come.

In a May letter, Texas Gov. Greg Abbott, along with Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, asked nearly all state agencies to come up with plans to reduce spending by 5% to mitigate the “significant economic uncertainty” caused by plummeting sales tax revenue, the state’s largest and most critical source of tax revenue, and by falling oil and gas prices.

The state exempted certain agencies, such as health institutions, from the cuts, but it asked all others to reduce spending in fiscal 2020 and 2021 by 5% each. Because many universities have already spent a large portion of 2020 funds, most of the money will come out of the spending plans for fiscal 2021, which begins in August.

“At most of our institutions, FY2020 funds have already been spent or encumbered,” wrote UT System Chancellor James B. Milliken in a June 15 letter to state leaders. “So most of the reductions must come in FY2021, which as a practical matter, makes the result a 10% reduction.”

The total reduction amount for each school was calculated by the Texas Legislative Budget Board based on the amount of funds allocated to each school during the 2019 legislative session. Medical centers, such as UT-Southwestern in Dallas and UTMB in Galveston, are exempt. The UT System administration will cut $391,525 from its own expenses.

UT System institutions will receive $173 million in federal aid thanks to the Coronavirus Aid, Relief and Economic Security, or CARES, Act, half of which will go directly to students in need of emergency financial help. Milliken has said the federal aid should help but is unlikely to make up for the revenue losses.

Cuts in Austin

UT-Austin spent nearly $26 million in the spring semester on unforeseen needs, such as housing refunds and other pandemic-related costs. In a letter to state leaders outlining a budget cutting plan, interim President Jay Hartzell said UT-Austin had taken steps to reduce costs even before the governor’s announcement.

In April, UT-Austin canceled planned merit-based salary increases and began critically reviewing the necessity of new hires and large expenditures. In May, the university said it would consider furloughs or permanent reductions in staff numbers in units that draw revenue primarily from providing paid services to internal or external customers — such as the Texas Performing Arts and the AT&T Conference Center.

UT-Austin plans to meet its $28 million target, in part, through the savings accrued from its actions earlier in the year. But those cuts won’t be enough.

Hartzell said UT-Austin plans to defer some debt payments, with this year’s obligations being amortized into payments between 2022 and 2026. The university also expects to save money leaving positions open as they become vacant and reassessing the budgets of all its academic and administrative units.

Cuts to specific programs or units have not been decided at this time, Hartzell said, but layoffs and other “workforce management actions” may result from the budget restructuring.

State funding reductions may also hurt some UT-Austin research efforts, as the university often leverages state dollars to get research grants, Hartzell said.

The university should see some additional savings after it stopped most school-sponsored travel in March, and in April began critically reviewing the necessity of any purchase or contract of more than $100,000. However, a spokesman said the budget office did not have specifics on how much has been saved.

Most of the cuts will be felt in the upcoming school year.

“With only 2½ months remaining, more strategic and recurring budget reductions in fiscal year 2020 are not possible,” Hartzell wrote.

Other universities

Spending cuts at other UT System institutions range from $1.97 million at UT-Permian Basin to $11.2 million at UT-Arlington. In letters to the state outlining their plans, many university presidents said their schools already are struggling under the cost of the pandemic.

UT-Dallas President Richard C. Benson said his campus lost $15 million in the spring semester paying for student emergency aid, refunds, summer school fee reductions, canceled conferences, increased safety measures and the conversion to online learning.

“This number will continue to grow,” Benson wrote.

To achieve its target of $7.9 million in cuts, UT-Rio Grande Valley will use savings from a hiring freeze it put in place earlier this year and reductions in travel and other operations. President Guy Bailey said while the school understands that the pandemic has had a severe impact on the state economy, UT-Rio Grande Valley already operates on very thin margins, offering one of the lowest tuitions in the state.

“We do this because a large majority of our students are economically disadvantaged, receive financial aid, and most work while attending school,” Bailey told state leaders. “We have made it our practice to control costs and improve efficiencies while providing exceptional services to our students, but any further reductions to our state support, specially any potential reduction in formula funding, will have long-lasting negative consequences for our university and the students we serve in one of the fastest growing regions of Texas.”

Even with federal funding through the CARES Act, Milliken said UT System institutions expect substantial revenue losses heading into the next year.

“That said, we understand that all Texas agencies and institutions of higher education must do our part to assist the state in its recovery efforts,” Milliken wrote to leaders.

The 2021 legislative session convenes in January, at which point, lawmakers will begin discussing appropriations for the 2022-23 biennium. Lawmakers in May said every state agency and institution should prepare to submit reduced budget requests as well as strategies to achieve further savings.

University of Texas System campuses to cut $78 million

School — state-ordered cuts, CARES Act funds

UT-Arlington — $11.2 million, $21.2 million

UT-Austin — $28 million, $31.5 million

UT-Dallas — $9 million, $19.1 million

UT-El Paso — $7.5 million, $24.8 million

UT-Permian Basin — $2 million, $1.8 million

UT-Rio Grande Valley — $7.9 million, $34.3 million

UT-San Antonio — $9.6 million, $29.7 million

UT-Tyler — $2.6 million, $5.2 million

UT System administration —$391,525 (no CARES Act funds)