University of Minnesota regents approve 'COVID-adjusted' budget

The University of Minnesota's Board of Regents on Friday approved a pandemic-adjusted operating budget for the coming fiscal year that totals about $4 billion and includes freezes on tuition, systemwide hiring and merit pay raises for all employees.

Separately, regents approved a plan for temporary employee pay cuts and furloughs to help offset financial losses from the pandemic, which sent students home for the spring semester to learn remotely. The break cost the U $35 million in room and board refunds.

The fiscal 2021 budget beginning July 1 assumes a return to near normalcy, with reduced operations in the summer making way for the reopening of campus classrooms and facilities in the fall. U leaders have developed two contingency plans in case the pandemic worsens and the return of students is pushed deeper into the fall.

This budget "provides a responsible, by no means definite, base level of operations from which potential contingency plans can be shaped," President Joan Gabel said during a regents committee meeting Thursday.

The full financial impact of the virus on the university could exceed $300 million if the pandemic continues into the fall, but for now it's more manageable. Leaders said they will amend the budget if financial challenges arise.

Gabel's COVID-19 budget includes a tuition freeze for most students, the elimination of merit pay raises for staff, minimal capital investment and lower residency in campus facilities. It also includes a 10% pay cut for Gabel and her cabinet.

The plan is contingent on the state maintaining the two-year funding level approved by the 2019 Legislature, a point of concern for some regents given the state's own pandemic-driven budget deficit.

Regent Richard Beeson commended Gabel for craft ing a "wise" budget that can be amended under changing circumstances. The final product is fair to university staff, students and stakeholders, he said.

"One of the principles I like frankly is the shared sacrifice approach," Beeson said Thursday. "I think our business model will resume and normalize better."

Regent Michael Hsu suggested that leaders consider a tuition decrease during the pandemic to help bolster enrollment.

Senior Vice President for Finance Brian Burnett shot down that idea, saying the university has a "very good value proposition."

"A good value proposition can always get better," Hsu responded.

Regents unanimously approved the budget on Friday.

Regents also approved an employee pay cut and furlough plan.

The university employs more than 27,000 workers. Salaries and benefits represent about 63% of the school's expenditures this fiscal year; salaries account for $1.8 billion and benefits total $623 million.

The temporary furlough and pay reduction plan will affect most employees, except those making less than $60,000 annually, graduate students, professionals in training and H-1B and E-3 visa holders.

Furlough hours will be allotted based on employee salaries, with the highest earners taking the biggest pay cuts.

The savings program will occur in two six-month segments. Employees who are furloughed will be assigned a bank of hours to use over a set time frame. Those who take a temporary pay cut will receive an equivalent number of days off.

Leaders say the university will save $45 million to $50 million from the employee furloughs and salary reductions and the 10% pay cut for Gabel, her cabinet and top sports coaches.

"Our staff and our faculty are our greatest asset," Regent Ken Powell, chairman of the board, said Friday. "We know that this is impacting employees and families at a time of great uncertainty. And we understand our decisions have a real impact on the university community."

Ryan Faircloth • 612-673-4234