A University Avoids Layoffs

As the spring semester comes to a close and the initial wave of revenue loss, belt-tightening and staff reductions subsides, colleges are looking ahead to next year’s budget. Many colleges say that 2021 budgets will feature layoffs to account for revenue shortfalls.

The University of Kentucky is bucking that trend.

Kentucky said last week that its 2021 budget would not include any “reductions in force,” a sharp contrast to an April announcement that the university predicted 1,700 furloughs as a result of the pandemic. Instead, the university is planning to weather its estimated $70 million revenue shortfall through a hiring freeze, changes to employee retirement fund contributions and by delaying an expansion of its family leave policy. Additional furloughs are also still on the table, though none are planned at the moment.

But the university hasn’t had to furlough so many employees, said Jay Blanton, a spokesperson for the university. To date, 700 clinical employees at UK Healthcare have been furloughed, in addition to nearly 300 university staff in dental clinics, dining services and parking -- just over half of the university’s expected temporary staff reductions.

More so than a budgetary necessity, Blanton said the employees were furloughed because “there simply isn’t work to be done at the current time. There aren't many people working on campus -- most people are working remotely. There’s only one dining hall open on campus right now.”

Blanton said the university has brought back many furloughed health-care employees and hopes to bring others back soon. In recent weeks, health-care operations have ramped up after the state lifted restrictions on elective procedures late last month.

The University of Arkansas, Fayetteville, also promised no planned layoffs in its 2021 budget, the Arkansas Democrat-Gazette reports. Revenue declines will be offset by other personnel spending reductions, including an ongoing hiring freeze, and halting some faculty and staff merit raises.

Personnel and related costs often make up a large portion of college expenses, and a guarantee not to cut into those spending areas is unusual, said Emily Wadhwani, lead analyst for U.S. colleges and universities at Fitch Ratings.

"I think it’s unrealistic to entirely exclude the possibility of layoffs and other human resource productions in this uncertain time. I think the more prudent management teams are planning for a number of scenarios, including campus to stay closed, stay online, you lose X amount of student-driven revenue," she said. "I would imagine that in the higher-risk scenario, avoiding layoffs or furloughs entirely is very unlikely."

That said, despite the promises, personnel expenses can still be reduced if needed.

“There are other ways to reduce your human resource costs that don’t look like a layoff or furlough that I expect we might see more of,” she said. This includes hiring freezes and halting merit raises like at Arkansas Fayetteville, and changes to retirement plans or early retirement options for staff.

Whether universities will receive more federal and state assistance will have a significant impact on upcoming budgets. Kentucky has experienced state funding declines for years. In the State Higher Education Executive Officers association’s latest report, state higher education appropriations in Kentucky fell by 3.6 percent between 2018 and 2019, the largest year-over-year decline of any state.

“Where a university stands depends on where they sit, and we’re still well below pre-recession levels of state funding,” Wadhwani said.

Another complicating factor for 2021 budgets is enrollment numbers. For many students, whether or not they’ll enroll in the fall is still up in the air.

“Generally, an economic downturn results in more people returning to college to retool and retrain. However, we are not quite sure what to expect in the midst of a pandemic,” Rob Anderson, president of the SHEEO, said in an email. “While we have heard that many students are reconsidering fall plans, many schools have also reported that their summer enrollments are up as many internships and other job opportunities have been canceled.”