Northern Kentucky University announced Wednesday it had reduced its budget deficit from $24.2 million to $9.6 million since late last year. Now, the university is tasked with continuing to dig itself out of a hole over the course of the next year.
As part of the new budget, NKU cut 100 faculty positions and 25 staff positions and plans to increase tuition and fees by 3% across the board.
The university released its budget Wednesday that details expected revenue, expenditures, and how much it’s pulling from the university reserves.
“It’s required us to work together as staff, faculty, and administration, but we’ve reduced a structural, recurring budget deficit from around $24 million to $9.6 million in one year,” said Faculty Senate President John Farrar.
Here are the key components of the budget and what they mean.
NKU’s Operating Budget
The proposed budget includes an expected operation amount of $280,590,172, with projected revenue expected at $264,483,089 — NKU plans to use $16,107,083 from its reserves to cover the difference.
“In the fiscal year that begins in July, we’ll have to continue this hard work to balance our expenses with income,” Fararr said. “We’ll have to make more cuts, but we must make more progress with revenue, too. This year isn’t going to be any easier.”
In the 2022-2023 budget, NKU had an operating budget of $271,500,000 with expected revenue at $271,475,728.
In the 2021-2022 budget, NKU had an operating budget of $264,500,000 with expected revenue at $264,494,641.
In the 2020-2021 budget, NKU had an operating budget of $251,000,000 with expected revenue at $246,964,420.
Expected Revenue
At the meeting Wednesday, NKU broke down expected revenue into five categories: tuition and fees; state appropriation; auxiliary services; other; sales and services.
The majority of NKU’s expected revenue comes from tuition and fees, which makes up roughly 61% of its budget.
“We are an extremely tuition-dependent university,” said Chief Financial Officer Jeremy Alltop.
NKU expects to pull $164.9 million from tuition revenue in Fiscal Year 2024. This is the same amount as the Fiscal Year 2023 projection.
The university must increase tuition to cover the $164.9 million in its budget. Without the 3% tuition increase, its revenue from enrollment would be $160.4 million.
The next largest revenue source is $64.9 million from the state of Kentucky. The university received an additional $1.3 million under the state’s new performance model established in 2016 by the Council on Postsecondary Education.
This projected amount in Fiscal Year 2023 is $63.6 million.
The next part of NKU’s budget comes from auxiliary services, such as housing, parking, and food service. For fiscal year 2024, this is $15.8 million. For fiscal year 2023, this is $13 million.
NKU also has a place in its budget for “Other.” This is income from investments and rentals. For fiscal year 2024, this is $14.3 million. In Fiscal year 2023, this is $12.6 million.
The smallest amount of money comes from Sales and Services. In the fiscal year, this is $4.6 million. It’s $3.7 million in fiscal year 2023.
Projected Expenses
The proposed budget includes an expected operation amount of $280,590,172.
“We have taken unprecedented action to close that recurring budget gap and continue to do this throughout the next year,” Alltop said.
The largest portion of this comes from salary and wages. In fiscal year 2023, this cost the university $118.4 million. In fiscal year 2024, this will cost $109 million — a $9.4 million reduction.
Benefits: FY 23: $35 million. FY 24: $37.1 million.
Contract services: FY 23: $26.4 million. FY 24: $26 million
Operating: FY 23: $26.1 million. FY 24: $34.2 million.
Utilities: FY 23: $6.7 million. FY 24: $7.4 million.
Capital: FY 23: $2.3 million. FY 24: 2.4 million.
Student financial aid: FY 23: $43.6 million. FY 24: $42.7 million
Transfers (Debt services): FY 23: $18.5 million. FY 24: $21.8 million.
NKU’s Budget Reserves
NKU plans to use $16,107,083 from its reserves to cover the difference in its expected operating budget of more than $280,000,000 with only $264,483,089 coming
Of the more than $16 million expected to come from the university’s roughly $81 million reserve pool, $9.6 million will be recurring, and $6.5 will be non-recurring — meaning the former amount will continue to occur unless NKU plugs that leak. At the same time, the latter will be only a one-time cost.
Board of Regents Chair Rich Boehne said in his more than 10-year tenure on the board, it’s the most the university has pulled from the budget reserves.
“This is probably the most dramatic draw we’ve done,” Boehne said.
Alltop said during the meeting that pulling running a deficit and pulling money from the reserves is not a sustainable situation.
“We cannot continue this for several years and running deficits funded by our reserves,” Alltop said.
Alltop said that the university had used a considerable amount of reserves — the reserves sit at roughly $81 million, which equates to 105-110 days of unrestricted cash, though this is a simplistic number as cash fluctuates, and the actual number will be presented this fall when the administration provides its annual financial report that’s reviewed by external auditors.