COVID-19 Playing Major Role in SJSU’s 2020-2021 Fiscal Year Budget

The university is leveraging reserves in effort to prevent layoffs and continue Transformation 2030 strategic plan.

 

Amid the COVID-19 pandemic, San José State University (SJSU) is in the process of releasing its budget for the current academic year. SJSU is scheduled to release its budget for the current academic year by the end of September.

With the California State University (CSU) system facing a $299 million budget reduction from the state of California due to COVID-19’s impact on the state’s overall budget, SJSU’s $377 million budget — down $26 million from last year — has been affected significantly by the state’s reductions and the economic impact of the pandemic. 

SJSU estimates a financial shortfall of more than $92 million from lost revenue and COVID-related expenses tied to the state’s budget reduction and university-specific revenue streams, most notably housing, which accounts for nearly half of the university-specific losses, parking, dining, concerts and events, athletics revenues and international student enrollment. Although SJSU’s total enrollment number is on track to mirror the 2019-2020 academic year, the loss of an estimated 500 international and out of state students this fall factors into the revenue reduction.

“On top of being a major health concern, the pandemic has created a financial impact on higher education that will hurt universities like SJSU for some time to come,” said President Mary A. Papazian. “The recovery from this will be long and arduous. I have and will continue to call upon Congress and others to support institutions like SJSU to ensure a well-educated workforce vital for our state’s future.”

The projected deficit is nearly six times the original estimate of $16 million in losses the university estimated during the spring semester after the county’s shelter-in-place order went into effect March 16. The federal government’s CARES Act, distributed in April, provided more than $30 million to SJSU, with nearly half of it earmarked and distributed as direct student aid. The remaining $16 million funded faculty training through the SJSU Teach Online Summer Certificate Program, enabled the purchase of much needed student and faculty IT equipment, and provided some relief to enterprises, including housing and parking services. The remaining funds from the CARES Act were used to support COVID-related infrastructure expenses, such as cleaning supplies and other uses by Facilities Development and Operations, and expenditures in Academic Affairs.

Options for this year and beyond

In July 2020, CSU Chancellor Timothy P. White shared a message emphasizing that the financial challenges caused by the COVID-19 pandemic will be felt by the CSU for at least the next three years. Chancellor White described the CSU’s plan to reduce expenses, including instituting a systemwide hiring slowdown, halting most travel for all campuses and the Chancellor’s Office, and the consideration of a furlough program beginning in the 2021-2022 fiscal year. Chancellor White has delegated to each campus president the responsibility and accountability for implementing local campus layoff plans, as determined by the campus and consistent with applicable collective bargaining agreements. 

“Layoffs are the least preferred option for SJSU, and we continue to look at the budget to find creative solutions to the looming financial challenges we face,” Papazian said. “We are committed to exhausting all avenues before resorting to layoffs. We will continue to find ways to ensure the university can maintain courses and services for students and keep our faculty and staff employed in the midst of a global crisis.”

While SJSU has continued to hire faculty and key strategic positions, the university has significantly slowed hiring and backfilling positions, resulting in budget savings.

Despite the expected financial shortfall over the next three years, SJSU is committed to continuing the work necessary to achieve goals of the Transformation 2030 strategic plan — including graduation rate increases, tenure-track faculty hiring and start-up, research growth, safety and growth of graduate studies. 

“Despite what feels like insurmountable challenges, we will continue the progress we have already made toward these vital goals for the growth of San José State University,” said Vice President of Finance and Administration and Chief Financial Officer Charlie Faas. 

In his July message, Chancellor White also wrote that use of reserves will be vital to protecting our institutions from financial exigency over the next three years. Campuses and the Chancellor’s Office will be measured in drawing on these funds to ensure they do not “zero out” their reserves. Funds from reserves intended for a specific need or priority will only be used to fund those particular areas.

Drawing from reserves

SJSU will utilize a significant portion of its reserves — currently $161 million from the general fund and enterprise reserves which amount to a little less than five months of funding to support all university operations. Given the long-term impacts of COVID-19, SJSU looks to draw on about 60 percent of its reserves in the 2020-2021 fiscal year. The remaining reserves will be largely expended in the next two fiscal years.

SJSU is also working closely with its auxiliary organizations to determine how they can best partner with the university. The university is prepared for several years where the state budget could be significantly decreased and additional state funding is not available. 

“Getting through the pandemic and its lasting financial impact will be a team effort, and potential support from divisions, enterprises and auxiliaries will allow SJSU to continue to adapt in crucial areas across campus and emerge from the pandemic on solid ground,” said Faas. “Together, we will continue to fulfill our academic mission and support graduation initiatives that have made San José State University a world-class institution that is the most transformative university in the country.”