West Virginia University officials are working out a financial puzzle that involves the possibility of being down $45 million next year while also dealing with increased insurance costs for employees and trying to spread money for raises as equitably as possible.
University leaders talked through the complicated picture for almost two hours during a Thursday financial committee meeting of the board of governors, before breaking into executive session.
“It’s not time to panic, but it’s not time to snooze, and I just want to reiterate that our leadership team gets it,” said Rob Alsop, the university’s vice president for strategic initiatives.
A few weeks ago West Virginia University President Gordon Gee described a $35 million deficit for the coming fiscal year — potentially growing to $75 million over the next five years if steps aren’t taken to control costs.
Since then, though, WVU officials calculated the deficit for the coming year is likely more like $45 million. University leaders are working through how to deal with that potential loss.
Options include cuts, although university leaders also were talking about trying to cushion the blow by using some cash on hand or savings to get through what’s being described as a transition year.
“The headwinds are outweighing waiting the tailwinds, and we’re going to have to make some hard choices and do some things that that you know, in a perfect world we we wouldn’t do,” Alsop told WVU board members.
On Thursday, officials said the financial strain is directly related to declining student population.
For 2023, officials said, WVU had just more than 26,000 students. For 2024, the university projects 25,082 students.
That trend means it’s possible that WVU could lose 5,000 of its student population over a decade. If they’re paying about $14,500 in tuition, that means a total financial loss of $72.5 million over that time.
The factors are even more complicated than that.
“Higher education is in transition,” Alsop said. “The pandemic had a big impact on us. Decline in the college-going rate has had an impact on enrollment. We’ve significantly increased aid to our students. Federal and state support was really meaningful during covid, but honestly it maybe masked some things that we should have dealt with earlier.
“We reduced our expenses during the pandemic, but that business model is not sustainable now. Inflation is having a big impact on the institution — payroll and everything is more expensive than it is today.”
The broad financial stress has hit as university officials also assessed increased costs of insurance for public employees.
Lawmakers passed a bill during the most recent regular session aimed at stabilizing the finances for PEIA. A significant aspect of that meant returning the cost-sharing ratio between employers and workers to 80-20.
Because insurance costs for public employees were held even over the past few years, that means a big adjustment all at once.
State employees who work for agencies largely funded through general revenue received $2,300 across-the-board raises meant to offset the rising insurance costs. But universities get their funding through a mix of sources, including tuition and fees.
Alsop said state officials budgeted an additional $3 million for WVU, and so now the university is trying to determine the most fair way to offset the increasing insurance costs for employees.
If the university would provide $500 for employees, the university calculated that would be a $1.78 million overall cost and fully cover premiums for 73 percent of its workers who have PEIA.
If the university would provide $1,000 for employees, that would be a $1.9 million expense and would cover full premium costs for 95 percent of university workers.
“We think it’s a priority to at least spend some, if not all, of this $3 million on PEIA,” Alsop said. “But you know, we don’t have the money to give everybody an amount and so we need to pick what’s the priority. We think doing either one of these solutions, and making sure that they don’t have less take home pay as a result of this is an important goal.”
A “Campus Conversation” for staff and faculty will focus on recent changes to the Public Employees Insurance Agency at 11 a.m. next Wednesday.
That conversation is likely to be an extension of the budget balancing act that WVU is trying to work through.
“I will say, we also have to make sure we finish FY23 in a good position and we need to make sure we can hit the $45 million,” Alsop said.
“And so we’ve heard loud and clear that if we can do more than the $3 million we need to try to strive for it, but I don’t feel comfortable at the moment saying we’re going to have that. But we’re working through that.”