Dear Faculty & Staff Colleagues,
I hope that you have been able to savor these dwindling days of summer and that this letter finds you and your loved ones well.
My deepest thanks to you
First and foremost, I want to thank each of you for the phenomenal efforts you have undertaken to operate under the unique conditions brought about by the pandemic. From converting to an online delivery format in the spring to all the training and innovation to enhance online courses to implementing new safety measures, you have devoted long days toward making Texas Christian University better. I am so grateful for the strength, courage and creativity you have shown in hurdling these unexpected obstacles and making the best of them.
In a few days our students will be starting fall classes – either in-person or virtually – and we will together face the challenges of keeping them, and our entire community, safe in this time of COVID-19. It will be an academic year unlike any other and I know that we will all be working hard to make it a fulfilling one.
TCU has been extremely fortunate over the past decade to enjoy a strong financial position that allowed us to significantly improve the profile of our students, enhance our academic programs, expand our beautiful campus, build our international reputation, and turn serious attention to diversity, equity, and inclusion (DEI). Our historic strength is the foundation that will allow TCU not only to survive but also to thrive through this time of crisis. To optimize those foundational strengths, we must be willing to make tough budgetary decisions to reallocate operational funds in a way that protects and sustains this University for the future.
Dual budget challenges: COVID and beyond
The most significant budget impact of COVID-19 has been the need to permanently reallocate $65 million from the University operating budget to financial aid in order to provide students with the equivalent of a 10 percent tuition reduction for courses that were moved online AND to provide additional need-based aid. This amount will address financial assistance for fall and spring from a tuition viewpoint. However, given other COVID-related expenditures, revenue losses and the need to increase financial aid, we are estimating a $90 million shortfall in our $558 million operating budget for FY 2021 . In FY 2022, we expect that some portion of the budget shortfall will be ameliorated if and when the campus is able to return to our new normal and resume live classes and activities.
The four primary drivers of this year’s current shortfall include: a slight decrease in enrollment compared to the level budgeted; increased financial aid for online classes; an increase in need-based aid; and modified athletic programs with anticipated lower revenues. We will further adjust these assumptions throughout FY 2021 as we assess the continuing impact of those four determining factors, including the Big 12 decision, announced this morning, to play a modified schedule this year. If the pandemic results in significant decreases in campus-wide activity, there remains the possibility that budget challenges may impact our workforce through actions like modified work schedules, furloughs, or reductions in full-time positions.
Some of these reductions will come through opportunities to participate in the Phased Teaching Load incentive program for faculty employees, which is open to applicants until September 16, and TCU’s first Voluntary Incentivized Retirement Program (VIRP) for eligible staff employees. The VIRP allows eligible staff employees to consider and elect early retirement in exchange for a lump sum benefit. All eligible employees will receive a personalized notification from Human Resources before the end of August.
Our forecast is for an ongoing budget shortfall of $65 million, or 12 percent of the operating budget, for FY 2022 and beyond, due to the increase in financial aid. To date, we have identified $58 million of $65 million in the cost reductions needed to allow the University to offer greater financial aid as well as COVID-19 tuition assistance. The vice chancellors across all departments have been charged with identifying an additional $7 million in reductions this year to offset the increase in financial aid and assistance. Reductions for FY 2021 identified to date primarily come from employee benefit changes, freezing open positions, deferring merit increases, and temporary reductions in costs including travel, food, and shuttle services. The $65 million in cost savings, plus the lowering of capital reserves and the one-time use of borrowed emergency funds will assist with short-term financial stabilization to help the University manage its finances in the current academic year.
At the same time we address COVID-related challenges, we must also reinforce TCU’s overall financial standing to assure that our underlying foundation is secure enough to sustain and protect our future.
A vision to sustain and protect TCU
Various staff across campus and the Board of Trustees had already been working diligently to address future economic challenges and opportunities well before the COVID crisis erupted. In November 2019, the Board of Trustees charged the administration with achieving the following goals over the next three years as the means to become stronger, more resilient, and more competitive for the long-term future:
- Increase the level of financial aid to become competitive with the nation’s best schools in attracting top-performing students and a more diverse student body;
- Reduce tuition increases which have ranged from 4.8 to 8 percent over the past decade, to a level of 3 percent or lower;
- Maintain the 14:1 student ratio in accordance with our plan for responsible enrollment growth ;
- Build the endowment to a level of $3 billion, with an emphasis on raising funds for scholarships;
- Examine academic programs, investing in those with the highest potential impact and explore innovative new programs that generate new net revenue ;
- Emphasize long-term financial sustainability by reducing debt and reallocating resources to shape TCU as an even stronger university with global reach.
Success in achieving these goals, combined with our aim to surpass our $1 billion goal of Lead On: A Campaign for TCU, will determine, preserve, and further solidify our status as one of the top universities in the country. The core of that mission is our ability to increase financial aid.
Therefore, we have made the decision to make the recent reallocation of $65 million from the University operating budget to financial aid permanent, to facilitate the University’s continuing long-term goals to enroll an academically talented, diverse student body and make TCU more affordable for students and families.
Permanently increasing financial aid by $65 million will allow TCU to compete with universities across the country by featuring a competitive tuition package that will lead to significant increases in both the academic profile and diversity of incoming students at TCU. In order to fund this goal, we estimate that the University will need to permanently reduce the operating budget by $65 million in FY 2022 and beyond. In addition to making further recommendations for budget cuts in this fiscal year, each vice chancellor will also need to create a plan to move temporary reductions to permanent status over a three-year period, i.e., by the end of FY 2023.
We can expect that lower tuition increases coupled with increased financial aid offerings will continue as a part of our new normal. We must attain a permanent reduction of $65 million, equaling a 12 percent reduction in permanent operating expenses, across all University units . All vice chancellors and unit heads will work within their areas to determine how this will be achieved.
Going forward, we must continue to stay on this path of sustaining and protecting TCU for the long-term future. On every level, we will use process improvements, business automation, organizational alignment, and procurement and contract negotiations, along with health care and other savings, to build a new era of conservation and long-term sustainability.
While these complex plans and contingencies are difficult to share and will be challenging to implement, it is essential that we provide you with the big picture now and more detail as we progress through these changes. We will be engaging with multiple groups on campus to discuss these plans in more detail with a commitment to shared governance.
A paradigm shift for higher education
Our responsibility to secure TCU’s future has never been more vital. TCU, along with colleges and universities across this country, are facing massive headwinds that are battering all of higher education. According to the U.S. Census, the college-age population in the United States is currently majority-minority, which calls for academia to adapt accordingly. The Census also reveals a dramatic drop in birthrates and predicts a continuation in this trend running up to an “enrollment cliff” in 2026 brought about by the “baby bust” associated with the 2008 recession. Even more relevant to colleges and universities, we are seeing a decline in students’ ability to pay the high tuition prices that have been rising for decades. Consider these phenomena alongside the fact that it will take years to recover from the economic impact of COVID-19 even after it is eradicated.
An August 2 Hechinger Report analysis revealed that more than 52 American colleges have already closed in 2020 and hundreds more are on the precipice of collapse. Many never fully recovered from the 2008 recession and do not have the wherewithal to survive current and future trends exacerbated by the pandemic. Roughly 1,360 colleges and universities have seen declines in fall enrollment since 2009. No institution, not even the most wealthy and prestigious, is immune from the need to address today’s economic challenges.
An optimistic future for TCU
Because we are facing our challenges head-on, I have unwavering optimism about TCU’s future. As the University’s finances are adjusted to support more financial aid equal to our aspirant schools, and as we explore exciting new academic programs and adapt successfully to these rapidly evolving times, I am confident in our ability to attract an increasingly academic and diverse student body and support our colleagues in lifting this University to even greater heights.
We have sacrificed, withstood and learned a great deal in this very difficult year, but in the end, it has made us stronger and more resilient. Now, we focus squarely on the future, knowing that the tough decisions and actions we take this year will determine our ability to be one of the top American institutions that come through these tumultuous times even better positioned for long-term success.
Thank you again for your hard work and innovative spirit, your tenacity in addressing unprecedented challenges, your love for Texas Christian University, and the care that you show our students and fellow colleagues every day.
Victor J. Boschini, Jr.