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UNC Chapel Hill says “inefficient” operation requires budget cuts

UNC Chapel Hill, facing a $200 million annual deficit related to the pandemic, plans to cut 1.5% in personnel funding and 7.5% in operating funds for both the current and 2022 fiscal years.

Chancellor Kevin Guskiewicz disclosed the plan in a letter issued Friday. It didn’t make clear how much money would be targeted in the cuts. The university spent $1.8 billion on salaries and benefits in 2020; 1.5% would be $27 million. Other expenses totaled $1.3 billion last year; 7.5% would be $98 million.

“Carolina has operated in a highly decentralized financial environment that is inefficient and is simply out of date in today’s world,” according to the letter. “The last time we operated with a balanced budget was nearly a decade ago. The imperative now is to find ways to reduce our spending to protect the financial health and viability of the University.”

The letter said that UNC Chapel Hill faces three main financial problems: a $100 million “structural deficit in the University’s central funding sources,” an estimated $200 million deficit in the current fiscal year because of the pandemic and about $850 million deferred maintenance.

“We believe we can tackle our budget challenge in a reasonable and strategic manner while creating a more sustainable financial model for years to come.” UNC said it will use “revenue-generating srategies” to offset the budget cuts.

Decisions related to the budget cuts will be based on eight principles listed in the letter, including a connection to the university’s strategic plan and through strategic moves, not across-the-board cuts. One principle suggests that cutting staff should include a “focus on reducing the number of senior administrators in our organization.”

UNC had total reveuues of about $3.16 billion and expenses of $3.17 billion in the year ending June 30 2020,  according to its annual financial report. Operating revenue, which includes tuition and fees, federal grants and sales from housing, food services and medical clinics, declined by about $70 million from a  year earlier. Operating expenses increased by about $130 million, including an $85 million boost in personnel  costs.

State appropriations totaled $535 million. Tuition and fee revenue totaled $400 million, versus $424 million a year earlier.

The letter was also signed by Executive Vice Chancellor and Provost Bob Blouin and Interim Vice Chancellor for Finance and Operations Nate Knuffman.

UNC Chapel Hill is part of the 16-campus UNC System. It enrolls about 30,000 students and is one of the nation’s most highly rated public universities.

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