Updates on FY '26 Budget Development

March 3, 2025

Dear Faculty and Staff,

I am writing to provide an update on our ongoing efforts to align UHCL's budget with our long-term strategic priorities. As I've outlined in previous communications, the financial adjustments we are implementing are being done in phases to ensure they are both strategic and aligned with the university's mission and future.
 
Our current financial situation has evolved over several years due to a combination of factors. Key challenges impacting our finances include a decline in enrollment of over 1,000 students since 2021, the absence of a tuition increase for the past four years (and no increases planned for at least the next two years), rising operating costs, and reduced state funding. As a state institution, we have two main revenue sources: state funding and tuition revenue—both of which are directly tied to enrollment. While I am hopeful that enrollment will grow in the coming years, we must take into account our current circumstances as we plan our finances.

The 89th Legislative Session is now underway, and the proposed higher education budgets have been released in HB1 and SB1. In these initial proposals, there are reductions to the overall higher education budget. This includes the complete elimination of “Institutional Enhancement Funding” for all institutions, which means a $4.79 million annual reduction to UHCL’s state appropriation ($9.5 million for the biennium). Additionally, we are anticipating our formula funding from the state will be reduced by over $2 million annually due to declining enrollment. As a result, we are anticipating a potential loss of $7 million in state funding each year for the next two years.

Our goal is to develop a balanced budget that does not rely on our fund balance and maintains a reserve of approximately 12%. The proposed reductions in state funding, combined with decreased tuition revenue, and discontinuing the use of $9.1 million in reserves to balance the budget makes it more critical than ever to create a sustainable financial model.  Therefore, we need to reduce our annual budget by $16 - $20 million.

Over the past several months, the Executive Leadership Team has been working with their divisions to identify areas for cost savings. We are using several strategies, including the VSIP, a review of vacant positions, further budget adjustments, and a reduction in force. Below is the current status of these approaches.

Voluntary Separation Incentive Program

As of today, 38 employees (24 staff and 14 faculty) have started the VSIP process. While they still have time to withdraw, these numbers are helping us shape our budget planning assumptions.

With these numbers in mind, our next steps include:

Review of Vacant Positions

The Executive Leadership Team is working with their respective divisions to evaluate all vacant positions to determine whether they should be removed, retained, or repurposed.

Other Budget Adjustments

In addition to reviewing vacant positions, further financial adjustments may include department restructurings (position realignment and position demotions), program eliminations, and reductions in contracts, travel and M&O.

Reduction in Force

Personnel costs make up a large part of our budget. Despite our efforts to explore alternatives, a reduction in force (RIF) will be necessary to align our workforce with UHCL's operational and financial realities. These reductions are a difficult but necessary step we must take to ensure the university's long-term sustainability.

The process of identifying impacted positions is expected to be completed by the end of April, with effective dates for the RIF occurring by the end of May. Employees impacted by the RIF will leave their positions upon notification but will remain on the payroll in active status until August 31, 2025. This will allow employees to continue receiving their monthly salary and benefits for 90 days - through August 31, 2025.

I know this news creates uncertainty, and I want to emphasize our commitment to transparency as we move forward. We will continue to keep you informed as decisions are made, and I appreciate your patience and dedication as we face these challenges together.

Thank you for your continued commitment to UHCL, our students and the community we serve.

Sincerely,

Richard Walker, Ed.D. 
President