POCATELLO — Idaho State University says it has no plans to implement layoffs or furloughs as the school continues to grapple with a projected structural budget deficit north of $15 million.

University leadership has been working to eliminate a $15.5 million deficit since it was first identified in 2021. Those efforts have included establishing a principle-driven advisory group tasked with strategically balancing the school’s central fund revenues and expenditures, says Jennifer Steele, ISU’s vice president for finance and university planning and chief financial officer.

“There are no current conversations or discussions about furloughs or layoffs,” Steele said. “We still have some hard work ahead of us but we’re on track to be balanced by fiscal year 2027.”

WHAT IS A BUDGET DEFICIT AND HOW DID ISU GET HERE?While ISU is in an overall strong financial position, Steele says, including noted improvements to the school’s overall net financial position every year for the past several years, the primary issue is that expenses for the institution’s central fund — which finances basic operating costs for academic programs and support — are outpacing revenues.

“We are focusing on that fund so that we can get to a point where we are no longer drawing down our reserves,” Steele said. “It’s that simple.”

The deficit has been driven by four primary factors, including almost a decade of enrollment declines, several years in which tuition and fees were held flat, extraordinary inflation, and the intentional spending of surplus reserves to invest in infrastructure and student recruitment and retention, Steele says.

“We’ve started to turn our enrollment around and are seeing multiple years now of enrollment increases, including new students and retention, but those multiple years of declines had a very deleterious impact on our tuition,” she said. “By holding our tuition and fees flat, that also had an impact on tuition revenue and it kind of doubled the impact with declining enrollment.”

Steele continued, ”We’ve dealt with extraordinary inflation as all of everyone is experiencing in both our personnel expenses and our operating expenses, and basically stagnant state funding. So we’re seeing significant increases in everything from utilities to library subscription expenses, construction, all of that, which there has basically been no new funding for. And then we’ve also been intentionally spending down our surplus reserves to invest in infrastructure and student recruitment and retention.”

HOW HAVE ISU’S RESERVE FUNDS BEEN USED TO ADDRESS DEFICIT?Steele says ISU carries an internal policy to retain at least 7.5 percent of the university’s annual operating expenditures in reserves. For the central fund, that amount is about $15 million, she said.

“But that is not a figure that we’re comfortable with because that doesn’t even meet a monthly payroll for example,” Steele said. “We are much more comfortable having our central reserves in the $50 million range. That helps buffer against unforeseen issues like a pandemic, a catastrophic failure of our heat plant or a significant disruption of enrollment. That fund is also essential for us being able to make some strategic investments. So for example, if we want to go out for a bond to do a major student housing project or an academic building, or building out the Meridian campus, we need to be able to demonstrate that we have the financial health and capacity to take on those financing options and make those payments.”

Steele said ISU currently has $67 million to $68 million in its uncommitted central reserves and this money is coming in handy in regard to lowering the school’s deficit.

Steele said that as ISU works to close its budget deficit, this large amount of uncommitted reserves affords the luxury “of being able to do this thoughtfully and strategically over the next couple of years while still having a healthy reserve balance but getting to the point where we’re kind of plateauing out at the $50 million range and having a balanced budget.”

WHAT WORK HAS BEEN DONE AND WHAT’S LEFT TO DO?

In 2021, ISU implemented new reporting systems that enabled the school to analyze its financial position in different ways to look into various trends and the activities of major funds, Steele said.

“When we looked into those trends we found some issues in our local and auxiliary funds,” she said. “In 2021-2022 we worked to shore up those funds first, which are now healthy with strong reserves. Now we are focused on the central funds, which is where we have our balancing work to do.”

A multi-year plan was unveiled in January 2023 with the goal of closing the deficit by fiscal year 2027, which would be June of 2026.

“We’re doing a combination of short and long term measures,” Steele said. “We want to maintain the momentum we’re seeing in enrollment retention, which has shown increases for the past five years, as well as the momentum we have with research, philanthropy and employee morale. We want to bring everyone together and lean in and do the hard work of basically reallocating and realigning resources together.”

The university launched a budget optimization initiative last year that includes several projects that aim to grow revenue and scale successes and best practices throughout the school.

“We’re looking at our organizational and financial structures and trying to really focus on efficiencies and effectiveness,” Steele said. “We’re also participating in a benchmarking consortium so we can look at different functional activities and see if our expenditures are in line with peer institutions that have a similar footprint and enrollment size.”

She continued, “We are really trying to be data informed in our approach. We’ve launched 15 projects now and they’re already starting to show their results and we’ll see more of both revenue growth and expenditure reduction over the next two years.”

ISU implemented two short term measures in 2023 to address the deficit, including a hiring pause and a slow down in internally funded capital expenditures.

ISU started this fiscal year with a $15.7 million budget deficit and worked to close it to about $5 million due to these efforts.

But in a memo distributed to faculty and staff in December, Steele said the fiscal year 2025 budget has structural deficit of about $15.5 million based on a modest increase in undergraduate enrollment, current tuition and fee rates, health insurance premium increases, a fully-funded position list and mandatory increases in operating expenses. This amount doesn’t factor in any change in employee compensation or tuition rate increases.

“As we look ahead, and we’ve been very transparent with the campus community, we’re trying to inform people about where we are and not cause alarm because there is no cause for alarm but a call to action for us all to work together to kind of get that revenue and expense numbers to be in alignment,” Steele said. “We have a budget advisory group that’s been leading our efforts over the past couple of years and it is one of the most highly functioning work groups I’ve had the privilege to lead. We are just really asking tough questions and coming together to garner the collective best thinking.”

Steele says the group is putting together a plan for the next budget cycle that will include four main elements.

“We’re going to continue supporting these budget optimization projects and we’re also rethinking how we’re managing salary savings from vacant positions,” Steele said. “We’re considering a small increase to our administrative recovery rates, which is a tax basically against expenses that we charge all units to help offset administrative and overhead expenses. And then we’ve also identified expenditure reduction goals by divisions. So each division will be looking at where they could perhaps close vacant positions or find other permanent reductions to their overall expenditure footprint.”

Steele commended the work the budget advisory group is doing to get ISU back on track and is confident the university is implementing the right approach to achieve that goal.

“One of the reasons why our advisory group is so effective is that one of the first things we did was establish principles,” she said. “We always go back to those principles. And it really has been a principle-driven approach and because we’re figuring things out together everyone feels invested.”

She continued, “We’ve been very transparent about the trends, issues and what we’re looking at. It has just been a very open and collaborative, solution-oriented process. As far as my level of confidence, I truly believe this is the right path forward to set us up for sustainable progress and success. So often people or academic institutions are in this type of situation, they’ll do across the board cuts or other measures that don’t necessarily create a sustaining, dynamic ecosystem for the budget. That is not our process and I think we will be better off in the long run because of it.”