(View larger version of chart)
To recap, in fiscal years 2014, 2015, 2016, and 2017, we had operating deficits ranging from $25 to
$30 million annually. To address the situation, we initiated a 3-year fiscal recovery plan in FY18
that established annual targets to put us on the path to achieve a balanced budget by the end of FY20.
We not only exceeded our financial goal, we did so one year earlier than targeted.
I appreciate the hard work of everyone that led to this result. All across the WSU system, Cougs
rolled up their sleeves and worked together to help move the University to a more fiscally stable position
compared to just 2 years ago. Each major unit (campus, college, and vice presidential) was asked to
combine spending reductions and revenue increases in order to assist the fiscal recovery, and I appreciate the
creativity applied to enhancing revenue and the tough decisions made in reducing expenditures.
It is also worth noting that the institution as a whole has made significant progress in several important
arenas—including record research awards, exceptional donor support, and the enrollment of highly qualified
undergrads—despite our financial constraints. We are well positioned to capitalize on these successes as
we regain our financial equilibrium, which also provides opportunities to invest in areas that will advance the
Drive to 25.
Next goal: Rebuilding University reserves
Also shown in the graph above is our overall reserve balance. Think of reserves like a savings account.
The University needs to have funds set aside for things like emergencies, large equipment purchases, and new
strategic initiatives, and as a financial buffer when enrollments fluctuate. With an overall system budget
of about $1.2 billion annually, we should have reserves equal to 10 to 15% of our annual operating
budget—somewhere between $120 and $180 million.
We were able to operate from FY14 to FY18 in part by spending down reserves to accommodate our annual deficit
spending. Reserve funds exist in 2 places: at the unit level (campus, college, vice presidential) and
centrally. While we have successfully increased reserves in many units across the system, we have spent or
allocated essentially all of our central reserves.
The central reserves have been used or allocated to fund priorities such as maintenance and operations costs
for new buildings, increased funding support for the College of Arts and Sciences, and a system-wide
videoconferencing service. Because needs that require central funds will remain steady going forward, it will
be important for us to replenish these monies during the next several years.
Now that we are no longer dealing with an annual operating deficit, it is critical that we not return to
the spending habits that put the University in a precarious fiscal position. Thus we will continue to follow
our fiscal recovery plan for FY20. At the same time, Vice President for Finance and Administration Stacy
Pearson is working with Provost Mitzi Montoya, deans, vice presidents, and chancellors to establish a
budget process that will take into account the units’ desired spending (including the ability to spend
some unit-level reserve funds). There also are several units on campus that will require multiple years before
they can operate with a balanced budget—all of these units are operating based on multi-year recovery
Equally important, we soon will work with leaders and campus governance groups on the buildout of a new
budget model for the University. Broadly speaking, our budget allocations historically were based and built
around a series of special circumstance “deals” that were not consistent or strategic across
campuses, colleges, or vice-presidential areas.
Provost Montoya and Vice President Pearson will be leading efforts to develop, publicize,
socialize, and implement the new budgetary model that will be developed. This effort will be supported by the
launch of Workday—our new modern and robust financial system—starting next year. We will keep the community
updated as work on the revised budget model progresses.
Any change to a university budget process causes some stresses. We will ensure everyone across the system
has a chance to provide suggestions and feedback on any proposed new budget model prior to implementation. In
short, we will need excellent ideas and critical feedback about what we do now—and creative thoughts about how
to improve moving forward.
WSU Athletics: Annual deficit nearly halved
Most of you know that WSU Athletics also has been working hard to reduce its annual operating deficit.
I am happy to report that effort is paying dividends.
Since FY14, when athletics ended the year with a $13.7 million deficit, the annual deficit has been nearly
halved. The final projected deficit for FY19 is $7.1 million.
Athletics is on track to eliminate the annual deficit by FY24, based on a budget and multi-year recovery
plan approved by the WSU Regents at their meeting in June. Following legislation approved during the 2018
state legislative session, the Regents are now required to examine and approve annual intercollegiate athletics
budgets if yearly deficits occur.
It is important that athletics meets or exceeds its spending targets over the next several years as we move
incrementally to balance the budget. To ensure progress and additional oversight, we will provide budget updates
at each WSU Regents meeting during the 2019–2020 academic year. This represents a change from previous
years when budget updates and approval of spending occurred in June of each year. Additional details about the
athletics budget are available online.
In summary: Excellent progress, but work to be done
The University continues to make excellent progress on restoration of our fiscal health. While we finished
the past fiscal year with a positive operating balance, we need to continue carefully monitoring our spending.
We have depleted our central reserve fund and now need to develop a plan to replenish it during the next
several years. Meanwhile, WSU Athletics continues to close the gap between revenues and expenses, making
notable progress in recent years to reduce its annual operating deficit.
In conclusion, we have remarkably improved our fiscal health during the last 3 years. Again, thank you
to all of our students, faculty, staff, and leaders for the hard work that has gone into our recovery.
I look forward to providing additional information and answering your budget-related questions during the
upcoming town halls, which Provost Montoya and I will host system-wide in September, October, and
November. As always, I also am happy to answer questions that you might have via email.