I write to provide you with a budget update, including the decisions we need to institute to ensure the University is on a sustainable budget pathway. First, some context, followed by actions we are instituting for the balance of the current academic year and the upcoming 2023-24 academic year.
The University’s annual operating budget is approximately $200 million, divided almost equally between state support and tuition revenue. The current total projected revenues for next year (2023-24) are approximately $10 million less than the budgeted expenses for the FY24 fiscal year. This amount constitutes about 5% of the total annual operating budget.
The drop in revenue is primarily due to a decrease in enrollment. Our enrollment (total headcount) in fall 2019 was at an all-time high of 16,142, whereas our enrollment in fall 2022 was 14,747, a drop of almost 1,400 students, or about 9%, from fall 2019. This is primarily because first-year enrollments decreased from 3,117 in fall 2019 to 2,494 and 2,874 in the two subsequent recruiting cycles due to the global pandemic.
Our transfer enrollments have also been decreasing (1,156 in fall 2019 to 920 in fall 2022) due to significant decreases in community college enrollments across the state. The fall 2022 first-year enrollment of 3,223 is the highest in Western history, and we are committed to increasing enrollment for future years, but it will still take us a few years to fully recover from the pandemic drop.
The funding provided by the federal government through the CARES (Coronavirus Aid, Relief, and Economic Security) Act of 2020 and the American Rescue Plan of 2021 helped us cushion the impact of the enrollment declines in 2020 and 2021, but we need to ensure that we adapt our budget model to avoid creating long-term budget deficits for the university.
Working through the projected budget shortfall requires two complementary strategies: shorter-term actions to decrease base expenditures, and a longer-term set of strategies to increase enrollments and create new revenue streams.
For the 2023-24 academic year (FY24,) we will implement a 3% reduction for all divisions and units; and, effective immediately, we will also institute several cost savings measures that were in place during the pandemic that helped us reduce immediate expenditures, including controlling travel, purchasing, and hiring.
Our intent is to limit the reduction in base budgets to 3%, while simultaneously putting in place temporary savings measures. As we did during the pandemic, we will continue our commitment to the retention of our valued faculty and staff by funding compensation increases as provided by the state budget and honoring our collective bargaining agreements.
Provost Johnson has begun a comprehensive academic program review and the vice presidents of the other divisions are conducting parallel reviews of our non-academic functions, programs and services. By taking a close look in areas such as under-enrolled classes and unnecessary or duplicative administrative functions, we can ensure our budget is both sustainable and strategically aligned with Western's mission.
We are planning discussion sessions open to all WWU faculty and staff on March 30 and 31 to share and explain the budget situation more fully. Calendar invitations will be sent to all employees. The Office of Strategy, Management, and Budget will also follow up with additional information on the short-term measures being instituted to control expenditures.
In closing, our greatest focus continues to be on recovering enrollments, to attract new students and improve retention through expanding and/or introducing new retention strategies. This is important not just for Western’s bottom line, but also for the health of our state. The pandemic and its aftermath have shown us that we need to increase efforts to reach new prospective students. Thanks to the continuing efforts of our colleagues in Enrollment Management, Marketing, and Advancement, the first-year applications for fall 2023 are running about 20 percent higher than at this time last year. This is a good start, but we will continue to look for ways to identify and recruit students, help them get the financial aid they need, and provide the support they need to succeed at Western. The state of Washington has a goal that 70% of our high school graduates will obtain a postsecondary credential by 2030. Right now, about 43% of students obtain a credential. It is our job to bridge that gap and make sure that everyone who wants to go to college has the opportunity to pursue an education at Western. I have charged a group to focus on enrollment growth, both through recruitment of new students and retention of current students. The bottom-line is to get us back to the pre-pandemic enrollment levels as expediently as possible.
I wish I had more positive news to share about our budget picture at this time. However, I want to make sure you are fully informed about university matters, including finances. While it may not be much of a consolation, most of our public peers in the state have been facing more significant enrollment declines and budget woes and have taken more drastic steps to control costs.
As always, I continue to be amazed and humbled by the heroic work that everyone at Western did during the pandemic, and the outstanding work that you all continue to do to serve our students and the state of Washington. We will keep you informed as we develop further projections for the next academic year and beyond, and as we further advance our recruitment and retention plans. I am confident we can approach these challenges thoughtfully and collaboratively while maintaining our shared commitments to the quality of our teaching and research and improving inclusive success for all students.
With respect and gratitude,