When President Bob Frank gave his administrative report to the Regents, he noted that the price of oil per barrel dropped from $92 in August to $49. This is significantly lower than prices were in December at $66 per barrel, when Frank projected a $2.8 million budget deficit for UNM, he said.
“Unfortunately, the news I bring you here in January is not much better,” Frank said.
This collapse in oil prices along with several other factors such as PNM’s 13 percent rise in utility rates, he explained, have increased the projected budget deficit to $4.7 million.
To put the numbers in context, Frank said a $1 change in the price of oil per barrel translates to a $7.5 million change in state revenues, nearly a fifth of which come from oil, gas and mining. That does not spell good news for UNM, which is partially dependent on state funding, Frank said.
During a budget development update at the meeting, Andrew Cullen, UNM’s associate vice president of planning, estimated new state revenues in December were half of what they were in August. This means that estimates for the additional formula funding UNM would receive went from about $4.2 million to $2.6 million.
If oil prices continue on the current trend, funding reductions going forward could be even more severe. However, Dianne Anderson, UNM’s director of communication, said that the administration does not currently expect a significant reduction in the normal funding allocations for the fiscal year.
“We are hoping to get at least the same amount as we did last year,” Anderson said.
She said that the state will not finalize its budget allocation until the state legislative session, which begins Jan. 20.
“Because of the volatility of the oil market, it is a moving target right now,” she said.
While UNM officials await news from the Legislature, there are several initiatives in place to offset the increased deficit. Frank stressed during the Regents’ meeting that while collapsing oil prices are beyond the control of anyone at UNM, there are key areas that can be focused on to increase revenue.
“There are two things we can control: student enrollment and cost management,” he said.
He said that UNM must increase enrollment and retention by improving amenities throughout campus and emphasizing the quality of its academic programs.
Frank also discussed several strategies for increasing cost discipline, broadly referred to as “strategic cost management.” Frank said the strategies include actions such as hiring pauses, shared services, department and program reviews and instructional efficiencies.
Frank concluded his administrative report by stating that final budget decisions will be made in April, and that the Regents will be briefed on further developments at next month’s meeting.
Lena Guidi is a freelance reporter at the Daily Lobo. She can be contacted at firstname.lastname@example.org, or on Twitter @DailyLobo.