Higher education admin budget facing $1.4 million shortfall
After a tumultuous year that saw higher education revenues shrink while legal and consulting costs rose, the Nevada System of Higher Education’s (NSHE) administrative office is expected to exceed its budget by at least $1.4 million, according to testimony provided to the Board of Regents on Friday.
With just nine weeks left before the end of the fiscal year, Officer in Charge Crystal Abba — operating as a de facto head of the system ahead of the appointment of an interim chancellor — told regents that there was “absolutely no way” to balance the budget before the end of the fiscal year in June.
“I want to be very, very clear in saying that there is absolutely no way that we can solve this problem in nine weeks,” Abba said. “I have nine weeks between today and when the fiscal year ends … The only way that we could actually balance this budget is if we closed the system office completely.”
The cost overruns will also likely increase because of a $610,000 severance package for former Chancellor Melody Rose approved as part of her resignation agreement, a figure excluded from Friday’s presentation because the numbers were calculated at the end of the third fiscal quarter, a day before regents approved Rose’s buyout.
Abba told the board she has no intention of ordering full office closures, nor would she seek to increase revenues through any increase in funding provided by individual institutions, or the so-called “campus assessment.” Instead, overruns will be balanced out first through spending from the system’s near-$3.4 million in reserves, before cutting costs in the medium or long term through the 2023 fiscal year.
Those cuts will come in large part through the cancellation of certain consulting contracts and a hiring freeze in the system office — which includes the office of the chancellor, as well as the vice chancellors and their respective staffs.
Andrew Clinger, the system’s chief financial officer, told regents that the overruns were triggered by a mix of conditions, including both an $851,000 increase in spending — especially on legal fees (totaling more than $318,000) and specific consulting contracts (totaling more than $202,000) — as well as nearly $1.7 million in decreased revenues.
Those increased legal fees were generated in part, Clinger said, by the hiring of outside lawyers to investigate claims made by Rose in a wide-ranging complaint made against top regents last year (a cost of $150,000), and the need to defend an ongoing class-action lawsuit filed against NSHE in 2020 alleging the system’s closure of college campuses deprived students of the benefits of in-person education (a projected cost, once complete, of $307,500).
That lawsuit is still working through Washoe County courts. Most recently, a bid by NSHE to dismiss the suit was denied on March 1.
Fees generated by consulting contracts largely stemmed from three sources:
- The drafting of a new strategic plan for the higher education system (which cost $170,000)
- An ongoing salary study (projected to cost $97,000)
- A final contract for government lobbying that Clinger said has already been terminated (which cost $70,000)
Clinger told the board that much of the revenue decrease, more than $967,000, was triggered by the loss of so-called “special distributions,” or additional money generated as investment income that was used by the system to cover costs in 2021. An additional $611,000 was lost through a system-wide 12 percent cut to higher education operating budgets by state lawmakers last year.
Clinger also told regents that the deficit had ballooned as large as $2 million at the end of the second quarter, as discussions with former chancellor Rose were focused on increasing revenues, rather than reducing expenses.
“What the former chancellor wanted the data on is how do we compare, I think with the assumption that we as a system office are under-resourced compared to other system offices,” Clinger told regents. “So I think the discussion and the conversations initially were really just focused on the revenue side.”
He added that early discussions about a hiring freeze or re-assessing contracts were held as those deficits increased into the second quarter, but “we did not execute on those at the time.”