FY23 Budget Update, Nov. 21 2022

November 21, 2022

Dear Colleagues – 

I am writing to share with you the results of the university’s recent Budget Update, which was approved last week by the Board of Trustees. In September, we first alerted the Board that – while we achieved this year’s targets for first-time students and discount rate – we anticipated a decline in the undergraduate year-over-year retention rate as well as the likelihood that we would miss our target for undergraduate transfer students. Although we have seen continued growth in graduate revenue for the fourth consecutive year, the rate of that growth was lower than we had built into this year’s budget. Combined, these factors lead us to project a revenue shortfall of just over $9 million compared to our initial budget projection. Roughly two-thirds of that relates to the decline in undergraduate headcount.  

Over the past few months, our immediate budget challenge has been to reduce, as much as possible, the need to draw on the university’s reserves, which are fortunately healthy. We have sought to respond to this year’s revenue shortfall in ways that do not undermine the student experience or the ability of Seattle University to achieve our strategic goals and to reposition ourselves for growth in areas of opportunity. We have not, for example, stepped back from the largest pay increase in over a decade or the restoration of retirement benefits. Instead, many of our responses have involved one-time savings. Through these efforts, we have been able to reduce the projected shortfall by roughly $5 million. 

Some may no doubt be tempted to draw a connection between this budget update and the recently announced health plan cost increases. But those cost increases were unrelated to the revenue shortfall and were instead driven by higher utilization of health care services by our plan participants and by inflationary pressures affecting health care costs more broadly. As in past years, the university absorbed 75% of those cost increases in keeping with the historical 75/25 cost split we have employed for this particular benefit.  

The work of the past two months has shed light on several challenges we need to address as a university. Most obvious among these is undergraduate retention. There is little question that this year’s unexpected retention decline reflects the ongoing impacts of the COVID pandemic on our students and our campus. The erosion in retention is a national phenomenon that is not unique to Seattle University. But this year’s reduction occurs within the context of a longer-term, gradual decline of our retention rate at Seattle University over the past decade. We need to reverse that trend. 

During my first year and a half as president, I have heard from many members of our community about how inspired they are by our institutional mission. I share that enthusiasm. As a university, our most basic mission is to help our students achieve their educational goals, culminating in the successful completion of their degree programs. To be true to our mission, we need to become better at retaining the students we matriculate. This imperative is made even more urgent by the post-COVID decline in undergraduate enrollments nationwide, not to mention the coming demographic cliff. Our strategic plan and its working groups provide the goals and implementation structure for many of the improvements necessary over the coming weeks and months to reverse our long-term decline in retention, and we will accelerate those efforts. Ultimately, successfully improving undergraduate retention will require the engagement of every member of the university community. I look forward to working with you on this essential undertaking.  


Eduardo M. Peñalver