The new dean of the debt-plagued University of Washington dental school says the school has turned a corner on its financial problems, but across the university, last year's $325 million deficit is a growing concern.

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Over the last year, the University of Washington’s debt-plagued dental school eliminated the equivalent of 34 full-time faculty and staff through layoffs and attrition, tightened expenses and found other ways to save money. Now, its interim dean says, it has turned a financial corner.

The school is still losing money — $2 million over the last fiscal year — and saw its long-running deficit grow to $38 million, although the losses last year are less than a third of what was originally forecast because of the layoffs and other cuts.

The school’s money woes mirror a much larger financial issue at the UW, which in the last fiscal year had an operating deficit of $325 million.

It’s not unusual for big universities to run modest operating deficits from year to year, said Brian McCartan, the UW’s vice president of finance. The shortfalls are typically offset by gifts from donors and investment returns from endowments.

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But in 2016-17, UW officials say, the deficit went beyond their definition of “modest.” Along with the dental school deficit, UW Medicine had a $70 million operating deficit. Rising salaries and benefits to faculty and staff, which weren’t fully funded by the state Legislature, were also partly to blame.

Now, the university has put both UW Medicine and dentistry on financial stability plans. It has cut expenses around the university, making decisions to “live within our means,” McCartan said.

The UW School of Dentistry is the only dental school in Washington. It runs a low-cost dental clinic that serves thousands of patients a year, nearly half of whom are on Medicaid. That clinic serves as a training center for students, much like a medical-school residency trains future doctors.

The school’s $38 million in red ink began accumulating in 2010. Faculty members complained for years that the school was poorly managed, and faulted the university for not being more transparent about its budget. Administrators said the main issue was low reimbursement rates from Medicaid — a problem that has caused some of the financial problems at UW Medicine, as well.

As the problems mounted, dental school dean Joel Berg resigned in October 2017, and in April, interim dean James Johnson also stepped down.

In August, Gary Chiodo, previously the interim dean at Oregon Health & Science University’s dental school, was hired to straighten out the finances and is expected to serve in the position for at least two years.

Chiodo says the cuts didn’t affect students — nearly all of the school’s students graduated on time this year. But the financial issues have had an effect: Some faculty have been recruited away, and the school has experienced high staff turnover “due to inefficiencies and fatigue created by reductions,” according to his report to the regents board. In the first quarter of this fiscal year, the school saw a 15 percent drop in patient visits.

Last year, the dentistry school had forecast it might lose as much as $7.7 million, Chiodo said, so the loss of $2 million was a significant improvement.

Chiodo said he’s working on making the budget more transparent to faculty, and is revamping the way those who work in the school’s faculty-run dental practice — which is separate from the student dental clinic — are paid, structuring it more like a group dental practice. The faculty-run dental practice should bring in more revenue to the school, he said.

Still, “we’re not out of the woods,” said UW President Ana Mari Cauce during a UW Board of Regents meeting Thursday. The university plans to ask the state Legislature for $2 million in each of the next two biennium budget cycles to help compensate for low Medicaid reimbursements.

And when it comes to the university’s overall budget, the UW is going to press the Legislature this year for more money, with a focus on getting money to pay salaries. It’s planning to ask lawmakers for about $110 million for the next biennium to fund raises of about 4 percent for faculty and staff, and between 2 and 4 percent for employees represented by unions.