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Memo

To: President Cindy Phillips and the Executive Committee of the Faculty Association

From: Edna Mora Szymanski, President

Date: April 23, 2009

Re: Intent to Retrench

I regret to inform you that despite our best efforts to avoid this eventuality, the University will need to retrench tenured faculty in order to address our budget deficits. I doubt that this news will come as a surprise to you, given the extensive conversations that have occurred on campus and at meet and confer concerning the serious nature of our budget situation. Still, I recognize the gravity of this announcement and that this news cannot be welcome. I have and will continue to consult with the Chancellor and his staff regarding this most serious of decisions.

Let me briefly recap some of our prior discussions. At the January 15th meet and confer we discussed the deficit and the need for a prioritization process to inform retrenchment. More recently, at the April 9th meet and confer, I provided the Faculty Association with a handout describing the overall budget issues. It is attached in Appendix A. At this time, I also provide Appendix B dealing with the history of decreasing enrollment and appropriation share, Appendix C listing frozen positions, and Appendix D showing trends in enrollment and credit generation over the last five years. Additional appendices relating to retirements, positions, and other personnel information are included in supplemental hard copies.

The frozen faculty positions represent all faculty positions for which funding exists at this time. As I indicated at the January 15, 2009 meet and confer, all tenure stream positions will go through the Academic Affairs Budget Advisory Committee process in the future.

Since the time of the Appendix A handout at the earlier April Meet and Confer meeting, we have learned that our tuition revenue shortfall exceeded the amount previously projected. The current shortfall is $833,396, which is almost 3% of tuition revenue. Thus, this amount not only adds to our current deficit itself but also requires a downward change in the tuition revenue assumption underlying the previously projected 2010 budget. As a result, the current structural deficit, including tuition revenue shortfall and revised tuition revenue assumptions, is now $4.95M. In addition to our own deficit, we expect a state appropriation decrease of approximately $3.8M, with the exact amount depending on final action by the legislature. Thus, our total deficit is approximately $8.75M.

Following are some actions already taken or underway that will address the deficit:

  • If all compensation programs settle at 0% salary increase, that will remove $1.2M from the deficit.

  • Currently, we are holding $1.34M in frozen positions. These positions are eliminated at this time. However, some will need to be replaced since they are in critical areas. So it is expected that this savings is no more than $.7M. For academic positions, the Academic Affairs Budget Advisory Committee will advise on prioritization of positions to be considered for restoration.

  • The following additional base cuts have been taken thus far

    • Operating                                  $.15

    • Fuel and Utilities                         $.3

    • Scholarships                               $.3
      (moved to another source)

    • MSUM work plan initiatives     $.55

    • Rents                                          $.15

    • Miscellaneous other                  $.03

  • If the revised tuition and fee structure is approved it, coupled with a tuition increase, could net us $1M to $2M. This is purposefully an underestimate considering our problematic enrollment history.

Although I listed the unalottment in previous presentations, I do not list it now. In reviewing our cuts, I have determined that many were one time rather than base. Thus, they do not contribute to the necessary base reduction.

Other divisions are continuing their budget reductions at this point. However, they, too, are waiting to see the totals of early separation incentives before proceeding further. I expect a contribution of at least $.45M from this effort. Even with this addition, the total of the above actions and possibilities is not sufficient to address the deficit of approximately $8.75M. Further, it is important to note that we are required to prepare a balanced budget this summer.

I should note that some hiring is continuing in the revenue fund areas and in positions related to growing enrollment and better managing our resources. Specifically, we are in the process of searching for a housing director and area coordinator. These positions are supported by increases in student fees and do not impact the general fund. We are searching for a marketing director to help us better market the university and attract students. In addition, pending further work on enrollment management with Noel Levitz, we will search for an additional twin cities area recruiter. We will also add .5 to 1 FTE in the area of data management to support both enrollment management and better resource monitoring. The latter positions will be supported by the general fund. However, it is my intention to ask for support from the Chancellor’s Office for the first two years of those positions.

Although I had hoped to have more specifics by this time, the following key data points are still up in the air and will be needed to determine the exact extent of our required retrenchment.

  • The budgetary savings resulting from early separation incentives and other resignations

  • The status of Board of Trustee approval of our tuition and fee structure proposal as well as the Board approved rate of tuition increase (July 2009)

  • The final numbers on the portion of our deficit resulting from the state appropriation (late May 2009)

  • Specific guidelines on use of federal stimulus dollars

  • The impact, if any, of legislatively approved severance incentives

At this point, it is clear that we will need some retrenchment in order to balance the budget. The actual amount will be determined by the above variables. We plan to continue to examine cuts and formulate plans throughout the months of June and July. We will again ask the assistance of the Academic Affairs Budget Advisory Committee and the University Planning and Budget Committee in providing feedback to our intended budget plans. Consistent with the requirements of the IFO Agreement, no department or program, as applicable, in which the retrenchment of tenured faculty will occur will be permitted to hire or retain adjunct, fixed-term, non-tenure track or probationary faculty.

Following is a tentative schedule for the remainder of the process:

April 20

  • Deans are asked to work with chairs of departments that have average cost recovery ratios below 75% or have programs with such ratios to prepare proposals to move to a 75% cost recovery ratio immediately through budget cuts and to move to an 85% ratio within a year using a combination of budget cuts and increased tuition revenue. Deans are also asked to work with chairs on proposals for frozen positions or those impacted by early separation incentives or other resignations to be considered by AABAC in September, noting that only a portion of such positions will be authorized for search and that portion will be determined by actual revenue.

May 15

  • Reports due from deans and chairs on proposals to increase cost recovery of selected programs and departments.

May 15-June 2

  • Reports reviewed by VP, Budget Officer, President, and Comptroller with questions and concerns sent to deans.

June 3 & 4

  • AABAC meets for up to 2 days with President, Budget Officer, and Comptroller to hear presentations from deans and chairs.

June 24

  • President and VP present draft budget reduction plan to AABAC for discussion and feedback.

July 8 & 9

  • VPs present division budgets and cuts to UPBC for discussion and feedback.

July 15

  • President presents final budget for the university to UPBC.

July 16 AM

  • President and UPBC present university final budget to executive committees of bargaining units.

July 16 PM

  • President meets and confers with IFO on retrenchment.

July 17

  • President meets and confers with other bargaining units.

July 18-29

  • Layoff notices sent out.

Early September

  • VP meets with AABAC to recommend prioritization of frozen faculty positions, noting that only a portion will be searched dependent on revenue.


Appendix A
President’s Budget Presentation to MSUM IFO Meet & Confer
April 9, 2009

Planning Guidelines

  • Plan for a four year rather than two year cycle. Note that this is necessary because the stimulus funds are only one time funds and cannot be used to sustain base operations.

  • Use stimulus dollars for only one time costs.

  • Balance the budget.

Other Considerations

  • MSUM has had declining student credit hour production for over 5 years. This translates to declining tuition revenue and a declining share of the state appropriation.

  • Over the last 5 years, we built up a structural deficit that resulted from declining tuition revenue and actual expenditures exceeding actual revenue. As a result, we have needed to cut each year. This is not sustainable. The total of our current structural deficit and tuition revenue shortfall is $4.2M. It may increase once we calculate this year’s tuition revenue shortfall. More conservative projections should keep this from happening in the future.

  • Tax revenue funds state appropriations. Thus, if the economy recovers in Year 1, the tax revenue rebounds in Year 2, and the appropriation would hopefully catch up in Year 3.

  • The most recent state economic forecast suggests both a slow recovery and a potential additional problem for the 2012 – 2013 biennium. See http://www.mmb.state.mn.us/doc/fu/09/summary-feb09.pdf

This Year and the Next Four Years (Definitely Not To Scale)

 

Plan (From April 7 Town Meeting)
As we discussed in our town meeting on March 11, (see http://web.mnstate.edu/president/Speeches/budget_and_planning_presentations/3_11_2009_budgetpresentation.htm ), our current deficit has two components: our structural deficit, which is a symptom of infrastructure exceeding revenue, and the decrease in state appropriations. Further, we are looking at a 4 year plan.

Stimulus money is likely to replace part of the decrease in state appropriation during the coming biennium. However, it is only one time and will not continue into the next biennium. Thus, cuts are still necessary. Fortunately, the stimulus can offset some of the tails on the reductions. Following is an explanation of our deficit and plan.

Current Estimated Total Deficit $8.2 – $9.2M

  • Structural Deficit and Tuition Revenue Shortfall $4.2M

  • Estimated Reduction in Base Appropriation $4 –5M

Planned Base Budget Correction $8.2 - $9.2M

  • Already Accomplished $4.89M

    • (reductions, freezes, and proposed tuition and fee structure change)

  • Changes in Compensation Plans up to $1M

  • Remaining Cuts $3M-$4.3M

    • Early Separation Incentives $1M-$1.5M

    • Program Closures and Other $2.5M - $3M
      Personnel Reductions

    • Voluntary Salary Reductions $.2M - .5M

Use of Stimulus Dollars (one time)

  • Early Separation Incentives

  • Tails for Layoffs

  • Targeted efforts to increase enrollment

Building the Revenue Engine and Planning Forward

Even as we decrease our infrastructure, we still must attend to our revenue engine. Increasing enrollment is critical and may be somewhat challenging given our recent media coverage of the flood. To that end, we are planning to invest in a marketing director as well as additional recruitment activities targeted to the Twin Cities metro area.

In the future, resource allocation will be much more closely associated with revenue generation, thus decreasing the probability of a structural deficit.


Appendix B

 

     

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