About the President
Points of Pride
A Special Place
Dille Fund for Excellence
President's Remarks & Updates
Institutional Key Performance Indicators
Vision Task Force
University Reaccreditation 2007
Office of the President
203 Owens Hall
1104 Seventh Ave. S.
Moorhead, MN 56563
October 8, 2010
- Current Budget Situation
- Budget and Planning Scenarios for 2012
- Fiscal Sustainability Principles for 2012 and Beyond
- Recent Organizational Changes
Current Budget Situation
Note that some of this presentation is adapted from the July 15 Town
Briefly, we must balance our budget coming into the 2012 fiscal year,
which starts next July. As we have previously discussed, Minnesota has a
budget deficit of over $5B. It is more when adjusted for inflation. How
that deficit translates into a cut of our state appropriation depends in
part on the economy and on the legislature. Following is a summary of
what is expected at this time.
- For the current year, FY 11, our total general fund
budget is $64.7M with $25.7M coming from the state
allocation and the remaining from tuition. The
percentage covered by the state is 40%, down from 48% in
- It is virtually certain that we will have a
significant cut in our state appropriation coming into
the 2012 biennium. We are projecting from $3.5M to $7M
depending on how much of the deficit is addressed by
budget cuts and how much is addressed by additional
- We can handle the lower end of the range without
layoffs. However, if the cut goes to the upper end of
the range, we will need to eliminate our temporary
positions. Given the budget uncertainty, we have used
temporary positions to serve as a buffer protecting our
long-term employees from layoffs.
- Please be very cautious about spending. We are far
from out of the woods yet for 2012.
- It appears that the Minnesota economy will be slower
in recovery than was first expected. We expect a
continued decrease of state appropriations for at least
the coming 10 years. The decrease coming into 2012 will
be severe and further decreases are likely to be more
- Tuition increases cannot fully substitute for loss
of appropriation without compromising access and
affordability. Further, it is expected that the Trustees
will continue to regulate the rate of increase.
- Following are some figures to keep in mind as we
brainstorm fiscal sustainability.
- Personnel costs (salary and fringe)
are 80% of our general fund budget.
- A 1% increase in tuition = $379,000.
- A 1% contractual increase (salary
and fringe) = $510,000
Budget and Planning Scenarios for 2012
In this section, we will review our original plan for solving the
2012 budget gap. As you will see, we are still well on track with that
plan. We will then discuss the difference in our approach and that of
some other campuses. We will also summarize personnel changes by
bargaining unit. Finally, we will discuss our plans to handle larger
budget cuts if necessary.
Overall Budget Plan for 2012
As you may recall from earlier town meetings, our plans to address the
2012 budget year involved decreased base budget expenses and increased
revenue. We have made good progress.
- Through fiscal controls, hiring restrictions, and
early separation incentives, we have reduced our base
personnel expenses by $1M.
- Base budget costs were further decreased by almost
$.4M through energy initiatives.
- Revenue has been increased through summer session,
which netted $1.39M in 2010.
- We have brought in our largest freshman class since
2004. Including students who started in the summer, we
had an increase of 16.8% in new entering domestic
freshmen over last year. Recall, that the fiscal impact
of each freshman class is with us for at least 4 years.
Thus, this good news will help with next year’s
- Although we have had some declines in transfers, we
are on track for our enrollment goals for 2012. Two
transfer recruiters have been added to better assure the
2012 enrollment goals.
Comparison with Other Campuses
A report to the Board of Trustees in September revealed that MSUM made
the most use of the board early separation incentive (BESI) in 2009 of
any of the system institutions. We reported 25 BESIs in comparison to 14
at Bemidji, 12 at Mankato, and 17 at Winona. As you recall, we used our
one-time federal stimulus funds for this purpose as well as for energy
With our current progress, we can handle approximately $4M in
reduction of state appropriation. This amount is consistent with the
assumption that 50-60% of the deficit will be addressed by budget cuts,
and the remainder by revenue (e.g., taxes). The Chancellor’s Office has
used the same level in their budget planning, and they continue to
believe it is tenable. Some other institutions, including Mankato, St.
Cloud, are assuming that more of the deficit will be addressed by budget
cuts and are therefore preparing for a larger cut and planning layoffs.
Our situation was different from many institutions due to the
structural budget deficit that we addressed in planning for FY 10. At
this time, we do not have underperforming programs that we can
eliminate. The vast majority of academic programs have cost recovery
ratios above 100% or at otherwise acceptable rates for the discipline.
Some graduate programs are still in the process of improving their cost
recovery ratios in order to continue. As we have discussed, graduate
programs cannot be subsidized by undergraduate tuition.
Overall Personnel Changes at MSUM
To address our structural budget deficit and prepare for the 2012 budget
cut, we significantly reduced hiring and offered early separation
incentives. The following tables provide information on the net
reductions in long-term employees by bargaining unit..
Worst Case Scenario
Just in case, we have plans to handle cuts above the $4M we have already
- Some additional reduction can be handled on a one
time basis through reserves.
- If additional reductions are needed, we will begin
to cut temporary positions. Should that happen, we first
go to those employees who do not bring in revenue. In
other words, faculty and admissions staff would be
relatively safe, at least initially.
Right now, we doubt that we will need this contingency plan. As
usual, we will keep you posted as we learn more.
Nonetheless, we must prepare for additional cuts beyond 2012. To
address these future cuts without compromising the essence of the
institution, we must plan for fiscal sustainability.
Part of this section is adapted from the July town meeting.
At its simplest, fiscal sustainability is creating the set of
policies and practices that will assure that our revenue (tuition, state
allocation, other) is used to produce sufficient new revenue to enable
continued achievement of our mission in the future decade and beyond.
As we plan for fiscal sustainability, it helps to think of our
university as a business.
- Our primary product is student learning.
- Faculty members are in direct production of the
- Admissions and marketing are the sales force.
- Student affairs and academic affairs provide direct
support of production.
- Physical plant and administrative offices provide
the infrastructure for production.
- The president and cabinet provide the direction and
- Customer service (retention) is everyone’s
Currently, we are using the following principles to guide planning
for fiscal sustainability.
- Where possible, we are investing in increasing
revenue. Examples include investments in admissions and
- We have worked to decrease expenses through
continued reorganization for efficiency through the
Non-Instructional Budget Advisory Committee (NIBAC),
LEAN, and other efforts, including early separation
- Through the Academic Affairs Budget Advisory
Committee (AABAC), we continue to focus on the cost
recovery of our academic programs.
The above efforts have served us well. However, we have a continued
probability of decreased state funding and caps on tuition increases.
Thus, we need to focus on two fronts: return on investment of current
revenue and the creation of new sources of revenue.
Return on Investment of Current Revenue
- What is a reasonable goal for the total
institutional academic cost recovery ratio?
- What additional processes should be examined through
Educational Lean to improve efficiency, quality, and
- What current policies or practices detract from
Creation of New Sources of Revenue
In thinking of new sources of revenue, we need to think about at
least a few questions. The following is a start. We welcome ideas.
Please feel free to email me or to drop by during office hours.
- What can replace lost state funding without diluting
our brand (faculty-student engaged learning) and
straying from our mission? (See Collins, “How the Great
- Once we fill gaping holes, what percentage of each
new tuition dollar should go to production (i.e.,
faculty), and what percentages should go to other parts
of the business?
- For new ventures, how can we create business models
that support themselves, provide additional revenue to
replace state infrastructure funding, and are win-win
solutions for the administration and unions?
Recent Organizational Changes
As you know, we have made some recent personnel changes. It is
important to note that these changes revolve around the changing needs
of the university and do not reflect the commitment of the individuals
in those positions.
First, we are combining the positions of Registrar and Director of
Institutional Research into one position. The new position, which will
have different requirements, will oversee both the Records Office and
the newly formed Office of Institutional Effectiveness. Many of our
current processes developed before the advent and improvement of
information technology. The new structure, which will include some
current IT and admissions employees and will report to AVP Ginny Bair,
will bring together the creators and users of institutional data. It
will enable the development of improved synergies.
Second, the Athletics Department has some unusual challenges. It
receives funds through multiple sources, including ticket and
advertising sales, and has strong data requirements through NCAA and the
Department of Education. To that end, we are in the process of a
reorganization to improve business and data processes. In the short
term, we are using some contract employees to set up the policies and
processes. We will then reconfigure two key positions and proceed to
search, depending, of course, on the budget picture.
There may be more changes over the coming year as we address the
budget as well as the changing needs of the institution. I know that
change is difficult, and I ask your understanding as we proceed through
this challenging budget and transition period.