Declining enrollment, contracts, tuition freeze contribute to $4.1 million deficit, MSUM pauses hiring
Despite the first increases in state higher education funding in eight years, the school faces an estimated $4.1 million deficit out of a $69 million budget. There are several reasons for the shortfall. Initial enrollment figures show a 3.5 percent decline; union contracts are expected to cost more than predicted; a technicality means the new money the legislature earmarked for faculty and staff compensation cannot be responsibly used; and most of the new state funding goes to pay for a two-year tuition freeze, which limits MSUM’s ability to raise revenue.
At the first of several town hall meetings on Aug. 29, President Edna Szymanski outlined the situation in front of faculty, staff and administrators. While she said, “fundamentally, I think we’re in excellent shape,” she announced the school has implemented a “hiring pause” for most positions and will offer voluntary “targeted early separation incentives,” which will reduce faculty numbers to match reduced enrollment.
“I will take a very conservative approach to preserve our options,” said the retiring president, who has managed a deficit while avoiding layoffs in each of her six years in charge.
Szymanski said she “abhors” layoffs – “I prefer any other way to deal with budget deficits.”
A variety of causes
About $1.7 million of the deficit is due to a new fiscal model, under which MSUM has admitted far fewer underprepared students and, as a result, has experienced declining enrollment.
The new model is more moral and better for MSUM’s reputation, Szymanski said.
Previously 15 to 20 percent of incoming freshman did not meet published admissions standards.
Besides diminishing the institution’s respectability, Szymanski said, that model left students “with debt, no degree and probably significant damage to their self-esteem.”
“Reputation brings students, which brings revenue,” she said. She predicts enrollment will increase by two percent next year due to reforms in the enrollment management and admissions offices, which are amping up efforts to recruit new freshman and transfer students as well as to retain current students.
Statewide, MnSCU enrollment is down five percent, which Szymanski said is partly caused by competition from for-profit colleges.
The remaining $2.4 million in the expected deficit is due to more expensive than projected union contracts.
Two unions, AFSCME (with about 150 MSUM employees) and MAPE (35 to 40 employees), have already settled two-year contracts with the state, although they have not yet been ratified by the legislature. The contracts include compensation packages of 3 percent each year – twice what the MnSCU central office budgeted for, according to MnSCU spokesman Doug Anderson in an email statement.
MnSCU “lowballed it, and they forced our campuses to lowball it,” said Faculty Association president Ted Gracyk.
Local leaders of both AFSCME and MAPE emphasized that in the previous contracts during earlier budget crises, the employees settled for no salary increases.
“It’s tough to take that over and over again,” said local MAPE president Bryan Kotta, an IT computer systems manager.
MSUM locksmith Dave Renecker, the local AFSCME head, noted in an email that many insurance expenses are being passed on to employees.
“I have not added it up, but my hope is the salary increase will cover the insurance increases,” he wrote.
Negotiations are just starting for the faculty union and the union that represents student affairs, admissions and registrar’s office employees. MSUM administration is now budgeting for these union contracts and two others for smaller unions, to include similar increases to the MAPE and AFSCME contracts.
The budget deficit would have been about $900,000 smaller if the new money the legislature allocated for faculty and staff compensation had materialized, but over the summer MSUM officials realized they couldn’t actually use the money because it was one-time funding and couldn’t be counted on for future years. Existing contracts also prevent the university from issuing bonuses.
“We don’t know what we’d do with it even if we had it,” said MSUM vice president of finance and administration Jan Mahoney of the still undistributed funds.
The state legislators that represent Moorhead said they have been in touch with leadership in both chambers and are working to resolve the issue in the next session. But they offered no promises.
“You can’t fix all the damage that was done from the long-term disinvestment in just one year,” said Sen. Kent Eken, DFL-Twin Valley. “This session was a significant step in the right direction.”
Rep. Ben Lien, DFL-Moorhead, called 2013 “a historic year for higher education.”
“What we did was as student oriented as possible,” he said, highlighting the tuition freeze and the increase in state grant money, which is now prorated for part-time students, many of which attend MSUM.
But administrators said the tuition freeze also reduced MSUM’s ability to deal with the budget deficit.
“We wanted modest tuition increases and a modest increase in state appropriations,” Mahoney said.
Even student government leaders in MSUSA, the system-wide student government association for MnSCU, advocated tuition increases.
“We pushed hard for 3 percent,” said Kevin Struxness, MSUM Student Senate president and MSUSA member, “to make up for lost revenue and declining enrollment.”
Student and employee impact
Reducing faculty numbers through the hiring pause and targeted early separation incentives will increase class sizes and reduce course offerings “a wee bit,” Szymanski said. She noted MSUM will still have the lowest faculty-to-student ratio in the state.
Struxness said the Student Senate has not formed an official position on the deficit, but senate leaders “feel comfortable” with the administration’s approach.
“I truly feel they have the students’ needs and wants as a first priority,” he said.
The hiring pause does not affect admissions and retention, which increase revenue, or core functions, such as public safety. Mahoney said an administrative specialist position in the Career Development Center is one example of a position that wasn’t filled due to the pause.
Administrators are currently crunching the numbers for the targeted early separation incentives in advance of a Sept. 19 meeting with the faculty union.
“The Faculty Association looks forward to learning about the details of the offer being made and to which departments,” Gracyk said.
The goal, Mahoney said, is to “right size our staffing profile to our enrollment.”
“The fiscal future of the university has to be considered, and we’re looking at it long term,” she said. “Not one or two years but five and six years out.”
BY BRYCE HAUGEN