State Budget Update

Earlier this month, state economist and University of Minnesota faculty member Professor Tom Stinson shared his most recent state budget forecast with state leaders, and last week, he presented the same information to the University's Board of Regents. The outlook--a $1.2B state budget shortfall in the coming year (fiscal year 2011, July 2010 through June 2011) and an additional shortfall of approximately $5B in the next biennium (fiscal years 2012 and 2013)--presents severe challenges for the state of Minnesota and the University for the foreseeable future.

While we expected a substantial shortfall, this latest forecast shows a much deeper challenge than anticipated. As Professor Stinson indicated, we cannot raise enough new tax revenue to fill this hole, nor can we expect an economic rebound strong enough to fix it. The University will likely face additional historic budget reductions during the next three academic years at least:

• We could see an additional state budget cut of $36M for the coming year.
• We expect to see deep reductions again in the next biennium.
• We expect internal budget targets to be reduced again for fiscal years 2012 and 2013.

Given the realities of the state budget process and the calendar, we have just 12 to 18 months to respond with our budget plan for fiscal years 2012 and 2013.

Everyone has a role to play. To meet the long-term needs of our students and the state, we will need to engage the entire statewide University community in identifying our priorities; programs or services to be reduced, consolidated, or eliminated; and opportunities to reduce costs and increase revenues. We must continue to reexamine our priorities in light of the University's public mission, in order to ensure continued academic quality and affordability.

In the past year, each academic and administrative support unit was asked to reduce its budget to help address an 11 percent state budget cut. On average this year, academic budgets were reduced 5.5 percent; administrative support budgets were cut 5.7 percent. Those are significant reductions in a people- and technology-intensive competitive enterprise like ours.

Careful planning during the past two years enabled us to take advantage of numerous natural opportunities to reduce the size of our workforce and moderate future workforce reductions, through strategies including the investment of federal stimulus dollars, a voluntary retirement incentive option, substantially restricted hiring, and strategic consolidations of departments, offices, and functions. At the same time, we have also significantly reduced costs for academic programs, administrative overhead, construction, energy, maintenance, and operations--all while driving many of our key academic indicators significantly higher. We have accomplished these things together and are positioned relatively well for success despite these difficult economic realities.

Fortunately, we have a responsible, long-term plan for the University of Minnesota as well as clear and consistent principles that continue to guide our decisions and shape our priorities. While I cannot overemphasize the urgency of the budget situation we face in the next few years, we know what we must do:

• We must reduce spending and control costs.
• We must make targeted investments in core strengths and emerging opportunities in order to preserve the University's quality, productivity, and impact.
• We must continue to advocate strongly for state and federal support of the University's public mission of exceptional education, breakthrough research and innovation, and public service and outreach that meet the needs of our society and citizens.

I am confident that we are up to this task. I know we continue to ask a lot from each of you, and I want to thank you all for your shared sacrifice and personal commitment to the University of Minnesota. 

We can--and should--be proud of the progress we have made these past several years. I wish you a joyous and restful holiday season, and I look forward to rolling up our sleeves to meet these challenges together in the new year.

Robert H. Bruininks

President