Budget Update and Legislative Outlook
Every January at the University of Minnesota presents a new semester with new possibilities. This particular January also presents us with a new governor, a new legislative majority, and new ideas to spark economic growth and meet the needs of our great state. Minnesota faces a projected budget shortfall of more than $6 billion, an enormous challenge for the state resulting from a failure to address Minnesota's long-term structural budget imbalance coupled with the lingering impacts of the worldwide economic downturn. As the state's only comprehensive research and land-grant university, we have an essential role to play in re-energizing Minnesota's economy by developing human capital, driving innovation, and creating thousands of new jobs through new ideas, new products, and new companies. In the coming months, we must all work together to make the case for strong support for the University of Minnesota to state leaders and citizens.
This legislative session will determine our biennial budget
-- our level of state funding for the next two years. The University of Minnesota requires strong state support to sustain its momentum; however, in the past two years, our level of state support has been rolled back a decade or more, from $703 million to $591 million. The suddenness, size, and scope of this rollback has made it necessary to adjust budgets at all areas and levels of the University system, and we have responded with discipline, creativity, differential reductions, and targeted investments. Our decisions have been strategic, guided by consistent principles
, and focused on the long-term academic strength and vitality of the University. We have asked the entire University community to set clear priorities, to reduce costs and increase productivity, to grow new revenues, to hire carefully and strategically, and to preserve employment where possible. Together we have made tremendous progress improving the University, yet once again we face the likelihood of reduced state funding.
During the last session the legislature saw higher education as a priority and increased our forecast base for future years. Currently our forecast base is $642.2 million -- 51.1 million per year higher than the $591 million we received this year. Knowing the economic challenges the state still faces, our biennial request this session is simple: We are asking that the University's forecast base be maintained so we can make essential investments in key open faculty positions and student financial aid, and meet rising core costs and required expenditures.
We have made very important gains in the past several years, especially with regard to financial support for students, the undergraduate experience, and outcomes including four-year graduation rates and degrees granted per year. In order to maintain this momentum, we need strong and predictable state investment. We believe our request to be reasonable -- however, even maintaining our base will be difficult in this legislative session.
If we sustain further state reductions, they will hit hardest in the 2011-12 academic year, and we will again need to reduce ongoing operating and capital costs. Clearly we cannot address any reduction in state funding simply by increasing tuition an equivalent amount. Nor can we in good conscience diminish our commitment to our world-class faculty and staff and simply reduce employment. As a result, we are currently modeling no increase in compensation for the 2011-12 academic year, subject to collective bargaining, and all units will be asked to model a 5 percent budget reduction. As was the practice during the past two years, actual reductions to academic and support unit budgets will be applied differentially.
This preliminary budget framework continues our history of solving two-thirds of our budget challenge through budget reductions and reallocation and one-third through additional revenues. Since we do not yet know what the legislature will do, it is premature to discuss any budget solution in greater detail; however, we will continue to invest in student support in order to ensure affordability for Minnesota students, and to moderate unplanned job losses to the best of our ability. We must also continue to take a university-wide, all-funds look at our budget and use every tool and strategy at our disposal to balance the budget in the short term and plan for our long-term financial future.
I plan to share additional information with you on the budget and other important issues every few weeks throughout this semester. In the meantime, I want to thank each of you for the myriad things you do to make this University a great place to work and learn. We can be proud of all we have accomplished together!
Robert H. Bruininks