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June 6, 2011
Last month, Governor Dayton vetoed budget bills that would have reduced state funding for the University of Minnesota to levels not seen since 1998, and the Minnesota Legislature adjourned without successfully negotiating a new state budget. While I am grateful for the governor's actions to support better funding for higher education and deeply discouraged by the gridlock at the Capitol, as I said in my May 5 message
, it is still necessary to present a balanced 2012 budget to the Board of Regents for action in June in order to have a budget in place at the start of the new fiscal year July 1.
The difficulty, of course, is making appropriate assumptions about state funding in order to model likely and alternative scenarios so that the Board of Regents and the next administration are positioned well for whatever state budget is eventually approved. The Regents previewed the 2012 provisional budget at their May 13 meeting; the timeline for reviewing and acting on the budget is as follows.
Friday, June 10: Board of Regents Budget Review and Public Hearing
Monday, June 20: Board of Regents Budget Action
Friday, July 1: Start of New Fiscal Year
Please note that both
the Board's review of the recommended provisional budget for 2012 and
a public hearing are scheduled for Friday, June 10, at 9 a.m. and noon, respectively, in the boardroom on the sixth floor of McNamara Alumni Center.
Recommended provisional budget
Unfortunately, due to the deep reductions proposed by both chambers of the legislature as well as the conference committee, we must plan for the worst, even as we continue to work tirelessly to improve our legislative outcome. We expect that Governor Dayton and members of the legislature will advocate for moderation regarding the University's proposed budget reductions; however, we also expect that state reductions will still be deep. To address them, I will recommend a fiscal 2012 budget that includes:
- more than $40 million in unit reductions, including elimination of staff positions (largely through voluntary strategies), reduced expenses, reduced reserves, restructured operations, and elimination of programs;
- more than $23 million in productivity gains, including new, uncommitted tuition revenue from growth in student credit hours and enrollment, as well as other miscellaneous revenues;
- a five-percent tuition increase for most resident undergraduates; and
- the University's third wage and salary freeze in the past decade (subject to collective bargaining).
It is important to note that budget planning has been under way for months now, and includes strategies to proactively manage our biggest cost center -- our talented faculty and staff -- while preserving employment and moderating unplanned job losses. The most recent retirement incentive option (RIO), for example, prompted nearly 350 eligible faculty and staff to participate, with projected long-term savings (salary, wages, and fringe benefits) of more than $30 million. On average, approximately 60 percent of vacated positions are not refilled; the other 40 percent are generally refilled at significantly less expense than the original position.
In addition, we are planning changes to fringe benefits (also subject to collective bargaining), including increased medical premiums and co-pays for employees; restructured administration of our healthcare benefits to reduce costs; and higher retirement contributions from new faculty and academic staff.
Contingency planning in case of government shutdown
Our planning also includes contingencies and principles to guide our operations in the case of a state government shutdown in order to avoid disruption to our educational programs and research commitments, ensure continued patient care and services for our clinical programs, safeguard our fiscal integrity, and appropriately support our employees and our physical infrastructure. Although the loss of state support (temporary or permanent) and the possibility of a shutdown pose challenges for the University, I am confident we can navigate these challenges especially if they are short-lived.
First, let me reassure you that the University will remain open for business. The University of Minnesota operates on a year-round basis, with clinical care responsibilities and summer programs, which expect to serve some 19,000 students in the next few months. We also have contractual obligations to numerous external funders, including the National Institutes of Health; the National Science Foundation; other federal agencies, foundations, and non-profits; and business and industry partners. We cannot interrupt these contractual activities with a total shutdown. Furthermore, any disruption puts additional funding, including new faculty research proposals and long-term partnerships, at risk and would simply cause further harm to our academic mission.
Second, we are hopeful that any state government shutdown would mean only a short-term, temporary interruption in the flow of funds from the State of Minnesota. During the current fiscal year the state temporarily withheld $89 million in state appropriations; it will return those funds to the University by the end of this month. The University, like any large and complex organization, continually manages fluctuating expenditures and revenues, and the payment of these funds will assist us in weathering a short-term disruption in the flow of next year‚Äôs state appropriations to the University.
University officials have been aware of a potential state government shutdown for several weeks and have been planning a variety of short-term actions to minimize any impacts on faculty, staff, and students; the communities we serve; and the long-term financial health of the U. It is unclear how long the current state budget impasse will last; however, appropriate plans are in place, and we are confident that we can manage through any short-term disruption without impacting day-to-day operations.
Gratitude for your continued work
Finally, I want thank you for your perseverance and hard work. In difficult economic times, outstanding faculty and staff like you have absorbed state budget reductions that have not only impacted your work, but also have taken a significant toll on your household budgets. Yet every day, you continue to deliver on our mission:
- recruiting and retaining more students,
- granting more degrees per year,
- generating historic levels of competitive research funding and private support,
- finding creative ways to reduce costs and increase productivity, and
- returning more than $13 to Minnesota's economy for every $1 of state investment.
You can expect another communication later in June with more information about our circumstances and planning. In the meantime, we must continue to tell the legislature that such productivity on the state's behalf should be rewarded, especially during lean times, when every job and every dollar of external support matter. The University has always been committed to aggressively presenting our case for state support through the outstanding advocacy of our senior leaders, Regents, faculty, staff, students, alumni, and friends. I do not know if state policy-makers will be swayed, but we will continue to fight for this most critical of state assets: the University of Minnesota.
Robert H. Bruininks