BSU looks at budget
No news is often good news. So, when staff meetings were held Thursday to announce Bemidji State University's budget forecast, few expected good news to be on the agenda.
But at least for this year, BSU's budget remains stable.
BSU Vice President for Finance and Administration Bill Maki spoke to faculty and staff during two sessions, explaining that the university will have to reduce its budget by $5 million; increased tuition costs may occur in the future and stable student enrollment is critical.
Maki outlined changes in the budget forecast that have occurred since October, particularly from the November election and the new state economic forecast that came out last week.
In October, BSU-Northwest Technical College President Richard Hanson announced BSU and NTC would need to reduce their budget by 10 percent.
BSU's budget remains stable for Fiscal Year 2011. Enrollment is doing well, Maki said. BSU reported an increase in summer enrollment by 7 percent from the prior summer. Fall credit enrollment was up 5 percent. Spring enrollment count is expected to be similar to the fall enrollment.
"Our enrollment clearly drives the revenue of the university," Maki said. "If we see an increase or a drop in students, it has an immediate impact on the budget."
BSU's budget remains balanced, for now, Maki said. The university sits at a 4 percent operating reserve, or $450,000. This number was more than $800,000 in October, Maki said. The change occurred after BSU announced a limited Board Early Separation Incentive, or BESI, program offered to faculty in certain programs.
"We ended up having eight faculty members accept the offer," Maki said. "So that is indicative of the budget for Fiscal Year 2011 as adjustments have been made to cover those costs."
While 2011 remains stable, 2012-13 paints a different picture. For 2012-13, the deficit is more than $6 billion, Maki said, which rose from the previous state estimate in February at about $5.8 billion.
"Economists are saying the economic recovery just keeps getting pushed out further," Maki said. "They are looking out further before the economy will recover. That drove this revenue change in projections to be reduced."
With projections of revenue in FY 2014-15, Maki said, "the news is not good." He said he expects deficits to continue unless some significant change occurs.
"We can't rely on state appropriation as much as we could in the past," Maki said. "There appears to be no indicators at this point that we are going to recover that money or get more funding in the future."
At the state level, Maki said, the change in the state's political environment will play a significant role as to how the university finds solutions at increasing revenue.
Maki said BSU had been looking at solutions that relied half on new revenue and half on expenditure cuts. But new shifts in the Senate and the House at the state level caused Maki to look at other models. It appears, he said, it makes more sense to look more at expenditure reductions as the primary way the budget will be reduced. Looking at new revenues or tax revenues aren't going to happen, he added.
Maki said higher education's share of the state budget is becoming difficult to maintain. In 2000-01, Maki said higher education was at 10.8 percent of the state's budget. The current biennium has higher education at 8.2 percent of the budget.
But Maki said one advantage colleges and universities have that other state agencies do not have is tuition.
"That's how we have become more reliant on tuition because we have no other major funding stream that many other state agencies do not have," he said.
Maki's information on the budget situation at the state was rather bleak, he noted. He said people should not expect in 2015 that higher education will be back at 10-11 percent of the state budget.
"That is not going to happen," he said. "We need to think about that as we project in the future. We need to look at our enrollment and our tuition."
According to Maki, the university had been told by the state's Office of Management and Budget to project a 15.6 percent increase in health insurance premiums for 2012 and an 8 percent increase in rates for 2013.
Those increases have gone down considerably, Maki said. Currently, university employees are looking at a .3 percent increase in 2012 and 12.5 percent increase in 2013.
"That is good news," he said. "We spend just over $4 million a year in health insurance, so the difference between 1 percent is about $40,000."
Maki reiterated the importance of enrollment for the university.
"This is something we need to pay the most attention to," he said. "If our enrollment does not meet projections, we will have to deal with it immediately."
BSU bases financial modeling on a "relatively stable" enrollment of 4,650 Full Time Equivalent students.
Maki said he is still looking at 4 percent increase in tuition in his financial modeling projections.
"The board has indicated they are not interested in raising tuition and we may need to look at 3 percent in our modeling," he said. "There has been some schools looking at 5 percent, but because of our higher tuition rate within the system, we've been looking at a 4 percent tuition increase."
The overall increase of personnel costs is still at 2.5 percent per year, Maki said.
He said if BSU experiences a 1 percent change in enrollment, this would equate to approximately $330,000 in tuition revenue.
"So, a 3 percent change in enrollment is critical to us," he said. "It can mean a million-dollar change."
State funding for higher education is becoming less important, as far as revenue, Maki said. A 1 percent change in enrollment is worth twice as much to the University than a 1 percent change in state funding.
Another revenue forecast is expected to be released in the beginning of January and again in the first week of March, Maki said. This will give the university a better indication if revenues are going to get better, worse or stay the same.
Maki said he needs to get a better of idea of what the Minnesota State Colleges and Universities' handle is on tuition. In the past, MnSCU has limited the amount of tuition increases.
Maki added he will be paying close attention to collective bargaining units, which are the largest expenditure of the university's budget.
"In summary, it's not a lot of good news to share, if any," Maki said. "But the $5 million number, as far as for the budget, is probably the number we really need to hit."
The other piece, he said, is enrollment.
"It is a critical piece," he said.
For more information about BSU's recalibration plan and the schedule, visit www.bemidjistate.edu/offices/president/budget.