Regents prepare for budget ‘cliff’ in 2012

by Jayme Fraser | March 5, 2010 | Montana Kaimin

The balance of cost and quality dominated discussion at the Board of Regents meeting Thursday at the University of Montana-Western in Dillon.

“This is the most exciting fiscal budget period I’ve ever seen,” Deputy Commissioner of Higher Education Mick Robinson said.

After a few quiet laughs and a joke about accountants, the Regents turned to more serious matters: the sum of shaky state revenues, statewide budget reductions, rising enrollment, widening gaps in the cost of college and the search for a new University of Montana president.

Presidential search

President George Dennison will enjoy a $74,950 raise in annual salary his last five months at UM, which means he will earn $34,352 more than if his salary had remained the same for the remainder of his term.

The increase in annual salary to $280,000 was instituted in preparation for UM’s search for a new president so it would match that of Montana State University’s new president.

“The greater the inequity and the longer it exists, the greater the turnover,” Montana University System Labor Director Kevin McCrae said. “Turnover costs the big bucks, if you will.”

McCrae said this should prevent salary inequities in the future.

Regent Clayton Christian said the Board has received the transition evaluation prepared by long-serving academic administrator Stephen Reno that will help the search committee identify the challenges of hiring a new president after Dennison’s 20-year term.

“I foresee releasing the names of those on the Presidential Search Advisory Committee very soon, hopefully within the next day or so,” Christian said. “We will stay on schedule and make some headway.”

Budget challenges

When UM’s new president takes office this fall, the executive will inherit a handful of budget challenges stretching through at least the next three years.

Besides a 5 percent decrease in next year’s budget as requested by Gov. Brian Schweitzer’s office, the new executive will also be running toward a fiscal “cliff” created by a budget gap left when federal stimulus dollars expire in 2012.

“We have the 2011 reductions and then, of course, the biennium cliff right after that,” Commissioner of Higher Education Sheila Stearns said.

Because these difficulties immediately follow each other, Robinson said the 2011 budget cuts would “very likely” be permanent budget reductions that will be the starting point for solutions bridging the budget cliff in 2012 and 2013.

But even the first round of budget reductions will remain uncertain as the governor and state legislators continue evaluating and planning the effects of declined state revenues.

“Until we get the governor’s final determination of budget reductions that will be focused on the university system, we don’t have real hard numbers to work with,” Robinson said.

Budget-cut burdens and solutions will vary across the state’s campuses. At UM, the Strategic Budget and Planning Committee has worked with the school’s vice presidents to develop action plans that were announced last week.

Enrollment and admission

The blend of residents and non-residents attending Montana schools raises interesting questions about the effect on revenues and appropriation.

“We have 1,600 more students in our system,” Christian said. “We need to be very mindful of this in our budgeting process.”

Christian said that besides the obvious challenge of providing more students with quality education during a financial pinch, the fact that resident enrollment quickened while non-resident enrollment slowed makes the fiscal impacts a greater concern.

“We haven’t looked at any FTE (full-time enrollment) allocation since the College Affordability Plan,” Christian said.

For instance, the level of state funding given to MSU and UM from the Regents based on resident enrollment at the universities has not changed since the Affordability Plan was created in 2006 though more residents have enrolled at UM while MSU’s resident count has dropped.

Christian said the Regents will consider a reevaluation of the appropriations during the budgeting process for 2012-13 that could be more equitable, though they have not decided if resident enrollment will be the only factor in considering funding levels.

Also, in light of difficult times and a desire to keep in-state tuition low, Dennison encouraged the Regents not to place the burden of maintaining educational quality solely on non-residents by stiffly increasing their fees.

“I think it’s very dangerous to say we are going to use the tuition from here to do it over there,” Dennison said.

Because non-residents generate greater revenue than residents, it might be dangerous to further discourage them in difficult times.

Financial Aid

The Regents noted that during tough economic times enrollment tends to increase as people seek an edge in the marketplace that would translate into higher wages.

But since the dependency on loans has increased in proportion to aid and scholarship awards, students are facing greater personal costs that disproportionately burden the poorest Montanans.

Dennison said that though the state has seen enrollment increases the past few years, a statistical breakdown of family and student salaries reveals that people within the lowest quarter of income are not part of the increase.

“It’s a flat line in regard to people with the lowest income,” Dennison said. “If you happened to pick the wrong grandparents, you just aren’t going to college.”

Regents Chair Stephen Barrett suggested reevaluating the number, kind and process of distributing tuition waivers.

He said it will be a tough discussion because all the waivers — ranging from the Western Undergraduate Exchange to the American Indian waivers — have noble and important purposes, but added that they short the system $30 million of tuition revenue.

Other Regents argued that waivers can actually increase revenue by attracting students that would otherwise attend other schools and who still pay above the value of the waiver.

Stearns directed the Regents to the latest Strategic Business Plan for the Montana University System that shows the gap between available aid and the cost of attendance for students. She said discussions of tuition waivers should keep the Regents’ goal of increasing college affordability in mind.

The Regents continue their discussion and vote on relevant items Friday. The agenda and any documents related to discussion can be viewed at mus.edu/board/meetings/2010/Mar2010/Mar2010.asp.

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