MSU Finance and Administration Division - 334 Wigley Admin - 507.389.6622 - fiscal-affairs@mnsu.eduMN507.389.662256001Mankato334 Wigley Admin Centerfiscal-affairs@mnsu.eduFinance and Administration DivisionMinnesota State University, MankatoMSU Flame

January 15, 2003 –
Budget Update from H. Dean Trauger


Yesterday Governor Pawlenty released his FY03 budget balancing recommendations. The Governor has recommended a cut of $25 million for MnSCU which amounts to a 4% cut in MnSCU's state appropriation.

MnSCU has distributed the cut to the state universities and colleges pretty much according to each institution's percent share of the base budget. They made a $1.4 million reduction to the Office of the Chancellor's budget, and systemwide set asides were reduced by about $1 million leaving $22,635,000 in cuts that was distributed to institutions. This resulted in an FY03 base budget reduction to MSU of $2,115,724 (9.34%). MSU's share of the FY03 MnSCU budget is 9.63%.

As I reported to you on Monday, MSU had a reserve balance of $4 million coming into FY03. This $2.115 million cut in appropriation will be taken from the reserve now, so no immediate budget changes will be required. However, the reduction is a base budget reduction, so we will have to work on a budget plan during the next few months to adjust our budget to the new base funding level. Also, this cut only addresses the $365 million deficit projected for FY03; we do not have any information on how the Governor or the Legislature plans to balance the state's budget for FY04-05 ($4.5 billion deficit).

As in other biennial budget years, major budget factors that impact budget planning are: (1) the unknown regarding state appropriation support; (2) bargaining unit salary settlements; (3) tuition rate increase-amount MnSCU will approve; and (4) FTE enrollment. It may be a number of months before we get any clarity on items 1, 2, and 3. MnSCU's Biennial Budget Plan had a 3% tuition increase proposed, but the $25 million reduction in base state appropriations will now surely change that plan. For MSU to just restore the $2.1 million state appropriation cut, we would have to increase tuition by 4.5%. Enrollment continues to grow (22% during the past four years), and it is projected to increase another 2% for FY04.

Demand for higher education is increasing, so why is higher education being looked at for additional state appropriation cuts? Apparently, it is because colleges and universities have the ability to generate revenue by increasing tuition.

Currently, there are so many unknowns regarding MnSCU's FY04-05 budget that I am not going to speculate on what MSU's budget challenges might be. The Cabinet, the Budget Sub Meet & Confer, and the Planning Sub Meet & Confer will be discussing MSU's budget situation over the next few months. Any ideas you have on what we should be reviewing that might bring about further cost efficiencies would be appreciated. Given the continued growth in enrollment, a reduction in the total number of employees does not seem to be an option right now.

For more budget information on budget scenarios and the agendas of the Budget Sub Meet & Confer, please go to www.mnsu.edu/finadm/comments.html. At this site there is a "Comments" section available for your input and/or questions as well.


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