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

March 26, 2003
From H. Dean Trauger


The Legislature is in the process of getting input from institutions,
organizations and individuals regarding Governor Pawlenty's proposed
budget plan for the fiscal 2004-2005 biennium. What the Legislature
decides as far as MnSCU's appropriation for fiscal years 2004 and 2005
will be a critical piece of the current budget puzzle that all state
agencies are trying to figure out right now. MSU's share of MnSCU's
state appropriation is about 9.5%, but the legislative appropriations
bill will not be completed until mid-May or later.

WHERE ARE WE WITH OUR FISCAL YEAR 2003 BUDGET?

MSU used $2.115 million of its reserve balance to cover the budget
"unallotment" that Governor Pawlenty implemented in February to cover
the state's budget shortfall for fiscal year 2003. MSU's Budget Sub
Meet & Confer group has recommended the following action to restore the
reserve balance by the end of June 2003:

Reduce each University division's fiscal year 2003 salary allocation by
1% and nonsalary allocation by 5%. This reduction in division
allotments results in $950,000.

Other additions to the reserve balance are:

1. Utility rates have been favorable until the last six weeks; and the
winter weather, with the exception of a few weeks, has been mild
resulting in utility savings in excess of $500,000 which will be moved
to the reserve.

2. Tuition receipts, due to enrollment growth, are more than $800,000
above budget.

These changes to the FY03 budget plan will bring the reserve balance up
to around $4 million-4% of the total budget-by June 30, 2003. A reserve
balance of $4 million should provide MSU with some flexibility to deal
with whatever budget challenge(s) that may develop for the fiscal
2004-2005 biennium.

WHAT DO WE KNOW ABOUT MSU'S FISCAL YEAR 2004 BUDGET?

No specifics other than what the Governor has proposed for MnSCU. The
budget puzzle has four critical pieces that must take shape before we
know specifically what our budget challenge is going to be:

1. State Appropriation

2. Employee Compensation - Bargaining unit negotiations

3. Tuition Rates

4. Enrollment - Student FYEs (full year equivalent)

WHAT DO WE KNOW ABOUT EACH PIECE OF THE BUDGET PUZZLE?

1. State Appropriation

The Governor's fiscal year 2004 budget proposal would result in MSU
taking an appropriation reduction of $6,161,234 from its fiscal year
2004 base budget appropriation. Currently, there are no legislative
budget proposals for higher education.

2. Employee Compensation

There have been proposals circulating to freeze compensation for state
employees for the next two years. However, there is also some talk that
the regular bargaining process for state employees might be the process
used for determining employee compensation. The financial impact
employee compensation has on MSU's operating budget is that for each 1%
change in compensation there would be a $650,000 change in expenditures.

3. Tuition Rate

The Governor has proposed that institutions hold tuition increases to no
more than 15%. A 15% increase in tuition rates at MSU would provide
$6,750,000 in additional income. MnSCU trustees have been concerned
about holding down tuition increases, so it is uncertain at this time
whether or not they will approve a 15% rate increase.

4. Enrollment

Student full-year equivalents (FYEs) have increased by about 20% in the
past four years. An FYE equals 30 undergraduate semester credit hours.
Students admitted for fall semester (fiscal year 2004) total about
4,700. If a 48% show rate is achieved, the freshmen class will exceed
the 2,100 target for new freshmen by 150 students. Given the current
political and economic environment, it is difficult to project total
enrollment. Will a 15% tuition increase impact students' decisions to
attend MSU? Assuming tuition rates do not have a significant impact on
enrollment, we can anticipate enrollment increasing by 2% over fiscal
year 2003-estimated 13,500 FYE students.

ACCORDING TO THE "MINNEAPOLIS STAR TRIBUNE", INSTITUTIONS HAD A
SIGNIFICANT AMOUNT OF FISCAL YEAR 2002 TUITION INCOME THAT WAS NOT
COLLECTED. HOW DOES THE ACCOUNTS RECEIVABLE SITUATION IMPACT MSU'S
BUDGET?

In the "Star Tribune" article Minnesota State University, Mankato had
$1.4 million (3%) of its accounts listed as 90 days past due. In
checking our current fiscal year 2002 receivables still uncollected,
MSU's total is about $180,000-less than .5%. Obviously, the author's
conclusion that uncollected receivables could be a major source of
revenue for MnSCU's budget problem is not valid. Outstanding accounts
receivable of 1% or less is very good, so our staff are doing an
excellent job of collecting tuition.

GIVEN ALL THE UNCERTAINTY SURROUNDING THE BUDGET, WHY ISN'T THE
ADMINISTRATION LOOKING AT REDUCING STAFF LIKE SOME OTHER MnSCU
INSTITUTIONS?

1. MSU's enrollment continues to grow even though we have now basically
closed admission for fall 2003.

2. MSU's student-faculty ratio is 24/1 which is high compared with its
peers; a 2% increase in enrollment with little additional staffing
increases the ratio, so a reduction from fiscal year 2003 faculty
staffing levels is unlikely.

3. MSU's administrative and support staff to student ratio is also
among the highest of peer institutions; and with an increase in students
and a slight decrease in administrative support positions, our student
to administrative and support staff ratio will move up to the top of our
peer group.

High student to faculty or high student to administrative and support
staff ratios are an indication of MSU's efficiency. Thus, significant
changes in the total number of employed staff will not be an answer to
the budget challenge.

WHERE ARE WE NOW AND HOW WILL WE MANAGE TO BALANCE THE BUDGET IN FISCAL
YEAR 2004?

1. The Cabinet will review all administrative vacancies as they occur
to determine whether the position can be changed, consolidated or
eliminated to achieve even more efficiencies in our operations.

2. Changes will be made to spending and staffing, but with the
continued growth in numbers of students we will be serving this fall, I
do not expect the total number of employees to be much different than
what we now have although some individuals may have changes made to
their positions or their assignments.

3. The Budget Sub Meet & Confer group is reviewing all the suggestions
that have been submitted by faculty and staff through the budget Web
site. They will identify which suggestions will be considered by the
Planning Sub Meet & Confer and the Cabinet. Thank you to everyone who
sent in ideas. The budget planning process will continue, and ideas for
cost savings will be prioritized based on implementation feasibility.

Once the unknown pieces of the budget puzzle are clarified and we have a
specific budget amount to work out, we will get specific about staffing
and other allocation plans. Given the complexity of the appropriation
and compensation issues, do not expect a final budget plan to be
complete for fiscal year 2004 until early September 2003. Between now
and September work will continue working on MSU's fiscal year 2004
budget plan.

Please let me know if you have suggestions, questions or concerns
regarding MSU's budget situation.


H. Dean Trauger
Vice President for Finance & Administration
334 Wigley Administration Center
Mankato, MN 56001
Phone: 507-389-6621
Fax: 507-389-6610


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