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University Budget Update

March 30, 2009

Earlier this month, Governor Pawlenty revised his proposed state budget, using temporary federal stimulus dollars to cushion deep and significant cuts to state support for the University of Minnesota. These federal stimulus funds are good news for the University, but they cannot permanently address the long-term challenges we face. Instead, this temporary funding extends our window of opportunity for addressing the proposed reductions strategically, without sacrificing our core commitments to excellence, innovation, and service. It enables us to more gradually achieve the cost savings, productivity improvements, and revenue enhancements that will be required to sustain the quality and strength of the University in a future with less state support.

Why less support?

• The governor's current budget actually reduces our base level of state support by an extra $36 million per year on top of his original proposed cut of $75.5 million per year.
• Federal stimulus dollars may temporarily erase the impact of both of these cuts--but once those funds are spent and the stimulus bill expires in 2012, our base level of funding will be substantially lower than it is this year.
• In addition, flat funding during the next two years means no new state money to address approximately $60 million a year in rising costs and other critical investments.

The University will emerge in July 2012 with less state funding--and unless we work hard now to reduce costs and grow revenue, we will face much more serious financial challenges in the future. We must remain disciplined in our approach to the budget, carefully leveraging these temporary federal stimulus funds to maintain academic excellence and high levels of service to students and the state and to invest in initiatives that will reduce ongoing costs and generate predictable new revenue.

Make no mistake: the University of Minnesota must be a leaner and more efficient organization in 2012, so we must continue our current efforts:

• We must ensure that our priorities remain strongly aligned with the language of the stimulus bill, which emphasizes the creation and preservation of jobs; mitigation of tuition and fees; modernization, restoration, and repair of facilities; and critical investments in education.
• While it is clear that we will need to reduce the size of our workforce over the next two years, it is our goal to limit layoffs by continuing to take advantage of attrition, by reexamining the ways we work and being planful about filling vacant positions, by exploring other options including voluntary reduced-time appointments, and by improving service and efficiency.
• And while we will need to grow predictable sources of recurring revenue including tuition, we will continue to moderate the impact of any tuition increase by investing in new financial support for students with need.
• Finally, where appropriate funding is available, we must also continue to invest in our infrastructure to ensure that our campuses meet the needs of the students and researchers of tomorrow.

Since even the best-case scenario provides the University with significantly less state funding in 2012 than in 2008, it is critically important that we proceed with a long-term perspective. To that end, we continue to make difficult choices in order to reduce administrative costs; improve efficiency, effectiveness, and oversight; and strengthen critical academic and support programs. Although decisions need to be made and implemented in a timely manner, I remain committed to working closely with the University community on these important issues.

• No recent policy discussion has generated more feedback than the proposed shift of the Regents Scholarship Program from being fully funded by the University to permitting some level of cost sharing between the University and eligible employees. Our goal is twofold: to reduce the annual cost of the program (nearly $9 million and growing 10 percent per year) and to ensure that it remains a generous benefit for our employees. We have listened to you, and we are exploring multiple ways to restructure this important program, especially with regard to employees pursuing their first baccalaureate degree. We are also examining the impact of expanded education tax credits and tax deductions on tuition contributions for degree-seeking employees. More detailed information will be available in the next few weeks.
• We must continue to explore ideas to strengthen graduate and professional education at the University. Every University unit will need to reduce its operating costs, but I believe that it is imperative that we not jeopardize the hard-fought gains we have made, especially in supporting graduate and professional students, faculty, and interdisciplinary programs. We will continue those functions that work well at the all-University level, but we must remain open to reforming all the University’s academic and support programs. More widespread discussions with the University community will take place before any of the ideas under consideration are implemented.

I encourage you to continue to share your best ideas for saving money and improving the way we work through The Economy and the U Web site. There you can also join discussions already underway regarding the University’s budget, cost-saving initiatives, and more. You can also get a clearer picture of how federal stimulus funds will temporarily bolster the University’s state support by downloading Potential Erosion of State Budget Base (56 K PDF).

You are a part of a great community and are the strength of this great university. Together, we can meet the challenges of today and find creative ways to strengthen the University of Minnesota for tomorrow. I want to thank you for your hard work, commitment, and support during these difficult economic times.

Sincerely,

Robert H. Bruininks

Related links

Budget principles

Government Relations

Federal Relations Report

Human Resources

Legislative Network

President's Office

Stimulus funding information
Office of the Vice President for Research

Resources

Employee and Supervisor Support

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