Morehead State and the 2010-12 State Budget
Briefing No. 6 by President Wayne D. Andrews
TO: Regents, Faculty, Staff, Students, Parents, Alumni, and Citizens
DATE: August 16, 2010
With the fall semester set to open in a few days, it is important that members of our academic community understand the University’s budget situation as we move into a new fiscal year and academic school year.
This is the sixth of a series of budget briefings I am providing via e-mail and postings on the University’s Web site at the following link: www2.moreheadstate.edu/budgetcrunch.
As you are aware, Gov. Steve Beshear called the General Assembly back to Frankfort in May to enact a biennial budget and that effort was successful. State government did not have to suspend normal operations on July 1. However, the 2010-12 state budget included a cut of 1.5 percent in our state appropriation and we did not receive funding for maintenance and operating (M&O) costs of new facilities. For MSU, the decision to not fund M&O equates to an additional budget reduction of $2.1 million as we will be forced to reallocate from the existing operating budget to cover these expenses. Also, each institution and its employees are now paying higher contribution rates to the KERS and KTRS retirement systems.
The Council on Postsecondary Education (CPE) approved a maximum raise in tuition for public regional universities of five percent but that increase, coupled with our loss of state general funds and maintenance and operating support, still left us with a budget gap of more than $2 million between projected income and expenses. We held some funds in reserve in anticipation of this year’s financial challenge but this year’s budget is the most delicately balanced in the five-plus years I have been your president.
I was disappointed that for a second year, we were unable to award across-the-board pay raises to our employees. However, I am grateful that with careful planning, we have been able to avoid employee layoffs unlike many who are struggling in today’s economy.
Since passage of the budget last spring, the state’s revenue picture has continued to worsen and most state agencies have been directed to make further cuts in their operating budgets for 2010-11. At this point, postsecondary institutions have been spared from this direct cut. However, we will likely experience indirect cuts in pass-thru funds managed by the Council on Postsecondary Education (CPE). Based on recent revenue forecasts, we also anticipate there will be calls for further cuts with no guarantees that postsecondary institutions will be exempt.
However, we are planning accordingly to work with each division early in the fall semester to identify a budget reduction reserve while we still have some flexibility with prioritizing our operating resources in the current fiscal year. To that end, I am implementing an immediate hiring freeze on all vacant positions. Exceptions to this freeze will be considered on a case-by-case basis with consideration given to the most critical needs and strategic merit of each request.
State government faces a tough budget year in 2010-11 but the outlook for the second year, 2011-12, is worse, according to the state budget office. The potential loss of federal stimulus funds from the state budget in that fiscal year could have a particularly harmful impact on higher education. For MSU, stimulus funds represent $1.5 million of our current year state appropriations. Absence of a major state budget restructure, we risk losing that funding from our appropriation base in 2011-12.
Lawmakers will return to Frankfort in January for the 2011 session. Not normally a budget year, the 2011 session will result in the 2010-12 biennial budget being reviewed and revamped. Legislators from each chamber agreed that the budget adopted in May was a temporary fix to keep state government operating and to buy time for the economy to improve and to produce growth in state revenue. That does not appear to be happening. Adding to the mix of uncertainty are the legislative and congressional elections scheduled this November.
Like other institutions, we are trying to look ahead in terms of developing a strategy to cope with even greater reductions while maintaining our strategic focus and working toward our strategic goals. We must continue to work to identify ways to further reduce costs, increase revenue through enrollment growth and reallocate existing budget resources to meet our most critical strategic needs.
If there is a silver lining in this budget cloud for MSU, it would be that this fiscal adversity has made better resource managers of everyone responsible for leading this institution which will benefit the University long past the current recession period. With your help, we will find even more creative ways to do more with less and continue to make progress on our path toward becoming the best public regional university in the South.
I will have more to say about our future in next week’s fall semester convocation in Button Auditorium. Meanwhile, I pledge to you that we will continue to be guided by our updated strategic plan and by our shared commitments to this institution and to each other as we carefully and deliberately chart our course through these uncertain fiscal times.