Budget outlook not good for higher education

Missouri’s institutions of higher education should prepare for bad news as a grim outlook for fiscal year 2011 comes into focus, according to officials in Jefferson City. In a memo from State Budget Director Linda Luebbering to state departments, Luebbering said general revenue collections are expected to decline by 1 percent in FY 2010 after the 2009 budget year saw a 6.9 percent decrease. The budget office projects a shortfall of more than $380 million in revenue collections compared to previous estimates. “We won’t have any money for increases,” Luebbering told The Chart in a phone interview this week. “We’re going to have to find reductions throughout state government in order to help pay for the foundation formula and health care.”Higher Education was largely spared in the FY 2010 state budget after Gov. Jay Nixon worked out a deal with university leaders to keep funding flat if institutions agreed not to raise tuition or academic fees. A similar flat funding agreement is the best-case scenario for FY 2011, according to Paul Wagner, the deputy commissioner of the State Department of Higher Education. “We’ve been telling them to brace for bad news, basically,” Wagner said. “There’s a little bit of protection provided by the stimulus package and the way that money has to be used, but for the most part looking at FY 2011 and at least a couple years down the road there just isn’t going to be much if any new money coming from the state and we’ve tried to get that message out so institutions can plan accordingly.”

Southern preparesfor belt tightening

University President Bruce Speck also believes flat funding will be the best-case scenario. “The upside is of course we wouldn’t get cut,” Speck said. “The downside is you’re talking about going two years without any increases so at the end of those two years you’re going to have to do something. You’ve acquired expenses over two years you’ve got to deal with. You can either take money out of your reserves or you’re going to have to somehow cut internally, and maybe it’s a combination of both of those.”Southern has increased its cash reserves, despite running a deficit budget. As of July 31, Southern’s cash reserves totaled $6.5 million, a $2.3 million increase from a year ago. “That was part of what we wanted to do so we do have reserves,” Speck said. “But the real issue is this: if you start taking your reserves down you don’t have your bank account there as a backup when something really happens.”The Coordinating Board for Higher Education last year requested that each university provide scenarios for cuts of 15, 20 and 25 percent in state appropriations. Southern has not been asked to provide such scenarios this year, but Speck said a 25 percent reduction could lead to program cuts.”I know when we went through that exercise last time, you’re talking at 25 percent you’ve lost your school of business and maybe your school of education,” Speck said. “They aren’t realistic figures in terms of what you can do, it would be draconian. You’d be cutting some major programs.”Last May we had a deficit budget the board passed which means we were already spending in deficit mode and the campus did a great job of retrieving about $1.3 million, but we still have a deficit this year so when you think about where you’re going to get it, the biggest budget you have here is personnel. What you start saying is where are you going to cut things and if you start cutting positions you’re also then cutting services and programs but if you say we’re going to cut programs you still have a problem with people because people run programs.”

Declining stimulus dollars add to budget problemBoth Wagner and Luebbering point to declining stimulus dollars as a big piece of the FY 2011 problem. A lot of that money designated for education was used in the current fiscal year, and it’s unclear how much will remain for the next budget.”It’s really too early to get into specific numbers, but there are a couple of really critical pieces,” Luebbering said. “One is that the federal budget stabilization and fiscal relief money will start to be phased out in FY 11, so some of that money we received in FY 10 from the federal government to help stabilize our budget will be going away. “The other issue really is when the recovery is going to happen,” she added, “when that will have an impact on improving employment statistics. Once that happens there is still going to be some lag time before we really see an impact on improving our revenue numbers so FY 11 is definitely at the moment looking very challenging.”Stimulus funds will almost certainly run dry before revenues increase in Missouri, and increasing health care costs create another headache for state officials. “The more cuts you do, the harder the next round of cuts become,” Luebbering said. “We’ve already done a lot of reductions and that exercise of trying to reduce spending becomes more difficult as you go on. The third piece of the puzzle is the continued pressure on increasing costs for health care and the state spends a large portion of its budget on health care so if the natural trend is upward spending on health care, it certainly means, absent any changes around there, we will need to spend more money on health care which will leave less money for everything else.”The downturn in the economy has actually boosted enrollment numbers at institutions across the state. Wagner called the timing unfortunate.”At a time when the economy is down a lot of people turn to higher education to learn new skills when they’ve been layed off and when you’ve got enrollment going up all across the state and the same time you’ve got funding held flat or reduced it’s a lot like laying off a bunch of doctors and nurses right when there’s going to be an epidemic. “We need more money for higher education, but I’m not sure that’s going to be possible.”