Reflections on the Governor’s budget proposal

02-17-2011

Earlier today, Governor Rick Snyder released his proposed Fiscal 2012 budget. The governor’s budget reflects the tough economic times that have challenged Michigan in recent years and the need for the state to begin to address both its structural deficit and unfunded future liabilities.

Simply put, this proposal represents the most significant set of budgetary, tax, and regulatory changes in generations. Given the scope of changes, it will take time for us to work through all of the implications. Though the proposed cuts are painful, we appreciate that the governor has put forward a comprehensive proposal designed to offer a sustainable path for a prosperous Michigan.

I know that Governor Snyder is well aware of the key role Michigan’s universities play in this transformation and the unique role of Michigan State as a world-class research university active in all 83 counties of Michigan. We are committed to working with the governor, the legislature, and our partners around the state to overcome the near-term difficulties in order to reach a future that includes sustainable support for public universities, which help fuel innovation.

The governor’s budget proposes a 15 percent cut in state appropriations for public universities that keep tuition and fee increases below the combined five-year average of annual changes of tuition and fee rates of all public universities. Universities that do not hold tuition below this rate will experience cuts greater than 15 percent.

For MSU Extension and AgBioResearch, formerly Michigan Agricultural Experiment Station, the proposal combines funding into a single budget line with an overall reduction of 15 percent. The intent in combining these lines is to allow the university to be as strategic as possible in the way it manages reductions and investments. In addition to the challenges presented by the budget cuts, MSU Extension will be further affected by the proposed reductions and restructuring of revenue sharing payments to local governments since Extension relies heavily on local funding to support local programs and extension offices. We are committed to working closely with our many stakeholders to address the issues that surround the cuts to MSUE and AgBioResearch.

It is important to put this budget in context. First, this is another round of deep cuts to higher education funding that continues a 10-year trend of disinvestment by the state. If the Governor’s proposed level of reductions stands, we will have absorbed a 25 percent decrease in state appropriations over the last decade. It is also important to note that over that same time span, MSU has expanded the total number of students we serve by more than 7,000. The resulting per-student funding level is roughly equivalent to what MSU was spending in the 1970s.

Second, while these reductions are higher than the 13 percent reduction projected in the budget planning framework approved by the trustees in June, they are within the parameters of our long-term planning. And as an organization, we have already worked together to reduce spending and focus our priorities.

If you’ve followed our Shaping the Future initiative of the last year or two, you know that we’re well under way with a number of projects meant to focus on our core strengths, winnow out lower-priority functions, and streamline operations as much as possible without compromising our quality or our mission. We have been as transparent as possible, and you can view our progress by going to http://www.shapingthefuture.msu.edu.

We are already in the middle of implementing a 10 percent budget reduction. Our faculty and academic and support staff have agreed to forgo one cycle of raises, we have reduced healthcare costs and capped future increases to those costs at 5 percent a year, and we have eliminated post-retirement health care benefits for new employees. Yet we have also carefully and selectively invested in areas of strength.

Finally, as we consider the implications of this budget and work through the details, we will continue our commitment to keeping the world-class education we provide within reach of our students and those who will follow them. While raising tuition is a necessity given the current budget situation and rising university costs, we will hold those increases to the lowest levels possible while still maintaining the quality and value of an MSU degree.

We will also continue our commitment to institutional financial aid. The state has all but eliminated financial aid programs in recent years, resulting in a $19 million decrease in funds available to MSU students alone over the past three years. But we have aggressively increased our institutional aid by 58 percent over the past five years, resulting in financial aid increases exceeding tuition on an annual basis by an average of 7.5 percent per year.

This is just the beginning of the budget conversation. We will continue to closely monitor developments as the state works to finalize its budget. At the same time, we will undertake our usual extensive process of consultation and discussion before we recommend our two year budget to the board. I look forward to working with the university community and our stakeholders as we put together these guidelines. We will provide details on the budget website at http://www.budget.msu.edu as they become available.

Although we may have to tighten our belts a bit further, these reductions are within the parameters we anticipated. We have planned well and managed soundly, and we will continue to do so. We are resourceful and resilient. We are reliable partners and collaborators, and we stand ready to do our share as the state faces fiscal realities. But it is important for the leadership and citizens of Michigan to recognize the vital role public universities play in rebuilding Michigan and the unique role of Michigan State as a world-class research university. In the end, a sustainable future for our universities means a brighter future for Michigan as it moves forward in the 21st-century global economy.

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