The global pandemic created financial challenges and several uncertainties for Michigan State University. As the end of September approaches, three important factors that impact our university budget are becoming clearer, so I want to take this opportunity to provide another update on our financial situation.
First, final enrollment numbers for the 2021-22 academic year: As you hopefully have already heard, we have one of our largest first-year classes this year, and a class that is diverse in many ways. Both elements are great news. However, last year, our fall incoming class was not as large, and that decline in enrollment impacts our budget for the next three to four years. We also have been down in international students over the past several years, and while we have made some improvements in this area, there is still more to do.
Second, the Michigan Legislature has finalized the higher education budget for the state fiscal year starting Oct. 1. Gov. Gretchen Whitmer is expected to sign the legislation this week. MSU is receiving a 1% increase in funding over last year, in addition to similar increases for our Extension and AgBioResearch programs. In addition, we will be receiving 3.9% of our FY 2021 funding as part of a federal requirement for Michigan to receive state stimulus funds. This state funding affirmation is an important development that provides overall stability to our university budget.
Third, our endowment earnings performance is strong, which is a trend across most of higher education. As I’ve mentioned before, endowment funds themselves are restricted and must be spent in the specific ways they were given, such as for scholarships or professorships. While the vast majority of the earnings in the endowment cannot be spent, we will have higher than anticipated payouts, which affords us some one-time funds in the current fiscal year.
Despite this good news, we continue to have budget challenges given the impacts of the coronavirus pandemic. We are grateful for several rounds of Higher Education Emergency Relief Funds (HEERF) from the federal government totaling $157.6 million, of which $70.9 million is in the form of emergency grants to students. The remaining funds can be used as institutional relief funds, which we have used to help recover from lost tuition revenue, COVID testing costs related to the Early Detection Program, hardware and training costs associated with online learning and modifications to ventilation systems in classroom buildings. These funds help reimburse the university for lost revenue due to the pandemic or increased expenses we would not otherwise have had.
Our eight non-academic staff unions have been in negotiations with the university. Those negotiations resulted in tentative agreements that include understandings about retirement contributions. Communications with those organizations will continue. It is, of course, important that we respect this collaborative process. Many of these groups have also faced furloughs and other sacrifices since the pandemic started, and those impacts have not gone unnoticed.
I appreciate the sacrifice many of you have been making to help the university continue its mission of providing a world-class education for our students. Last year, our faculty, academic staff and executive management took temporary pay reductions and received a decrease in their retirement contributions. Thankfully, we were able to stop the temporary salary reductions after one year. Further, we will be restoring the pre-pandemic university contribution to faculty, academic staff and executive management retirement contribution reductions, effective Jan. 1, 2022. These employees will return to a 10% contribution from the university if they are contributing at least 5% themselves.
With our university fiscal year that started July 1, units across campus are still operating under the second year of incremental 3% reductions. I know these cuts have not been easy. The pandemic has brought many physical, emotional and financial challenges. Please know I appreciate the contributions all of you are making, and I understand the challenges you are facing. I feel confident that we’ve made the right decisions to keep our core functions moving forward and protect the long-term viability of the university.
Samuel L. Stanley Jr., M.D. (he/him)