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March 4, 2010 Volume 31, No. 22

The budget picture for Mizzou? Bleak with a few bright spots

Cost-cutting tools

MU faces looming budget deficit next year

As the General Assembly puts together a state budget for next fiscal year, Missouri’s public colleges and universities face a funding picture that would have been almost unthinkable a decade ago — a best case scenario in which their appropriations are cut by 5 percent and in-state, undergraduate tuition is frozen at current levels.

For Mizzou, that would mean a $10 million reduction in the current state appropriation of $189 million.

And, if that’s the cheeriest budget prospect, the picture gets worse very fast. Gov. Jay Nixon struck a bargain with public colleges last fall in which he promised to cut no more than 5.2 percent from higher education for fiscal year 2010-11 in exchange for the tuition freeze.

But, as Missouri tax revenues continue to plunge, it becomes questionable whether lawmakers in Jefferson City will be able to scrape together the money to meet that goal. Legislators will have to approve Nixon’s proposal for the 2011 state budget, which begins July 1, 2010.

Given the grim economic picture, that has become an even more daunting task than usual. State budget director Linda Luebbering announced last week that tax revenues fell even more in February than they did in January. Gov. Nixon’s budget plan relies on an additional $300 million in federal stimulus money, but that money was not included in a jobs bill that Congress passed recently.

The litany of bad economic news makes it even harder for Mizzou administrators to plan for the 2011 budget. MU budget director Tim Rooney discussed some of those challenges when he briefed the Staff Advisory Council Feb. 25 and updated members on some possible funding scenarios.

Rooney cautioned that the situation could change almost daily before the legislature adjourns in mid-May.

Although MU is faced with a $10 million cut next year in state funding, there are a few bright spots. For instance, because of student enrollment growth and a number of cost-saving measures, MU has built up a $9 million fund that can be used next year to partially offset the state cut. At the same time, though, the campus will be facing inflationary increases in such fixed costs utilities, program compliance, and providing employee benefits.

“We will still be facing a budget deficit on campus that we will have to address,” Rooney says. As MU’s budget office models different scenarios for next year, the current estimate is that the campus will face an $8 million deficit for 2011. That estimate assumes that tuition will not increase, that state funding will drop by nearly $10 million, and that MU will apply its $9 million reserve fund to help plug the budget shortfall.

If that deficit would be addressed through across-the-board budget cuts, it would translate into a 2 percent reduction for campus departments next year, Rooney said. He pointed to a few bright spots in Mizzou’s financial picture.

For one thing, MU has not faced the double-digit cuts in state funding that has forced universities in other states to resort to employee furloughs and massive layoffs. “We’re in better shape than in many places,” Rooney said.

Another positive development is that the campus has dealt with budget woes by using fiscal responsibility and good planning, he said. For instance, in late 2008, Chancellor Brady Deaton called on all MU departments to cut back on non-salary expenses such as travel, entertainment, office supplies and other areas.

In the full calendar year since Deaton announced that cost-savings initiative, campus units have voluntarily achieved substantial savings. “This campus really answered the bell,” Rooney said. “Our non-salary expenses, just in the general operating fund, are nearly $20 million less than in calendar year 2008.

“Those savings remained in the units where they occurred, which provides them the flexibility to help meet the budget cuts we’re likely to experience,” he said. “We have employed basically all the tools we can employ to keep costs down and still provide the academic quality our students and their families expect from a major research university.”