The Minnesota Daily on Friday formally appealed a $90,000 cut from its expected student fees allotment, the result of a disagreement over its reserve accounts.
In the final step of that appeal process, Daily representatives will speak Monday before Vice Provost for Student Affairs Jerry Rinehart as they seek to overturn the Student Service Fees Committee’s recommendation to cut nearly one-fifth of its $556,000 initial student fees request.
At issue is the newspaper’s use of its reserve holdings, an account of nearly $690,000, which it claims should be preserved in case of future financial crises.
Fees Committee Chairman Kenny Kapphahn said the newspaper hasn’t adequately justified the size or use of that account.
“You’re not using that $600,000 to get through the economic recession, you don’t have a list of projects you’re saving it for,” Kapphahn said. “Why, then, do you have a larger reserve?”
The student-run newspaper advocates a reserve model that blends industry and nonprofit standards. Daily Business Operations Officer Brandon Quittem said the group’s model justifies a reserve that could sustain the newspaper for six months.
Current levels could buoy the paper for fewer than three months during the academic year, he said.
Disagreement over the reserve stems from the committee’s view that less of the Daily’s revenue should be considered variable, or nonguaranteed. That model reduces the amount of income the newspaper should hold in reserve to protect itself from unexpected loss.
“It’s not our job to set these reserve levels or tell them when to use them,” fees committee member Blake Thomas said. “But in this case, this year, we’re trying to provide them with some sort of model for going forward in the future.”
The issue of its reserves has not historically stalled fees requests, Daily President Ashley Williams said.
“We’re trying to increase the disclosure to students who pay the fee,” Thomas, a Carlson School of Management graduate student, said. “I think it’s really important that students know and understand that reserve account, because it’s a huge chunk of the Daily.”
Student service fees for the coming academic year are projected to be close to the $348.41 students paid per semester this year. If the proposed cuts are approved, the fees would be reduced by roughly $1.50 per student, Kapphahn said.
Disagreement over the holdings arose in mid-March after the committee initially recommended that the newspaper receive $550,000, nearly its full fees request.
Two weeks later, the committee voted unanimously to reduce that allotment to $460,000 after further discussion and talks with Daily representatives.
The committee ruled that the newspaper could “tap into its reserves to meet the difference between its request and the actual funding.”
The fees committee is a board of eight voting student-members appointed by student government and Rinehart. It is responsible for determining the fees allotments for student groups.
Money for the allotments is levied through the student service fee paid each semester.
The committee’s recommendation for student fees allotments for fiscal year 2010-2011 totals more than $26 million.
Rinehart couldn’t speak to specifics of the Daily’s appeal, but he said the hearing is a critical step in the fees process.
“It’s one final effort to make sure that serious damage isn’t done,” he said.
If the Daily fails in its appeal, its board of directors, a group of industry professionals who advise the newspaper’s management, and incoming managers will determine whether it will account for the lost revenue by drawing down its reserves or by cutting expenses.
Faced with the $90,000 cut, Chuck Brown, vice president, treasurer and controller of the Star Tribune and a Daily board member, said he would support balancing the budget through cost-cutting measures as long as they don’t “sacrifice the brand.”
The Daily slashed more than $600,000, about 25 percent, from its operating budget last year in response to dramatic declines in advertising revenue.
Those savings came through pay cuts, combining positions and eliminating a Friday print edition, but the group did not tap its reserve.
Daily management said the majority of the proposed $90,000 cut would likely be balanced by cutting expenses rather than draining reserves.
“[That decision] shows that I don’t even think they really know what their reserve account is for,” Thomas said.
Daily Editor-In-Chief Holly Miller said that being forced to use reserve funding would nullify earlier cost-cutting measures.
“It seemed to me like we were almost being punished for not dipping into the reserve,” she said.
The committee has no mandate to reduce student fees, Kapphahn said. Its responsibility is to weigh fee requests’ value for students.
“What are you getting for your student fees?” he said. “That’s the question that always comes up.”
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