State aid lags behind the U’s funding hopes

A decade-long drop in financial backing shows no sign of reversal for the U.
October 20, 2010

University of Minnesota officials face a decade-long trend of decreasing state support as they prepare a $1.3 billion biennial funding request for the Minnesota Legislature.


State funding accounts for about one-fifth of the University’s budget, down 13 percent since 1997. The downward trend shows no sign of receding as the state addresses long-term structural problems in its budget model and a $6 billion deficit.


Two severe economic crises in the past decade have pinched budgets and accounted for some of the decrease in funding, but rising costs in areas like health care, criminal justice and K-12 education are also straining limited tax revenues.


Since 1997, the state budget has grown nearly 70 percent, but funding for the University has failed to keep up, increasing by only 20 percent.


Although state revenue is expected to grow over the next 25 years, it will not be enough to keep pace with expenditures without significant changes to the budget model, state economist Tom Stinson said.


As state support has waned, University officials are turning to other sources of revenue to fund programs and pay faculty. Private fundraising and cost reductions have offset losses, but the University has also turned to tuition hikes to balance the budget.


Tuition revenue makes up 25 percent of the University’s budget, nearly twice what it did in the late 1990s. Yearly tuition rates have increased from $4,158 in 1997 to $11,094 for in-state undergraduates.


The University has largely offset tuition hikes through new scholarships, but President Bob Bruininks said if the full budget request isn’t met students will face increased costs.


"There aren’t any easy solutions," Bruininks said. "We would need to raise tuition but we’re going to do everything possible to keep the tuition rate increase at a very moderate level."


And if the decline in funding continues, Bruininks said the University will have to combine or cut programs to make ends meet.


"We’re getting very, very close to the bone right now," he said. "It would be very short-sighted for our state to cut this University much more. I think it will seriously impair our ability to compete and ultimately cost the state resources and educated people."


Students, faculty feel cuts


For most of his tenure at the University, which started in 1976, epidemiology professor Russell Luepker said state funding was more reliable than it is now.


"I think things have changed significantly," said Luepker, who chairs the University Senate’s Finance and Planning Committee.


Funding cuts over the past decade have meant fewer staff, teaching assistants and faculty, Luepker said, but the University has largely been able to weather the cuts through reserve funds and budget cuts of its own.


But Luepker said the University may not be able to withstand much more.


Federal stimulus dollars helped fill some holes over the past two years, Luepker said, but as those funds run out and the state begins work on reducing its deficit, funding cuts will be felt more deeply throughout the University.


Spots are increasingly being left open as faculty retire, he said.


"The implication of that is classes get larger, your advising load becomes heavier," he said. "It’s a paradox because, as the students say, ‘You’re charging us more but we’re getting less,’ and that’s a serious problem."


Biochemistry senior Christopher Tastad said he was only vaguely aware of the rising cost of college and declining state support when he enrolled at the University in 2007.


Tastad, who directs the Minnesota Student Association’s program to train student lobbyists, said he’s become more familiar with the budgeting process and the role state funds play at the University.


Funding the University should be a shared responsibility, he said. While the state has an responsibility to fund higher education, Tastad said University officials need to present budgets that show funds are being used effectively to support teaching, research and students.


"What neither of them can escape is the fact that the University has an obligation to provide accessible secondary education to the residents of Minnesota," he said.


Tastad said increasing tuition costs place a strain on students, many of whom must work multiple jobs or constantly search for financial aid to make ends meet.


Although the cost hasn’t driven him to consider dropping out, Tastad said he has known students who were struggling with the issue and thinks it will become more common if tuition continues increasing.


"There should really be a focus on making sure tuition is low so that students aren’t bearing the burden of a budget deficit," he said.


Returns to the state


Whether the University’s budget request is met will largely depend on who voters elect to the Legislature and the Governor’s office Nov. 2.


"Basically it all boils down to the election," said Rep. Tom Rukavina, DFL-Virginia, the chairman of the House Higher Education Committee. "The students at the University and the employees and the people of Minnesota have to decide whether higher public education and public K-12 is worth investing in — because we haven’t been."


The University will be able to better control tuition hikes if the state is able to provide consistent funding, Bruininks said.


Bruininks emphasized the impact of research and an educated workforce on the state economy. The returns the University provides make it the state’s best investment, he said.


"If we fail to invest in the University of Minnesota, I think we are making a deliberate, conscious decision to compromise the state’s future," he said. "It will compromise quality, competitiveness and ultimately cost the state dearly in its attempt to compete in the global economy."


Rukavina said he thought the University’s current budget request was reasonable and agreed to the link between economic prosperity and support of higher education.


But even if the University has its full funding request granted this biennium — something Luepker said no one is counting on — the state must still confront long-term budget trends that will continue to undermine higher education, state economist Stinson said.


The biggest challenge facing the state is runaway public health care costs which, if unchecked, will continue to rise by 8.5 percent a year over the next 25 years. According to a 2008 study looking at long-term state budget trends, if health care costs continue to rise and no changes are made to current tax laws, there will be no funding increases for other areas of the budget.


"There’s no doubt that we’re going to have to do something," said Stinson, who is also a professor of applied economics at the University, "We’ve gotten to the point where we’ve largely exhausted the supply of smoke and mirrors that have been used to create budget balances in the last couple of years."

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