A financially stable University will head into murky fiscal waters if the state cannot come through with promised funding.
Due to the state’s budget crisis, the University must consider cutting programs or raising tuition because of an expected decrease in funding, said Regent Michael O’Keefe.
The University Board of Regents Finance and Operations Committee met Thursday to discuss Minnesota’s economy and the University’s annual financial report.
Regent Lakeesha Ransom called the state economic report “somber.”
“The state’s not going to bounce back immediately,” she said. “(The Board of Regents) need to plan strategically.”
The state’s estimated $2 billion budget deficit, coupled with a nationwide recession, will mean the state needs to make budget cuts.
“Students need to be proactive and talk to their legislators,” Ransom said. “It’s easy to get mad at administration, but a lot of times their hands are tied.”
The state’s Office of Finance has asked the University and other state-supported institutions to project 5 percent to 10 percent cuts, said Richard Pfutzenreuter, vice president for the Office of Budget and Finance. At the University, the percentage cuts will translate to $65 million and $130 million, respectively.
The University knows it will experience some reductions, but administrators won’t know how bad the cuts will be until mid-January, Pfutzenreuter said. “You don’t want to overreact yet.”
The University might have to tap into its reserves, abandon some of its investments or look at job layoffs to replace the decrease in state funding, Pfutzenreuter said.
While the state economy is suffering, the University’s annual finance report shows a healthy institution, according to the report issued by the University Office of Budget and Finance.
“Our financial condition is very strong,” O’Keefe said. “We’re very strong in borrowing capacity.”
Moody’s Investors Services, Inc., ranked the University’s bond rating in its second-highest category, based on the University’s management, debt burden, operating performance, student demand and state support.
According to the report, the University’s total assets decreased by $19 million – less than 1 percent – from last year. The poor market performance of University investments and the funding of capital projects account for the decrease in total assets.
Regent Bryan Neel said although a large amount of the University’s investments were in equities, which have fluctuated since Sept. 11, he thinks they will perform better in the long term.
The University also gained $24 million in revenue based on increases in student tuition and fees. The regents voted in June to increase tuition 13.8 percent for 2001-02 and 13.2 percent for 2002-03.