Budget problems hit several universities in the Big Ten
cuts to its workforce as it attempts to close a $140 million budget gap. Getty
In the past two months, four of the 14 universities currently in the Big Ten conference revealed they were facing significant budget shortfalls — exceeding $100 million at two institutions. The announcements came from Rutgers University, Pennsylvania State University, University of Minnesota and University of Nebraska.
Pennsylvania State University
Penn State University trustees have acknowledged that its general budget has a deficit of $140 million. In a memo sent to campus officials in February, President Neeli Bendapudi admitted that while the university was “not in a financial crisis”, it was “in a vulnerable state”.
She blamed several factors for the shortfall, including “significant inflation,” low state funding, tuition freezes, lower-than-expected enrollment and the continued fallout from the pandemic. Bendapudi previously implemented a “strategic hiring freeze” and introduced a revised budget model. And she acknowledged that some units “may need to reduce the number of employees, evaluate or delay the launch of programs, postpone purchases or improvements… and/or restructure the unit.”
This week, Spotlight PA reported on internal university documents it had obtained showing that the administration was asking university departments to identify the approximate number of employees they would be laying off this year. The university said central cuts to base department budgets would not exceed 4%, but added that units facing large historical deficits needed to make additional spending cuts to balance their budgets.
In a budget address to the university community in February, Rutgers University President Jonathan Holloway said the institution should take steps to eliminate a $125 million budget shortfall over the next three years.
“We need multi-year solutions and structural reforms. Although I am focused on the current budget, I will not endorse a plan that requires drastic cuts so that we can plug a budget hole in a single year,” Holloway said. He said he had ordered central administrative units to cut their budgets by 9.5% and that school units should also find ways to increase revenue and cut costs.
Holloway noted that all of the one-time Covid-19 relief funds Rutgers received from the federal and state governments had run out.
“These essential funds have minimized disruption during one of the most difficult times this institution and so many others have faced,” Holloway said. “And they left. We have deployed these funds wisely and cautiously…but we no longer have access to the one-time money that has filled what would otherwise have been gaps over our past two budget cycles.
Similar to messages from other presidents, Holloway pointed to inflation, declining enrollment, reduced transfers and steep increases in benefits as the main culprits. He issued this challenge: “(W)e have to do things smarter, better and more efficiently. A few cans and cans: We can’t afford the unaffordable luxury of duplication and inefficiency. We can no longer afford to have competing academic programs at different schools on the same campus. We cannot have fully duplicated administrative structures.
University of Minnesota
Officials at the University of Minnesota’s Twin Cities campus recently announced that tuition revenue is expected to be $17.3 million lower than they expected. The revelation came amid a biennial request for a $1.7 billion appropriation from the state, about $302 million more than its current allocation.
In a March 15 letter to lawmakers, the university system (with campuses in the Twin Cities, Morris, Rochester, Duluth and Crookston) said that as part of the requested increase, it needed $135 million to core mission support, $48 million to make up for the system-level tuition shortfall, and $40.5 million to enable it to freeze resident undergraduate student tuition.
University officials attributed the shortfall in tuition fees to several factors, including a decline in student retention and the number of students transferring to the university. Another factor was that more students were taking fewer credits overall as they tried to graduate sooner than in the past. According to the University of Minnesota, Twin Cities, if the state does not make the full increase, it would seek to increase tuition for undergraduate students in the state from 6.5% to 7.5%. .
University of Nebraska
The University of Nebraska-Lincoln reported in February that it faced a further $13 million shortfall in its current budget, largely caused by declining enrollment.
This variance follows a deficit of $10 million in the 2021-2022 fiscal year which also reflects declining enrollment. The university managed this shortfall by cutting expenses on a one-time basis and using part of its reserves to make up the difference, but the strategy did not eliminate the shortfall on a recurring basis, which reached more than $23 million. per year.
So far, it appears the university is using the same strategy as last year to cover the deficit – controlling spending and dipping into its reserve. This strategy is not sustainable. Sooner or later, unless the university imposes a very large tuition increase, its palliative measures will have to be replaced by budget cuts that solve the problem permanently.
The Big Ten institutions are among the best endowed public universities in the country. When institutions of this magnitude report fiscal problems of this magnitude, it is a worrying sign that the economic impact of the pandemic and related events is far from over.
As bad as the financial situation for higher education has become during the pandemic, it could have been much worse without the extra money the federal government has distributed to colleges and their students to mitigate the economic fallout. This aid came in three rounds of Higher Education Emergency Relief Fund (HEERF) grants, totaling approximately $77 billion – $14 billion in the Coronavirus Aid, Relief and Economic Security Act (CARES), $23 billion in the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA), and $40 billion in the US Rescue Plan (ARP).
While these HEERF relief funds have enabled most institutions to weather the worst of the financial storm of the pandemic, they have also given college leaders a false sense of security. They masked the loss of students and declining institutional revenue and allowed most colleges to carry on too much of business as usual – at least temporarily. The result? Many colleges have halted or completely avoided a structural reset of their budgets and a significant reduction in their current spending that will eventually have to occur. It’s a calculation, as these four Big Ten schools find out, yet to come.
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I am president emeritus of Missouri State University. After obtaining my BA at Wheaton College (Illinois), I obtained a Ph.D. in Clinical Psychology from the University of Illinois in 1973. I then joined the faculty at the University of Kentucky, where I rose through the faculty ranks and served as Director of the Clinical Psychology Program, Director of the psychology department, dean of the university school and provost. In 2005, I was named president of Missouri State University. After retiring from Missouri State in 2011, I became Senior Policy Advisor to Missouri Governor Jay Nixon. Recently, I wrote two books: Degrees and Pedigrees: The Education of America’s Top Executives (2017) and Coming to Grips With Higher Education (2018), both published by Rowman & Littlefield.
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