Budget-Reduction Options Presented

Three options designed to balance Northern’s budget were discussed at a campus forum this afternoon. Each would implement nearly $3.4 million in “low-impact” adjustments – a combination of reductions, cost-avoidance, reallocations and revenue-generating measures – spread over two fiscal years. Two would include a mid-year tuition increase. The proposed reductions for each division were presented by Fred Joyal (Academic Affairs, pictured), Gavin Leach (Finance and Planning) and Interim President Mike Roy.

Roy said in developing its proposals, the President’s Council assumed a 6 percent executive order for the current year and a 5 percent cut in state appropriation for fiscal year 2005. It also anticipated a 3 percent increase in enrollment next fall.

The President’s Council classified budget adjustments as having either a low or high impact on Northern’s ability to fulfill its mission statement and vision. Members also used as their guide an ASNMU budget litmus test for FY04. The test addresses the impact on scholarships/loans, learning environment and overall cost, as well as the number of students benefiting from current programs or services and the short- and long-term effects of any reductions.

The $3.4 million in low-impact adjustments would result in the loss of about 16 full-time equivalent (FTE) positions, some of which are vacant. These reductions are in addition to the previously approved Budget Alternatives Committee (BAC) recommendations for FY05.

The group also identified $2.3 million in potential high-impact adjustments, which would impact about 38 FTE positions. Roy did not cover these at the forum, saying they are not included in any of the options being forwarded to the Board of Trustees.

“In essence, a high-impact adjustment – based on discussions we had – would impact the university’s ability to offer classes and have courses available for students to take when they need to take them,” Roy said. “The President’s Council is not advocating that they be implemented because of concerns that, with previous reductions and continuing enrollment growth, they would jeopardize the university’s ability to accomplish its vision.”

Listed below is an overview of the three budget-balancing options, in no particular order. Each calls for implementing only the low-impact reductions.

Option 1 would generate additional revenue through a 5.2 percent mid-year tuition increase ($134 per semester) effective in January, and a 2.4 percent increase ($120 per semester) effective in fall 2005.

Option 2 includes a 3 percent mid-year tuition increase ($77 per semester) and a 4.6 percent increase ($235 per semester) for fall. It would also require the university to identify $415,480 one-time dollars to balance the FY04 budget on a cash-flow basis.

Option 3 calls for no mid-year tuition increase, but a 7.7 percent fall increase. It would also require the university to identify $977,000 in one-time dollars to balance the FY04 budget on a cash-flow basis.

Media reports have predicted the executive order impact on higher education will be a 6 percent cut in funding for the current year.

“A mid-year increase would give us more flexibility, especially with tuition-restraint talk coming out of Lansing,” Roy said. “But you do have the tradeoff. We were conscious of not trying to push it all into tuition. If we do 3 percent mid-year, our rank as second-lowest in the state would not change. At 5 percent, we would move above Central for the current year.”

Northern’s annual tuition and fees are the second-lowest among the state’s 15 public universities.

Two questions raised during the forum regarded affected employees. Roy said impacted positions that are currently filled would be eliminated effective July 1. He added that the Reduction in Force plan established for the previously approved BAC reductions will continue for employees whose positions are being eliminated through the proposed adjustments.

The three budget options, along with itemized details on the low- and high-impact reductions, are available at Budget Reduction Proposal. They will be presented to the NMU Board of Trustees for consideration at its meeting later this week. The budget is a topic of a board focus discussion at 2:15 p.m. Thursday, Dec. 11, in 602 Cohodas.