Board of Regents convenes to discuss possible upcoming budgetary challenges

Story by Connor Jaschen, Editor-in-Chief

Murray State’s Board of Regents held a special Finance Committee meeting Tuesday to discuss the future of the university under the looming pension crisis and possible state budget cuts.

Several key pressure points have left the Board of Regents working quickly to shore up a budget that relies heavily on state appropriations – the future of which remains in the air until the upcoming legislative sessions.

This year, enrollment declined 4.6 percent, leaving an estimated $5.5 million shortfall in the budget. The state pension crisis, used to pay out retirement benefits to the faculty, will cost the university an estimated $4.8 million dollars if the system is left unchanged for the fiscal year.

These issues are compounded on top of a track record of the state legislature continually lowering funding for public universities.

Currently, the university pays $.47 for every dollar a faculty member pays, which the state also puts into. Under the current model, assuming no changes are made, the university will pay in $.84 cents on the dollar every employee has made.

Kentucky officials have already begun signaling significant funding cuts to higher education, as well, a process that will open up in the second week of January.

In September, Gov. Bevin asked most state agencies to provide new budgets, each with a 17 percent cut to account for a statewide shortfall of $200 million. Murray State President Bob Davies said he sees this as an omen of times to come.

“I would say we are anticipating a reduction,” Davies said. “How deep and how much would not be appropriate to estimate at this time.”

Faced with expected cuts and yet no real numbers to go off of, the Finance Committee of the Board of Regents set out to deal with possible cuts, ranging from 5 to 20 percent. At the lowest end of the spectrum, the university would expect to lose $2.2 million in state funding. At the highest, it would cost the university an estimated $8.7 million.

Worst case scenario – if no intervention is made with the pension crisis and the university did receive the 20 percent cut – then it could cost Murray State an estimated $13.5 million in state funding.

The state, though, isn’t the largest source of funding for the university.

“Obviously, we have to be cognizant of what’s going on in Frankfort,” Davies said. “But at the same time, our main revenue source is the students and their families.”

Davies said he worked with Jackie Dudley, vice president of finance and administrative services, on ways to make up for this expected loss of revenue without skyrocketing tuition – though tuition increases were discussed at the meeting.

Currently, the university is the third most affordable in the state: more expensive than Morehead and Kentucky State, but cheaper than Eastern Kentucky University. Murray State’s positioning was conscious, Davies said, and the possible tuition increases coincide with that mission.

The current undergrad in-state tuition is $4,410 per semester. A 1 percent increase in tuition would raise that rate to $4,454. A 2 percent increase would tie with EKU at $4,498. These two options, Davies said, are what the Board of Regents hopes to agree on, with a 3 percent increase on the wings in case of radical changes to state appropriations in the spring.

A 4 percent increase was also brought up, totaling $4,586 in in-state tuition.

These possible tuition increases come as EKU’s Board of Regents recently recommended no tuition increases for the upcoming year. Davies said this is because of the decreased ‘elasticity’ of higher tuition. In other words, the more a university charges, the more price becomes an issue.

The Board of Regents also discussed possible upticks in dining and housing costs, both modelling 1, 2 and 3 percent increases, respectively.

According to Davies’ calculations, though, a 1 percent tuition raise can be offset by higher recruitment. For every 80 to 100 students, the revenue from a tuition increase is made up for. How to reach an extra 100 students, though, is the sticking point.

“There’s a lot of pressure points on the enrollment side,” Davies said. “We are living where our traditional markets are.”

Performance-based funding is forcing more competition between universities. Many local communities are offering free two-year tuition to community colleges and, Davies said, price sensitivity for prospective students is at an all-time high.

The university has created several initiatives to overcome the recruitment shortfalls. Davies said Murray State ambassadors have made or planned to make 150 high schools just this semester.

Davies tackling of the budget crisis through recruitment doesn’t end there. The university has recently created the Dean’s scholarship as an automatic $1,500 a year for high school students with a 21 to 23 ACT and a 3.0 GPA – a market the ever-rising price of school weighs heavier on without scholarships, Davies said.

Mark Arant, vice president of academic affairs and provost, has been working on new programming for the university – specifically more online classes.

Arant spoke on the possibilities of moving digital to follow what he said was a trend across higher education and creating graduate classes on Murray State’s satellite campuses.

“Our challenge is going to be being sure we have the resources to get these programs off the ground,” Arant said.

Creating new programs for students comes with cutting old programs the university finds unprofitable. All programs will be returning their internal reviews to the Board of Regents in December.

Davies said if the board decides a program should be cut, it will be – but not without going through a ‘sunset plan’. A ‘sunset plan’ is a teach out plan, giving students the opportunity to finish their degree and faculty a period of promised income until the university cuts the programming.

Most sunset plans require a four-year period of continuation in order to accommodate both these students and faculty, making this option one for long-term savings rather than one that can save the university facing immediate threats to funding.

The university will also be sending out their refurbished RFP’s to determine the future of Health Services – a program the university hopes to outsource. The Board of Regents isn’t stopping at Health Services for possible outsourcing options, either, naming off housing and dining as two possible points of exchange between administration and a private firm.

This is being examined in the wake of a year filled with turnover for Dining Services, so far losing a head chef and a director. Currently, the university has hired a consultant as a short-term fix, albeit a more expensive one.

Outsourcing hopes to accomplish a few things, namely increased savings from the university, increased expertise for the program and increased satisfaction for the students.

Everything, however, is up in the air until university officials know exactly how much state funding Murray State will receive in the upcoming legislative session. The legislative process for the state budget – and more-than-likely the pension proposal – ends on April 9. The university hopes to make it’s final tuition recommendation by May 11.

Stephen A. Williams, chair of the Board of Regents, recommended the board continue to work proactively to face the vast possibility of cuts they are currently preparing for.

“There is no way to know where we will fall on that continuum of options,” Williams said. “But, we sure better have our homework done on those options.”