Beginning in 2012, tuition would have to increase by 9.8 percent each year for students on the University of Minnesota’s Twin Cities campus to close the gap left by a decrease in state funding.
But that is an unrealistic solution to an increasingly realistic funding problem, according to a report presented to the Board of Regents Oct. 8.
In the report, Richard Pfutzenreuter, University Chief Financial Officer, presented five strategies the University needs to adopt to survive the trend of decreased state funding to higher education.
Developed by a 22-member task force established by University President Bob Bruininks last spring, the strategies reflect the new truth that revenue brought in by tuition has surpassed state appropriations.
“The trend in state revenue is down. Tuition now exceeds state revenue. I think we’re going to be increasingly having to address our financial needs without substantial increases in state support,” Pfutzenreuter said.
This year, the state is contributing 21 percent of the University’s budget. Tuition represents 26 percent. The report contrasted this with rates from 1994 when state funding and tuition made up 32 percent and 15 percent, respectively.
If trends continue, according to the report, the University could experience a $50 million shortfall in 2012. But that figure is based on a simulated model, not fact, Pfutzenreuter said. The actual number could be higher or lower.
The University has to prepare for the trend to continue into 2012 and 2013. Ultimately, the level of severity lies in the hands of the state, he said.
Sen. Sandra Pappas, DFL-St. Paul, chairwoman of the Senate Higher Education committee, said the state is experiencing a “bad alignment” between meeting its obligations and keeping a balanced budget.
“I do feel like we’re letting the University down,” Pappas said. “We care about higher education, but we’re caught in a bind with a bad economy and a no-tax governor.”
Pfutzenreuter said the University will have to get creative in raking funds together because tuition is now the single most reliable source of revenue.
That would include soliciting more private donors and exploring options in online education and real estate development, according to the report.
At the same time, he said the University will have to maximize tuition while ensuring education remains affordable for students.
The answer is not to increase enrollment, since that would subsequently increase costs, Pfutzenreuter said.
Kristi Kremers, president of the Graduate and Professional Student Association, was included in the task force last spring. She said the report is a “wake up call” for anyone who was not already taking the University’s financial situation seriously.
Kremers said tuition’s role as a consistent source of revenue for the University is obvious. She hopes to have more student input as the issue moves forward to look out for rising costs. She said students need to include themselves in asking the state for more money.
Minnesota is one of many states dealing with a shift that puts financing state universities in the hands of the students. Ohio, however, is one choosing a different course of action.
Republican Sen. Bill Harris, Ohio Senate President, said the state’s general assembly realized the impact higher education can have on the economy and decided to increase funding to minimize tuition hikes.
In Ohio, about 9 percent to 11 percent of the state’s biennial budget goes toward higher education, Harris said. In Minnesota, Pfutzenreuter said, the University received about 3.9 percent of the state’s resources this year.
David Schulenburger, vice president of the Association of Public and Land Grant Universities, said, though citizens have grown accustomed to the state paying for education, it’s not guaranteed. Lawmakers have ground for concern when universities aren’t keeping their costs down. He added that states should be honest about their backward steps in funding and they should realize the effect it will have on tuition.
Rep. Bud Nornes, R-Fergus Falls, lead GOP in the House higher education committee, said students can always look at the Minnesota State Colleges and Universities (MnSCU) system if the University leaves their price range.
MnSCU spokeswoman Melinda Voss said the system has experienced a transformation similar to the University’s. This year, tuition makes up 54 percent of the MnSCU budget while the state is contributing the other 46 percent.
“I’m torn myself, between a land grant mission of educating all our students and the fact that the University needs to focus on high-ability students and on research and let MnSCU be the open-access university,” Pappas said.
Pappas said the University of Minnesota will have to divide its efforts because tuition cannot make up the difference on its own.
“There will be a push back,” she said.
The students who are qualified to attend the University but can’t get financial aid when they need it will be the ones most harmed when tuition increases, Pappas said.
“The reality is, tuition is going to go up,” she said.
Pfutzenreuter also said the University will have to look at its activities and determine which should have a higher priority and which should be dropped. A new steering committee will be established soon to pick up where the task force left off.