MSU Restructuring Program Highlights University Cost Control Efforts

MSU Restructuring Program Highlights University Cost Control Efforts

Gongwer News Service/September 4, 2009


A major announcement by Michigan State University President Lou Anna Simon of a restructuring program that could cut Michigan's largest university's budget by 10 percent over the next two years, along with refocusing its programs, is just the latest in an ongoing effort by the state's public colleges to help control costs, officials said.


In large part the specific effort at MSU and at all the universities is a reaction to what college officials call the "disinvestment of higher education" by state government over the past decade.   But it also reflects market-driven trends towards academic programs that offer more long-term job opportunities and the need to control costs such as energy and health insurance.


"Everybody is taking a multiple-year approach on controlling cost in their budgets," said Mike Boulus, executive director of the Presidents Council, State Universities of Michigan.   And pointing to a faculty strike underway at Oakland University, Mr. Boulus said cost control is one reason for the strike.


But given the focus the state has paid to the universities as a future driver of Michigan's economy, Mr. Boulus said all the universities in the state, public and private, have to look at "balancing costs and quality."


Terry Denbow, MSU vice president for university relations, said the "shaping the future" effort Ms. Simon announced has to be looked at as a "reshaping effort" instead of just a budget cutting effort, though clearly the university plans major cuts as part of its efforts.


Given the fact the state government has not increased funding for the universities over the last decade, Mr. Denbow said that this newest effort is just the latest in cutting costs.   Compared to universities in other states now being forced to make dramatic cuts, MSU, and to a certain extent all the universities in Michigan, have it easier because they are more used to controlling costs, he said.


Both Mr. Denbow and Mr. Boulus said Michigan schools want to avoid the crisis that has hit universities in California and Florida, where budget crises have forced the schools to put limits on enrollment.


"We don't want to do that," Mr. Boulus said.   "We want to keep them here, educate them here and hope they can get a job in this state."


In an email that went to everyone at MSU - students, faculty and staff - on Thursday and in specific communications to faculty and staff, Ms. Simon and other top MSU officials said the program will call for reducing its general fund projects by 4 percent during the 2009-10 academic year and then a further 6 percent reduction during the 2010-11 academic year.


Mr. Denbow would not be pinned down on a specific figure, but with MSU's general fund budget of $980 million (adopted by its trustees in July) that level of cuts could mean overall reductions of up to as much as $100 million.


All departments and colleges at MSU are to report back to the administration by September 30 on proposed cuts and changes they can make.


In her email, Ms. Simon said: "Two primary tenets will guide us.   First, we cannot simply cut back what we are doing today.   We must modify our activities in ways that create greater efficiency and effectiveness.   We must work differently, adapting our culture and our attitudes to build a new model for the way we achieve our goals.   Second, our fundamental goals and our measures of success will not change. 'Boldness by Design' will continue to be our guide, and we will continue to pursue those institutional measures that best assess our progress."


And she said: "Our sculpting will not come at the expense of our core values - quality, inclusion and connectivity.   Nor will it come at the expense of being among the best research universities in the world, one that is locally relevant and globally engaged."


Though outlined in a different, perhaps more formal setting than other universities, officials said every university is involved in controlling costs.


For example, Don Hazaert, interim chief of government relations at Eastern Michigan University, said the Ypsilanti-based school has frozen the salaries of all non-bargaining staff for this year.   It has eliminated hundreds of positions over the past several years, but the cost-controls have helped pay off in terms of EMU being able to keep its tuition increase for this year the lowest of all the schools.


Dave Reed, vice president for research at Michigan Technological University, said that since the executive order cuts of 2002 and 2003 the university has instituted a cost-avoidance posture. For example, the university last year offered a high-deductible health care plan that so far 30 percent of the staff has opted to take.   The school is also in the process of an overall academic review, trying to restructure and rationalize course offerings.   It has dropped some functions, such as providing its own cell phone service to students.   And it is centralizing its information technology processes so the university uses fewer servers, he said.


David Haynes, lobbyist for Northern Michigan University, said the Marquette school has in recent years eliminated three colleges and reduced the number of vice presidents from five to two.   It has also made major changes to health care insurance.


According to the University of Michigan's website, the Ann Arbor-based school has asked all units to cut costs and has commitments from those units to cut more than $15 million this academic year.   In addition, the university administration will realize another $10 million in cost savings by doing such things as waiting one year before contributing to a new employee's retirement plan and reducing its contribution to workers health insurance.


UM is also going to eliminate its television station and turn its fabled University Press into a digital-only operation to help meet that $10 million in cuts.


Officials at Oakland University said they have saved $31 million through eliminating positions, reducing program offerings, deferring maintenance.   But officials also said they have saved so much, through additional actions like wage freezes and holding down costs on health insurance, that they have to be careful not to affect program quality.


Jim Bachmeier, vice president for finance and administration at Grand Valley State University, said since the Allendale school is funded at a lower per student level than other universities, and has seen its per student funding fall in more than 20 years - from $3,100 per student to $2,900 - the university has spent less on many items than other schools.   For example, the university has far fewer support personnel on average than other universities, he said.


"I have fewer maintenance people per square foot," he said.   The university has fewer institutes than other schools, its faculty teach more than the average faculty at the state's other schools.


The university also controls costs through buying natural gas on blended prices through 36-month contracts.   That cuts both ways, Mr. Bachmeier admitted.   The university saves money when natural costs go up, but doesn't save when they go down.


But of cost controls overall, "We've been on this diet for quite a while and we're pretty good at it," he said.


And at Lake Superior State University at Sault Ste. Marie, the administration and faculty have created a shared-governance program that includes a committee to oversee budgetary issues.   Tom Pink, director of public relations for the school, said over the last several years employees began paying part of their health care coverage, and virtually every area of the university has been cut.


As the smallest public university in the state, "it's getting pretty difficult" to continue cutting, Mr. Pink said.


Mr. Boulus said the state's universities "don't wear our cuts on our sleeves."


But, "the cuts are there, you have to look inward where those thousands of cuts are taking place," and it means that every school has to look at every unit as a revenue center, he said.

Posted on Friday, September 04, 2009 (Archive on Wednesday, November 11, 2015)
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