Budget recommendations for "a year that's more difficult than normal," as Murray State University Regent Dan Kemp described it, was presented in summary form during a special meeting of the Board’s Finance Committee on Tuesday. Kemp chairs the committee that brought forth, for discussion purposes, budget proposals for the next fiscal year. Recommendations won't be officially adopted until board approval at the June meeting.
President Bob Davies reiterated the 'privatized' concept and other budgetary pressures he presented at a university town hall last month. Tuition and fees will be a 'driving force' for the university moving forward, he said, as state appropriation both declines and contributes further toward pension costs.
Vice President of Finance and Administrative Services Jackie Dudley outlined proposed budget recommendations for the Board to consider. Under budget scenarios presented, one option meets the $10.1 million shortfall and another comes just shy of meeting that amount. The differences are explained below.
The tuition model will be built on a 3% tuition rate increase for undergraduates, as announced in the recent town hall, should the Board and the Council on Postsecondary Education approve the rate. Graduate tuition will be 'reset' to be more 'market driven.'
The budget summaries presented differ in that one includes a KERS rate increase of 84.1% and the other does not. Dudley said it was determined by Governor Matt Bevin that he would approve postponing the rate increase to FY 20. Davies said the savings from the delay are added back as a 'contingency expense.' The KERS rate of 49.47% will remain the same for this fiscal year. Some $3.67 million is based on pension costs going to 84% for current workforce (less after proposed eliminations - had previously projected $4.7 million). Some cost avoidance factors have been built-in for custodial and grounds should it be outsourced later in the fiscal year.
One scenario shows enrollment growth of 175 undergraduate students and 119 graduate students. The other scenario shows that growth removed. The freshman class goal is 1,600.
The university is projecting a loss in revenue of $3.3 million to the proposed graduate/doctoral rate model. The offset to this would need to come from enrollment growth, Dudley said. Also, expenditures have been reduced to help offset this, she said. Approximately $1.7 million will be repurposed in the general fund to cover the change in the graduate tuition rate model.
The recently passed state budget contains a 6.25% reduction in higher ed appropriation, which amounts to $2.8 million to Murray State. The university also gained $3.2 million for the Breathitt Veterinary Center (which had initially received a $1.2 million reduction). Board members and Davies credited efforts from university leaders and the support of local lawmakers for getting the BVC funding restored. The total appropriation as listed in the state budget is a decline of $787,600.
Murray State did not fully meet the performance funding goals in FY18, cutting appropriation by $61,900. The notification of this came in after last year's budget, Dudley said, so this amount is being recognized in the proposed budget. Davies explained that this was the first year of the implementation of performance funding. Some schools had been over-funded and others under-funded and attributed the first year to being an 'equalization' year, he said.
Dudley said the performance pool of $31 million was increased this year 'significantly' because of the 6.25% reduction. Much of Murray State's reduction went into the performance funding pool, Dudley said. She said the university is estimating an appropriation increase of $470k.
The total expenditure increase depending on the scenario would be $3 million if KERS is included or $500 thousand if KERS is not included. Leaving a total net change of $10.1 in one scenario or $10.4 in another. This is a starting point for the rest of the budget, Dudley said. This number was brought up in the recent town hall, along with slides that depict aspects of the BOR presentation.
The proposed university budget includes the elimination of the optional retirement administrative fee of 5.1% totaling around $1 million in the budget.
Not included are any increases for calendar year 2019 employer healthcare contributions. Also not included are increases in deferred maintenance. There is no cost-of-living increase in the budget.
Not included in the numbers are 3% rate increases in housing and dining.
There is no funding for an on-campus health service clinic ($430 thousand). Dudley said the university is still trying to identify options. Any service possibly brought to campus will be fee-based and insurance style.
Funding for the residential college system would be reduced by about $240 thousand.
Parking permits would increase across the board from $100 to $200. Outsourced employees would also have to pay for the parking pass. The stadium would be considered an 'economy lot,' Dudley said, with a $100 rate. She said freshmen (previously required to park at the stadium) would have the option of purchasing a 'premium' parking permit.
The university is also looking to withdraw from the state worker's comp insurance plan. Dudley said Human Resources is working to identify private coverage that would bring ongoing savings.
The rental fleet is in the process of being outsourced and this will be in place by July 1. Savings would come from outsourcing the rental fleet (of about 40 vehicles) and from the outsourcing of maintenance on the operational fleet (university vans, dining vehicles, post office vehicles, etc.) Approximately $240 thousand would come back and an additional $140-$150 thousand that departments would collectively save by using a third party to rent vehicles.
Other outsourcing options are being considered, including dining and custodial and grounds. About $678 is in the budget as a contingency for the expected outsourcing of these two functions. Postal services are also being reviewed.
If all of the outsourcing options were to 'materialize,' then the university would transfer about 145 positions off the university payroll, not including custodial and grounds.
The number of FTE positions removed total 43.5. To date, 11 of those were filled positions.
Departmental unit reductions total nearly $6.9 million. Davies said these are not across-the-board cuts, but were made with careful consideration by each department.
The proposal also includes a $10 per-credit-hour increase in the undergraduate online fee for web courses. With the change in the graduate rate model, the university is proposing a $100 per-credit-hour web fee for online graduate courses. Grad students would no longer have a 30% premium for web courses and rather pay the proposed per-credit-hour rate, which Dudley said would amount to a $28 per-credit-hour savings for the student.
For employees, the sick bank would be capped at 20 days (current cap is 100 days). Bicycle and computer loans would be eliminated (relieving administrative overhead). Employees who work more than 20 years currently receive a free parking permit - the proposal is to provide that instead at half the cost instead of free (meaning they would pay $100 next year rather than $200). This would generate about $18-20 thousand. There was some desire expressed by board members and president Davies to remove this from the budget.
Employee tuition waivers (six courses per year) used by employees, spouses, retirees and part-time employees would be limited to full-time employees. Dudley said about $42 thousand is the savings from this recommendation.
The state budget eliminated the Kentucky State Employee Waiver program that allowed employees of other public universities to attend another public university at no cost. This is a separate state program that had previously been mandated by the state. Dudley explained this reduces revenues $627 thousand, but the university is reducing waivers by more so this would result in a gain of $250 thousand.
In discounts, the university didn't spend all of the discount money budgeted last year due to a decrease in students. There are also some savings from employee overtime that had been budgeted.
The Deans Scholarship is estimated to cost $1.5 million. Some $4.5 million in scholarships are incorporated to fund the third year of the new tuition model. A number of waivers have been eliminated - $2.8 million in graduate waivers (due to the single rate for graduate tuition).
The Murray State Promise is being expanded. Davies said this is an expansion of the 18-county Racer Promise. The expansion is part of an effort to recruit underrepresented students and low-income students. This would cover tuition only and start in Fall 18. This is for incoming freshmen who meet certain requirements.
The physical presence at the Henderson campus will be reduced, however, Provost Mark Arant said they are looking into collaborating to 'enhance' educational offerings in the region "in new ways."
Other recommendations involve details on academic program suspensions and reductions, tuition rates, course fees, parking, housing and dining fees.
There was some discussion over raising course fees. Some of this discussion considered the transparency of such fees. One factor discussed was that such fees flow back into the departments rather than general funds. This discussion will likely continue at the May 11 board meeting when tuition and fees will be approved.
Dudley admitted that the data presented was a lot, but was only a summary of the 700-plus page budget book.
"For every area we do not want to cut, we will have to find another area to cut. For every area we want to invest in, we will have to find an area we want to cut or move around," Davies said. "This is a plan that has an emphasis on where we can do the best we can given our resources and continue to move our institution forward."
Regent Chair Stephen Williams said "not kicking the can down the road" is a reality to keep in mind "because there's no indication that there's going to be any uptick in state revenues coming to the public universities." It's not an issue of holding out for better days, he said, relative to more state appropriations.
"This is a very difficult budget," Davies said. "It's tight."
The Board meets again on May 11 to approve tuition and fees increases. The Board meets again on June 8 to approve the budget.
Later in the special meeting, the Board approved design changes to JH Richmond Hall.
Watch the meeting here: