Eastern Michigan University President Susan Martin and Chief Financial Officer John Lumm delivered a brief budget update Thursday morning in the Student Center Auditorium, which was followed by a presentation from Charles Ballard, a professor of economics at Michigan State University.
This was the seventh in a series of campus budget discussions President Martin has held since the summer of 2009.
Lumm looked at the three primary University budgets — the general fund, auxiliary activities fund, and the capital expenditures.
For the general fund, $280.9 million is budgeted for it in 2011. For the auxiliary activities fund, $38.6 million was budgeted, and $67.6 million was budgeted for capital expenditures.
Lumm said the University is projecting a 2.4 increase in student credit hours for fiscal year 2011 and it has had a 6.8-percent growth — 35,000 credit hours — over the last two years.
“That’s after five consecutive years of declining,” Lumm said.
While the auxiliary fund and capital expenditures are on track, the general fund is a “challenge,” according to Lumm.
The challenge resulted from revenue growth being less than the budget and higher than anticipated expenditures in the first half of the year.
Lumm said through January, the expenditures were trending about $2.5 million over the budget for the year.
The University is in the process of identifying savings plans and implementing them. It is expected that these plans will bring costs in line with the budget for the year.
The plans include University-wide savings with all divisions committed and participating and continuing to closely monitor budget performance, Lumm said.
Lumm said he expects the challenges for fiscal year 2012 will be “much more severe.” Eastern’s current-year state appropriations total $76 million, but Governor Snyder’s proposal for fiscal year 2012 would reduce EMU’s base funding by $14.7 million — 19.3 percent — to $61.3 million.
However, if EMU keeps its expected tuition increase below 7.1 percent, it will qualify for a tuition incentive grant, which would add $3.3 million back to the amount the University would receive from the state.
Lumm said if you assume EMU receives the grant, the net funding reduction would decrease to $11.4 million or 15 percent.
That amount is equivalent to 4.1 percent of Eastern’s total general fund operating budget, Lumm said.
Lumm said with the state funding reduction, budget deficit carryover from the 2011 fiscal year and with the scheduled pay and normal operating increases in mind, EMU is facing a shortfall of $10 million – $12 million. Cost avoidance, cost savings or new revenue is required to balance 2012’s operating budget, Lumm said.
“We knew this was coming,” he said. “We’ve been working on this on several levels. There was a retreat Feb. 14 where we began talking about this.”
At that retreat, the University Budget Council input was presented to the Board of Regents. The next retreat is scheduled for either April 13 or 14.
“Ultimately, we expect the Board will act on the budget June 21,” Lumm said.
He said more than two thirds of Eastern’s costs are personnel.
“We have some difficult discussions and decisions to make over the next 60 days,” Lumm said.
He said the approach to fixing budget issues will be a meticulous one.
Building on positive momentum will be key, Lumm said.
“We are in a positive trajectory,” he said. “We want to make sure we don’t jeopardize that.”
Lumm said reassessing all the university does and how it does it, is something that needs to take place in order to figure out how to optimize how services are delivered.
“The support divisions are working inside to identify a significant level of savings,” he said. “Provost Kay is working with the campus community… We are looking at potential revenue enhancements. These are principles and approaches we’re taking. It will be difficult, but we’ll get through it.”
Before introducing Ballard, President Martin said while in Lansing, she objected “very strongly to the deep cuts,” and she doesn’t see state appropriations being returned to the old amount any time soon.
“I’ll be long retired before we get back to $76 million,” Martin said. “We expected a cut, but not 20 percent.”
Ballard’s presentation, Michigan’s Economy: Past, Present and Future, examined the Michigan economy as a whole and looked at the changes that have occurred over the years.
In addition to being a professor at MSU, Ballard also serves as the Director of the State of the State Survey in MSU’s Institute for Public Policy and Social Research.
Ballard has ties to the Ypsilanti area because his grandparents and aunt lived here. The state as a whole benefits by EMU doing well, according to him.
“What’s good for Eastern Michigan University is good for the state,” he said.
Ballard said the state has undergone major changes over the years.
“In the middle of the 20th century, Michigan was amazingly successful,” he said.
However, in recent years that success has changed.
“We have a very long-term and large shrinkage of manufacturing,” Ballard said. “We’ve been scrambling for decades.”
Between June 2000 and 2010, 858,800 jobs — or 18.3 percent — were lost in the state, Ballard pointed out.
“That’s huge in a state that has a labor force of about 4 million,” he said. “Of course it was not uniformly spread. Almost half of the manufacturing jobs accounted for that. If you’re looking for a silver lining, it’s a pretty deep cloud.”
Even so, Ballard said it’s not all bad. In January 2011, Michigan added 39,700 jobs.
“That’s the biggest one-month increase since 1998,” he said. “That’s the best since August of 1998. I don’t predict we’ll get that type of job growth month after month though.”
Ballard said despite what national press and media say, Michigan is an affluent place to live.
“The national press can think what it wants of us, but we’ve got a lot of assets and even after a tough decade, it’s not a bad place to be,” he said.
Ballard said Michigan needs to capture the same type of economic growth that occurred in the 1950s.
“That was just the kind of growth I like,” he said. “The rich were getting richer and the poor were getting richer. So don’t tell me we’re so poor that we can’t educate our children.”
The fact that there are indeed poor people in Michigan cannot be denied, Ballard said.
“I just said we’re not poor, I’m not saying there aren’t any poor people in Michigan,” he said.
In order for the state to prosper, education must be the top priority for the state, Ballard said.
“The states at the top all have a much more highly educated population,” he said.
Massachusetts has the most educated population in the country, he said.
“The biggest payoff you can find is investing early,” Ballard said. “I just don’t see how we can do it without money. Nobody in Michigan can say we’re serious about education as long as we don’t fund early childhood.”
