Addressing the Deficit
CMU administrators announce more serious budget concerns with layoffs, base-budget cuts planned
Central Michigan University administrators announced this week the 2017-18 fiscal year is likely to produce a $6 million budget deficit. That is in addition to the $14 million deficit the university is grappling with this fiscal year. This is according to a press release issued Tuesday.
That means cuts to programs, project delays and employee layoffs. President George Ross, his cabinet and the university's financial team are reviewing plans submitted by senior leaders — a group that includes department directors and deans — across campus to address next year's budget woes.
Below is an estimated timeline for restructuring the budget, according to the release:
March 1 — Reduction plans due to division leaders (vice presidents, president)
March/April — Financial planning and budgets, vice presidents, president review plan scenarios, update budget projections again for this year and next, finalize university wide plan, work with Human Resources
Late April — Senior leaders brief teams on respective college/department and unit plans
Early May — Layoff notice process begins
May – June — Bumping process for staff unionized positions occurs
June 29 — Board of Trustees approves fiscal year 2017-18 operating budget
June 30 — Layoffs become effective
July 1 — Fiscal year 2017-18 begins
“Budget reductions are grueling,” Ross said in a university press release. “A deficit this large is certain to include layoffs, and each of the 60-some members of our senior leadership team feels the pressure of what that means to our campus community.”
Now, university departments and union leaders are working to figure out which employees and services will be affected.
“There’s a level of frustration here,” said Jamie Cotter, a member of the office professional staff and the president of the group’s UAW Local #6888 worker’s union. “Could we have foreseen this? Could we have planned ahead? My members are worried and I’m worried about whether their positions will be cut. There’s a real level of anxiety (here).”
CMU’s overall operating budget is more than $492 million. Two funds make up the total operating budget, the general fund and non-general fund. The current recurring base expenditure budget, or university general fund, is less than $396 million. Joe Garrison, director of Financial Planning and Budgets, said the budget shortfall is in the general fund.
Barrie Wilkes, vice president for Finance and Administrative Services, said in the press release that base-budget cuts are coming in order to help fix that deficit.
"We've reached the point where we cannot scramble each year to make up the difference," Wilkes said.
Base-budget cuts are defined as recurring costs or anything that is expected to occur every year, Garrison said. Those recurring costs include salaries, benefits, supplies and equipment. When revenues don’t match the expenditure base, that is when the university projects a fiscal shortfall.
“We need to make sure we’re either generating enough revenue to cover those base expenditures or we need to actually respond accordingly and make some base-budget cuts so that our future revenue will be enough to cover our future current expenditures after those cuts,” Garrison said.
The university’s press release states the layoff notice process will begin in early May. The Board of Trustees will approve 2017-18’s fiscal year budget at its June meeting.
The release states $9.2 million in the service centers and $4.8 million in individual colleges will be covered in part by one-time funds.
Garrison said there are four areas where one-time funds can come from: vacant positions/savings, delaying expenditures, salary savings and base-budget cuts.
Vacancies include unfilled positions or holding fewer course selections, Garrison said. Delayed expenditure savings could come from savings on equipment expenses. Strategic reserves are funds that roll over from year-to-year to be used for a one-time purpose.
“With the budget model, the college keeps a certain portion of revenue to cover their expenses,” Garrison said. “They work internally to manage their own colleges. For the service centers, all of those funds were dispersed out. We’re actually going to pull back in the entire amount of those one-time cuts. We will realize that full amount ($9.2 million) in the service centers.”
The road ahead
Provost Michael Gealt said looking at priorities for student success will be a priority in the budget planning process.
"We've worked to identify and protect what's essential for student success and programs that fuel growth, achieve national recognition or bring in external funding," Gealt said in the release. "This is about proactively shaping CMU's future in response to population changes and career growth areas."
Wilkes and his team plan to refine the current budget projection, which will include emerging factors like changes in enrollment numbers and state appropriations.
Ross said student recruitment efforts, scholarships and financial aid would be excluded from the reductions. The exclusion also includes debt service — or obligation payments toward borrowed funds from previous capital projects — and utility budgets.
Construction projects for the summer, which includes renovation and space maximization efforts in Ronan, Warriner, Brooks and Foust halls and on the fourth floor of the Charles V. Park Library, have been put on hold. Campus identity and signage work is also on hold.
At the CMU Board of Trustees formal meeting last month, Ross announced the budget shortfall was estimated at $14 million, which was an increase from the estimated $10.6 million announced during the fall 2016 semester. The budget deficit was initially projected at $9.8 million.
While the number has grown larger than expected, university officials were aware of potential fluctuations and the difficult financial challenge ahead. Wilkes and others held a budget forum in October to discuss university’s situation, saying even then that final numbers were yet to be calculated.
Before last month’s Board of Trustees meeting, CMU sold its Flint public broadcasting station through an FCC auction for $14 million. Garrison said CMU may not see that money until the auction is over, which could be years.
In his testimony to the Michigan House Appropriations Committee earlier this month, Ross said layoffs are likely and the university was in the midst of course-correcting. He urged the committee to increase higher education funding for students.
Campus departments are planning to make budget cuts for the 2017-18 fiscal year. Ian Davison, dean of the College of Science and Engineering, said last month the college will offer fewer course selections to counteract the deficit as opposed to making cuts within the department.