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UMaine System Trustees Fail to Patch Hole in Budget
05/19/2014 06:17 PM ET   Reported By: A.J. Higgins

Two years ago, the trustees closed a $43 million shortfall, followed by another one nearly as large this year. Now for the fiscal year that begins July 1st, the board faces a $36 million structural deficit in a trend that Vice Chancellor for Administration and Finance Rebecca Wyke says must end.

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They relied on a patchwork fix of deep cuts, layoffs and savings, but the trustees for the University of Maine System were still unable to develop a plan that will completely close a $36 million-dollar structural gap in next year's $529 million operating budget. Instead, the board voted to use one-time money from reserve accounts to buy the administration a little more time to develop a budget fix that addresses declining enrollments and higher operating costs at the system's seven university campuses.

Two years ago, the trustees closed a $43 million shortfall, followed by another one nearly as large this year. Now for the fiscal year that begins July 1st, the board faces a $36 million structural deficit in a trend that Vice Chancellor for Administration and Finance Rebecca Wyke says must end.

"This level of deficit spending isn't sustainable and it is evidence that the current operating model is not serving us well," Wyke said.

In attempting to craft a balanced budget, Chancellor James Page says the elimination of 160 jobs and program cuts yielded nearly $23 million in savings. The system turned to its $15 million Rainy Day Fund for a $10 million withdrawal that will buy the decision makers a little more time.

"The money that's taken out with those reserves is one-time money so it does not address the structural part of that full amount, so in effect what the presidents, the staffs, we all decided, was that in some instances, the full $36 million was a bridge too far for one year," Page said.

Faced with flat state funding and declining enrollments, the trustees are also confronting rising operational costs and the need to make infrastructure improvements. Still, university officials resisted the temptation to raise tuition, which has remained unchanged for the last three years. Samuel Collins is the chair of the University of Maine System trustees.

"In talking with the Legislature, they're very concerned about the affordability of education for Mainers and right now, Mainers are spending about 18 percent of their median income toward education and we want to make sure that it's affordable for Maine kids," Collins said.

But Collins and other board members say that even as they attempt keep college costs within reach of Maine high school graduates, the number of prospective students is still too small. Fifty percent of Maine's high school grads do not go on to postsecondary programs and the numbers of students in Maine's high schools are declining each year. Chancellor Page says that means Maine will have to become more competitive in attracting out-of-state students who pay significantly higher tuition rates.

"Now one of the challenges is that every state in New England has a declining high school demographic so the competition for students is quite fierce, not only amongst the publics, but onlines and privates and all the rest," Page said. "Each of the campuses is charged with looking at their enrollment management questions and several of them have quite aggressive strategies, but it's not a one size fits all for what may be the case in southern Maine versus Presque Isle versus another campus."

Despite those funding challenges, there are some who would like trustees to reconsider some aspects of its asset strategy. Meaghan LaSala says it's time for the system to divest its endowment from the fossil fuel industry.

"We understand the concerns associated with divestment: Will it be costly, will it put our endowment at risk?" LaSala. "The truth is that not divesting our endowment is costly and risky. The fossil fuel industry has in its proven reserves five times more carbon than we can afford to emit in the atmosphere."

And UMaine Mechanical Engineering Professor Mick Peterson told the trustees that while 31 percent of the system's budget is dedicated to instructional costs, the figure does not reflect the true value of those services. Peterson says he's tired of hearing that the university spends too much on faculty.

"Are we going to be the lowest percentage of our budget spent on instruction of any of our peers or aspirational peers? The differences are stark," Peterson said. "When we start looking at our similar peers -- and certainly our aspirational peers -- they're spending 40 percent on instruction, we're spending 30 percent -- that's a big difference."

Chancellor James Page says the next two years are likely to present equally serious budget challenges that will require new approaches to delivering a quality education at all seven of the system's campuses.



 

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