Minn. colleges unlikely to use reserve funds to cover cutsby Tim Post, Minnesota Public Radio
St. Paul, Minn. — Saving up for that metaphorical "rainy day" is part of many a sound budget strategy - and it's one that state colleges and universities have been following for years. Between them, the University of Minnesota and the MnSCU system have about $180 million in reserves.
Some lawmakers say if there's ever been a time for colleges to dip into those accounts, it's now, as the state faces a budget deficit of more than $6 billion.
If a program comes in under budget at Minnesota State University-Mankato, some of that money goes into savings.
Increases in enrollment in recent years have meant more tuition revenue, so a portion of that was socked away.
Low natural gas prices have saved the college money as well, which provided another boost for the college's so-called reserve fund.
All together the college has saved up about 7 percent of its annual operating expenses.
"Which is approximately $9 million," said the college's vice president of finance and administration, Rick Straka.
It's up to college leaders to decide how and when budget reserves are spent, but Straka said that money has been set aside for a very specific purpose.
For instance the college recently had to write a check for $130,000 dollars to rebuild several campus entrances because of changes to a county road.
That's the kind of budget surprise Straka says the reserve is meant to cover.
"People maybe think it's a big slush fund. This is not a slush fund where we just get to spend it on all kinds of things," he said.
Every one of MnSCU's 32 universities, community and technical colleges has a budget reserve. The MnSCU central office has money set aside as well.
In total it adds up to $90 million, about five percent of MnSCU's annual budget of nearly $2 billion.
The University of Minnesota has its own reserve fund, $87 million, just under 3 percent of its $3 billion budget.
THREATS OF CAPITOL CUTS
As lawmakers threaten to cut the state's higher education funding, those college budget reserves are getting more attention.
State Sen. Claire Robling, R-Jordan, said if colleges have been saving for a rainy day, they'd better get their umbrellas, because this might be it.
"It's good to know that they have some funds in reserve that they might be able to fall back on during these difficult times," she said.
Just like a family that needs to dip into its savings to deal with a financial hardship, Robling said colleges should look to their reserve funds to help them through cuts in funding.
"They won't have their regular revenue coming in and so that's when they go to their reserve funds just like a family would if they want to make sure the house payment is made and they don't risk losing their home," she said.
Minnesota college officials see it differently.
MnSCU's chief financial officer, Laura King, said lawmakers shouldn't view colleges' reserve funds as a place campuses can go to make up for shortfalls in state funding.
"That wouldn't be the way you'd want to use it. Because it creates a continuing obligation that you don't have the resources for," King said.
In other words, King says, it doesn't make sense for colleges to spend their emergency money, funds that have taken years to save, to put off hard decisions for just one more year.
University of Minnesota Chief Financial Officer Richard Pfutzenreuter said the school would spend some of its $87 million in reserves to cover a short term budget gap, but he doesn't think that's what colleges face.
"The cuts that are coming in all likelihood are going to be recurring cuts. I don't think they're going to be one-time cuts," he said.
If Minnesota colleges don't use reserve funds to deal with the decline in funding, they have two options: further trim their expenses and increase revenue.
That means more job and program cuts at Minnesota colleges and even higher tuition bills for students.
- Morning Edition, 02/10/2011, 6:50 a.m.