SETTING THE PLANNING/BUDGETING CONTEXT

When I arrived at MSU, it was my goal to be consistent in my communication and realistic in my planning. I understood that this was an expectation of the Board and the Commissioner. Because my style so closely matched these expectations, I felt this was the right opportunity for me to accept.

My first major address to the campus was on March 1, 2001. In reporting on the half-completed Legislative session, I said that:

• We expect the state to do what it can, but we won't rely on the state to solve our problems.
• We will offer a results-oriented investment opportunity for the state, not ask for handouts.
• We will focus on assessing our work and on being accountable to the Board, the Legislature and the Montana public.
• We will form partnerships to leverage the General Funds we are given

I have tried to be consistent in my tenure as President and I think you will find that my remarks to the recently completed Legislature reflect these same themes. That openness and consistency, along with the advocacy of the Interim Commissioner and the Board, helped us to receive a positive hearing by members of the Legislature.

Later in that March, 2001 address, I announced the creation of an Office for Planning and Analysis, so that decision-making for all MSU campuses could be better informed by data than had been true in the past. I also announced the creation, on the Bozeman campus of the 22 member University Planning, Budget and Analysis Committee (UPBAC) made up of students, faculty, professional and classified staff and a member of the Local Executive Committee who is also a business owner in town. Billings already had an effective process in place, and the Northern and Great Falls campuses developed similar processes to structure their decision making.

It was and is our common goal that our processes would be open to our publics, that they demonstrate a link between planning and budgeting, and that they build in measures of internal assessment and external accountability. Further it was my goal that

1. The budgets must reflect institutional priorities
2. We would not budget based on miracle scenarios
3. We would not spend money we did not have
4. Our budget decisions would be backed by and informed by data
5. The primary source of program investment revenue would be re-allocation

I present this background information, because by sticking closely to these first principles, on all of our campuses, from that first speech to presenting the current proposals before you - we want you to have a sense for the consistency, the inclusiveness, the openness and the forethought that each of the MSU campuses have built into their budget processes over the last three cycles.

SETTING THE REGIONAL CONTEXT

Expenditures

Based on the standardized cost of education data that are collected by the University of Delaware, the MSU campuses have very similar standing within their various comparator groups. That is, they each spend about 70% of the average amount per student that is spent by schools in their comparator group.

Having said that, you have in your packet, on page two, an FY-2000 comparison of the several revenue streams for campuses in our region that would compare to MSU-Bozeman or UM-Missoula. Note that in the 4th column, the Montana schools receive a General Fund appropriation that is 48.4% of the regional average and only 63% of the next lowest state, North Dakota. Our tuition in that year, shown in the far right column, represented 116% of the regional average, 3rd highest among the nine states. Our total expenditures per student from these two sources, seen in the 3rd column from the right, was $8446, 64.5% of the regional average and, despite above average tuition, only 80% of the amount spent by the next lowest state, in this case, South Dakota.

What this means is that we are doing more with a lot less than other institutions in our region, and in national comparisons, we operate on a shoestring. Without additional revenue, we'll be so thin as to jeopardize the quality of our education.

Tuition Increases

Following the close of the Legislative session, our task was to devise budgets that would allow each campus to maintain the current level of basic services. In order to accomplish this and cover significant increases in fixed costs, we are proposing tuition increases on the MSU campuses that will range between 10.8% and 12.25% in each year of the biennium. MSU did not further expand the tuition differential beyond the levels approved by the Board.

At MSU-Billings, for instance, this will mean an increase of $339 in the first year and $380 for the second year for a full time student. The first year increase is only $83 per semester over the rate that full-time students paid in the spring semester just ended. The increases on the other MSU campuses fall out in just about the same way.

You have in your packet, on page six, a "Comparison of Announced Tuition increases for Fy04/05." As you can see, among schools in the West, we are slightly higher than Idaho and Utah, about the same as Oregon State and Washington and quite a bit lower than Arizona, California and University of Oregon. Other schools in the region have not yet announced their increases for next year.

THE PRIMARY ISSUES

The increases that we are proposing, and those that other states in the region have adopted, are part of an on-going trend that you have recognized and that I have been talking about since I arrived in Montana. The societal shift is away from seeing higher education as a public good, and therefore meriting primary support from public funds, to one of a personal, individual gain, where the student should bear the primary burden for the cost. I see this trend continuing and I believe that we should be planning on a six-year horizon as though the trend will continue. In the near term, as we prepare to deal with this reality, we all are struggling with striking the most appropriate and realistic balance of quality, access and cost.

Our students tell us they have chosen our campuses because of the quality of our programs. On the Bozeman campus, where students had long indicated that location and programs were the primary reasons for selection, quality is now in the forefront when students choose MSU. We have worked hard to wisely use every dollar that comes into our campuses to provide the educational experiences that we promise our students and their families. Time and again our students have asked us not to compromise on quality. They don't want to see program funding reduced or eliminated and they understand the implications of that wish. Each of our campuses focuses on student success and the state and national awards that we announce to you periodically are emblematic of the quality education occurring everyday on the MSU campuses.

We have not lost sight of the challenge that Montanans face as they try to pay for their education. It is probably fair to say that as costs of attending college increase there are Montana students who will find it more difficult to consider higher education. But, when our campus staff or high school counselors work with these students, they find that the financial resources can be found. We're encouraged that the message of availability of assistance is reaching these students -- applications for admission from in-state students are up about 1%, from last year at this time -- about the same as the increase in the size of the Montana 12th grade class.

Because we understand that tuition will continue to rise and because we want college to be affordable for every qualified student, we have launched significant new efforts to maintain access by raising private funds for scholarships. We are having success. In the last five years, our scholarship endowments have increased from just under $11 million to now over $25 million. Our goal is to be at over $30 million in the next three years. We are committed to making MSU affordable for each qualified student.

THE ALTERNATIVES

What are the alternatives? For public higher education -- especially for instruction -- a partnership exists between the people of Montana, in the form of General Fund appropriations and the students, in the form of tuition. The State Legislature has completed its work. They did a good job of responding to the competing demands, given the current state of Montana's economy. Now, that part of the partnership is set. The open budgeting processes of our campuses have produced a set of recommendations to me. I believe that they have acted thoughtfully, and I support their conclusions and the proposed tuition figures that result from them.

Semester Resident UG/Nonresident UG Tuition and Fees:

Without the tuition increases we are proposing, the magnitude of the cuts for our campuses would be daunting -- the Bozeman campus alone would need to cut over $17 million during the next two years. On a per student base that is already 20% below the next lowest state, reductions like these would make our institutions very different in a very short time. That is why our student governments considered these increases and voted to endorse them. We all understand the nature of this partnership and the importance of quality.

Given the 20 to 30 year national and state trends of flat or reduced general fund contributions, it seems clear that tuition will continue to rise. We can respond to this in one of two ways: First, we can artificially hold down tuition for a period of time and then have a huge increase at some year in the future. Arizona and California have done that and their increases next year will be $1,000 and $2700 respectively. The second way is to deal constructively with actual costs and with what the Legislature, trending over several sessions, is able to provide. This will result in more regularized tuition increases each year, which will allow students, families and the campuses to plan more accurately. In our own planning and budgeting on the MSU campuses, we have tried to take the latter approach.

I mentioned earlier that our goal in developing our budgets was to be able to offer the same range of programs and services that we have offered in FY2003. So where does the increase go? Let's use the example of Bozeman, which is requesting a 12.25% increase. In FY03 1% of the Bozeman tuition pool was $455,419. Here is where the new tuition income will go:

Most of the expenditures listed here occur on the other MSU campuses as well and their budgets will line out in a similar way. I'll ask each CEO to address you regarding the particular circumstances on their campuses.

INTER-CAMPUS TRANSFERS

Finally, at the direction of the Board, MSU presents a method for sharing a portion of tuition and General Fund income among its campuses. You have a table near the front of the MSU packet, on page four, with some details.

Early on the MSU CEOs decided that any movement of funds should be based on the ability of those funds to permanently grow new FTE enrollment for the campus rather than merely provide additional support for current activities.

The funds will be transferred in four ways:

• An RFP process that is being evaluated by a committee with membership from the four campuses
• An enhancement to the Board's movement toward full funding of Native American fee waivers
• A specific contribution to the Great Falls campus to compensate for rent lost in the proposed movement off campus of the Bozeman Nursing program
• The relief of $100,000 of expenditures that now flow from the Billings, Northern and Great Falls campuses to Bozeman.

I think this budget is consistent with the promises I made you when I accepted this position. The state has done what it can, and we are doing the rest through fund-raising, collaborative approaches, budget reductions, tuition increases, and results-oriented investments in each campus that require each campus continually assess its sustainability and be accountable for it.

Next: Campus CEO's