Enrollment decline, state cuts, faculty raises contribute to budget shortage
Chancellor Rita Cheng said in her Sept. 5 State of the University address this fall’s lower overall enrollment created a projected $3.8 million tuition revenue decrease, which has eliminated the gain expected from this school year’s tuition increase. With new financial commitments totaling $4.7 million for fiscal year 2012-2013 — in the form of salary increases, faculty promotions and additional financial aid money — Cheng said university leaders plan to seek new ways to balance the budget.
Tuition increased by about 4.8 percent after the SIU Board of Trustees’ approval in May.
“The enrollment decline pretty much wiped out the anticipated increase of the tuition revenues,” she said.
Cheng said the tuition increase was intended to fund the university’s salary increases. The university phased in a 2-percent faculty and staff increase this year through a 1-percent increase Jan. 1 and a 1-percent increase July 1. She said the university anticipates another 2-percent increase next year.
Cheng said tuition may increase again because of the additional salary increase costs.
“We will likely look for a modest increase to cover … anticipated salary increases, which is most of our budget,” she said. “We’ll also look at our fees to cover salary increases.”
The Board of Trustees must approve the university’s budget. Board of Trustees Chair John Simmons said in an email the faculty and staff raises are necessary to keep pace with inflation and remain competitive with peer institutions.
“Every year, the need for a tuition increase is dependent on the ability of the state to provide an increase in appropriations,” he said in the email. “When the state cannot provide an increase or provides an increase insufficient to meet higher costs, then either tuition must be increased or programs’ budgets must be cut. In the latter case, faculty must then make do with less funding.”
Simmons said the salary increases come as a result of the most recent SIUC faculty contract. While Cheng said the plan was to fund those increases with money raised from increased tuition, this year’s 970-student decline from 2011 has caused the university to look at reallocating funds.
Cheng said it is important to raise salaries because the university needs to keep its salaries competitive in order to retain the best employees.
“Our people are our most important asset,” Cheng said. “When students come to campus to take advantage of the faculty and staff support for the campus, almost everything we do is by our people. Over 70 — almost 80 — percent of our costs are people because we’re a service organization, and so we highly value our employees and we want to retain our really good employees.”
Cheng said faculty and staff salaries have been frozen at universities countrywide. She said she thinks the university has done a good job of phasing in the raises.
One key factor in why tuition may help fund faculty raises is because of a lack of state funding, which formerly contributed to salaries. Simmons said state funding for the campus decreased by $11.9 million this year.
“In the past, the state used to give us money to help fund our salaries, and so now the real challenge is how are we going to fund these,” Cheng said. “I can’t predict what we’re going to be able to do (after 2013).”
Cheng said she would like to give raises in future years, but it will depend on whether the university gets state support, sees an enrollment increase and continues success in the distance education program.
Cheng said distance education classes brought $6 million to the campus in 2011.
In addition to salary increase, the university has a new $750,000 financial aid commitment.
Cheng said the university hopes to attain extra financial aid funding through the new vending machine contract with Pepsi MidAmerica to help reach $5 million in available financial aid. Other sources of aid, she said, should come from state funding, SIU Foundation money and scholarships.
Although financial aid accounts for one of the budget’s new expenses this year, Cheng said it is not this fiscal year’s greatest financial commitment. She said she thinks the the two greatest new financial burdens are the $7 million state funding cut and the $4 million needed to cover salary increases.
She said the university has to make up for the state funding cut by restructuring where money is being spent in the budget.
“It’s a big, big challenge for us, but we’re doing a great job in addressing that through open positions and reorganizing and realigning and restructuring,” she said.
Despite new financial burdens, this is not the first time the university has had to look for money in new places to balance the budget.
“We’re not panicked,” Cheng said. “We are not wondering how we’re going to do this. We know what we have to do, and we’re going about our business and getting it done.”