Minnesota’s colleges and universities brace for turbulent financial future

School’s out – at least in the in-person sense. But how long will college classes and student-professor interactions be a strictly online experience? Like just about everything related to the spread of COVID-19, that remains to be seen. But the leaders of Minnesota’s higher educational institutions are unified in their hope that students will be back on campus at the start of fall semester.

That was among the key messages delivered to the House Higher Education Finance and Policy Division Tuesday. The division received an update from the University of Minnesota, the Minnesota State system of colleges and universities, and a representative of the state’s private colleges.

The upshot was that the transition to online learning has gone well, but that the future remains turbulently uncertain.

And, even with the help of funds from the federal Coronavirus Aid, Relief, and Economic Security (or CARES) Act, Minnesota’s public and private colleges are all expecting to deal with budget shortfalls and declining enrollments.

Minnesota State

The system of 37 state colleges and universities currently projects a loss of $35 million to $40 million for fiscal year 2020, and the transition to online learning for over 30,000 course offerings has a lot to do with that. About $17 million in room and board costs was refunded to students no longer housed on campuses, while $5.3 million was used to support academic and staff continuity and $3.2 million went to student support services. The system is also expecting to lose $7 million to $10 million in revenue due to cancellations of continuing education offerings, facility rental and other events.

Chancellor Devinder Malhotra said he and other administrators have agreed to 10% pay cuts and there is a hiring freeze in the system office. While he praised the innovative ways in which technology has been used to teach such skills as auto repair and welding, he stressed that campuses aren’t empty, and for unfortunate reasons.

“The impact of COVID-19 extends far beyond the classroom, further magnifying long-standing inequities in income, particularly affecting communities of color,” he said. “All campuses have remained open to these students for their needs for technology, food services and housing. … We know that half of all community college students and one-third of university students were already affected by food or housing insecurity, even before COVID-19.”

Rep. Ben Lien (DFL-Moorhead) addressed Malhotra’s recent announcement of a $6 million budget shortfall at Minnesota State University-Moorhead and a proposal to suspend 10 majors and lay off 11% of staff at the school. Lien implored Malhotra to explore cutting administrative costs before faculty.  

University of Minnesota

President Joan Gabel said she and her cabinet are also taking a 10% salary reduction, that 200 senior leaders have agreed to a furlough, taking no pay for a week, and that the university has suspended all new hiring. Along with no salary increases or bonuses in fiscal year 2021, this is expected to result in $40 million in savings.

It has also frozen tuition for next year for all except the medical and dental schools and three engineering programs.

“Under a best-case scenario,” Gabel said, “fall semester would have regular operations with some assumptions baked in: Out-of-state and international students are going to be fewer than usual, and classes will be some hybrid of online and on-campus. The worst-case scenario is that there would be no on-campus instruction.”

With an expected significant drop in enrollment, that worst-case scenario may add up to $324 million in losses, according to university projections.

On the positive side, Gabel said a large system-wide virtual commencement will take place on May 16, and that there will be an expanded portfolio of summer courses, some of them geared specifically toward learning about COVID-19.

Rep. Aisha Gomez (DFL-Mpls) expressed exasperation at news that the university’s football coach, P.J. Fleck, agreed to one week without pay with a resultant savings of $86,000.

“One week’s pay is larger than the national median income,” Gomez said. “This reveals problems we’ve had with executive compensation. … It makes it hard for us to fight for funding for the university.”

Private colleges

As pointed out by Rebecca Bergman -- the president of Gustavus Adolphus College who testified on behalf of the Minnesota Private College Council -- about 30% of Minnesota college students receive their bachelor’s degrees from one of the state’s 17 private colleges, while the University of Minnesota and the Minnesota State system account for about one-third each.

Bergman told the division that losses are expected to reach $70 million for the state’s private colleges. The division chair, Rep. Connie Bernardy (DFL-New Brighton), asked about her school’s ability to tap into budget reserves.

“We have an endowment, as most do,” Bergman said. “But most endowment dollars are for specific purposes. Ours was about $200 million and we dropped to about $175 million in mid-March. We try not to overdraw, but we are working with our board to cover a portion of the shortfall. We don’t know yet how the economic downturn will affect donations. Furloughs are possible, with layoffs the worst-case scenario.”

How the CARES Act comes into play

The recently approved federal funding comes in two pieces: Half is intended for emergency financial aid grants to students, half to the colleges to cover the costs of instructional changes due to COVID-19.

Each testifier said the same of how they are expecting to disburse the student funds: That some will likely be divided equally among all students, some specifically geared toward Pell Grant recipients (usually from lower-income households), and some set aside for emergency funds available by application.  

Malhotra said Minnesota State will receive about $93.4 million from the CARES Act, with $46.7 million to students. The University of Minnesota will receive about $36 million under the CARES Act, and Gabel said it is waiting on guidance from the Office of Higher Education on its distribution. Bergman said she knows of 12 private colleges in the state receiving a total of $12.65 million, adding that Gustavus Adolphus is expected to receive about $1 million.

“But the CARES act is covering less than 25% of the costs and losses to private colleges and universities,” she said.

Gabel and Malhotra expressed similar concerns.