2018 Budget

January 23, 2018

To the Eastern Michigan University community:

In meetings over the past two days with the leadership of our impacted bargaining units and with administrative leaders, I have shared information about the budget challenges the University is facing. The discussions have included an overview of the steps the University is implementing in order to address the challenges in the short term.

These actions are not easy or pleasant, and are not without consequence to virtually every area of our great institution. They are necessary, however, as we align University resources with declines in revenue.

For background, the University's FY18 budget was built on the assumption that we would generate 478,000 student credit hours (SCH). For a variety of reasons, outlined in more detail below, we did not meet that target and, based on fall semester enrollment, we reduced that projection to 473,000 SCH. Based on winter enrollment, we have revised the full-year projection downward further to 470,000 SCH. 

Under normal circumstances, a 1.6 percent deviation from budget would not be cause for emergency, but these are not normal circumstances. The FY18 budget was also built on the assumption that we would implement significant reductions in expenses. Through that process, we identified some initial cuts, held open positions, and took other steps. Although we implemented several important initiatives, it has simply not been enough.

As a result of not meeting our revenue projections, coupled with our persistent expense profile, the University faces a significant -- and growing -- budget deficit for FY18, estimated currently at from $4.5-$5.5 million, should no action be taken. Given that we are about half way through the fiscal year, we must take action now. Failing to act now would only compound the problem and make the solutions more difficult to implement. 

To address the immediate challenge we face for FY18, all divisions of the University have been tasked with reducing their current-year FY18 budgets. Much of the reduction must be achieved by reducing personnel expenses. Salaries and benefits account for 61 percent of the University's expenses, and those expenses grow each year. Reducing expenses for supplies, services and materials (SS&M), while a piece of the overall plan, can achieve a relatively small percentage of what’s needed.

We are currently working through the total impact on personnel. While precise numbers are not yet known, it is safe to say that upwards of 60 positions may be affected. This includes the elimination of positions that are currently open and unfilled, as well as positions that are currently staffed with employees.

Total numbers will not be available until our Human Resources team completes its evaluation of positions with the individual bargaining units involved. 

I understand that this news is distressing. It is, unfortunately, only the first of many steps that we must take in the coming months and years to address the long-term challenges facing regional public universities, particularly in Michigan. This is not an Eastern Michigan University problem – or reflective that we have done something wrong. Several other Michigan universities also face declining credit hours and greatly reduced budgets. 

State appropriations for higher education have declined compared to 10 years ago. Student credit hours have been declining, which reflects the evolving demographics of fewer high school students, fewer community college students available to transfer, and more individuals choosing work over school. Those individuals who do attend four-year universities are enrolling in fewer courses. Preliminary data from HEIDI show that, between fall 2016 and fall 2017, total enrollment in Michigan's public universities declined 1.34 percent, and enrollment at all of our comparable in-state peer institutions declined.

One need look no further than our own bottom line to see the stark impact of these trends: Eastern receives $10 million less per year from the State of Michigan than we received in 2003, even before adjusting for inflation, and our projection for 470,000  SCHs  in FY18 represents a 11.6 percent decline from only four years ago. 

This is not the kind of news a university wants to share. However, I am firm believer in being as upfront and as realistic as possible, whether the news is good or challenging.

I vow to work as hard and as smart as possible over the next several months, along with the University’s leadership team, our labor partners, and everyone who has a stake in the University’s future, to be as forthcoming as possible as we implement these actions.

Our students, faculty, and staff do amazing things every day. Eastern Michigan University powerfully improves and transforms lives. This University has served the people of Michigan for more than 160 years, and we intend to continue doing so for at least another 160 years, but that will require difficult decisions to sustain our core mission. We will accomplish this goal together.

Sincerely,

James M. Smith