President Smith's presentation to the Alumni Association Board of Directors regarding budget and athletic cuts (April 14, 2018)

EMU’s Budget: Investing in Our Future – April 2018

Background

The last several months have been challenging for the EMU community. Higher education institutions – particularly regional public universities – in the United States face significant demographic and financial challenges; those challenges are particularly acute in Michigan, which has experienced a significant decline in both State funding and high school graduates over the last ten years. The decisions we have made to eliminate positions and sports programs were difficult – even heart-wrenching – but, as outlined below, they were carefully developed as part of our plan to position EMU for a strong future.

Changing Demographics

The landscape for higher education has changed dramatically in recent years, and will continue to change for the foreseeable future. The number of high school graduates in Michigan has declined by 15.3% over the last ten years, and is projected to decline by nearly 16% over the next ten years.

 

declining number of michigan high school graduates

 

Enrollment has declined dramatically at Michigan community colleges, which are a key source of EMU transfer students.

Declining community college enrollment

 

As a result of these changing demographics, enrollment and student credit hours (SCH) – EMU’s primary source of revenue – have declined.

EMU Student Headcount

 

EMU Student Credit Hours

Enrollment has also declined at many of our peer institutions, including WMU, CMU, and FSU. Only GVSU and OU have experienced small recent increases in enrollment.

Declining Federal and State Budget

As enrollments have declined at regional public universities, support from the federal and state governments has been stagnant or declined. EMU receives nearly $10 million less per year today from the State of Michigan than we received in 2003. These are actual dollars, before adjusting for inflation.

Declining EMU State Appropriations

If State funding to EMU had been adjusted based on inflation since 2003 – without any additional increase – EMU would today receive an additional $36.5 million in funding per year. That is 10x the size of our projected deficit for fiscal year 2018.

Declining EMU state appropriation adjusted for inflation

This dynamic reflects a disturbing but undisputable trend over three decades: the State of Michigan has shifted the cost of higher education from taxpayers to students.

statewide shift from state aid to student tuition

Meanwhile, Pell Grant awards have been nearly stagnant, having increased by less than 0.8% per year between 2011-2017. More than 40% of EMU’s undergraduate students receive Pell Grants.

The Financial Situation that Must Be Addressed

Although these demographic and financial trends have been coming for years, not enough was done to adjust the size of the University. Accordingly, EMU has incurred operating deficits in each of the last seven years:

 

EMU operating surplus (deficit)

 

As a result of these recurring deficits, EMU’s financial reserves are too low.

EMU financial reserves (in millions)

The Higher Learning Commission (HLC), our primary accrediting agency, has directed the University to submit a financial recovery plan in December 2018 that includes a detailed update and roadmap for operating a balanced budget and growing our reserves.

We are Not Alone

EMU is not alone in facing these challenges. Regional public universities throughout Michigan, the Midwest, and the nation face similar – and often worse – financial challenges.

  • Central Michigan University faced a $10 million deficit in the middle of FY2017 and faced additional financial challenges for FY18.
  • Wright State University in Ohio slashed $30 million from its budget in June 2017 and announced this month that departments across the University must cut another $10 million this fiscal year.
  • The University of Akron has cut more than $40 million in expenses in the last three years.
  • Eastern Kentucky University announced this month it was eliminating more than 150 positions, eliminating two sports programs, closing a regional campus, and suspending several academic programs to close a “daunting” $25 million budget deficit.
  • Nine of the 14 institutions in the Pennsylvania state university system have experienced double-digit declines in enrollment since 2009. The system faced a $70+ million deficit last year – despite cutting $325 million over the last decade – and is considering closing campuses.
  • The Illinois public university system has experienced significant enrollment declines (11% over five years) that was coupled with a state budget crisis. Western Illinois University, which is half the size of EMU, recently laid off 100 employees and another 59 employees took an early retirement.
  • Two universities in the University of Wisconsin system have eliminated dozens of academic programs to reflect declining enrollments.

The Future

Although these challenges are serious and are not isolated to EMU, we will nonetheless overcome them. EMU has a rich and proud history upon which to build, and our future is bright, but we must take action now to thrive in a rapidly-evolving technological, demographic, and financial landscape.

In recent months and years, we have launched new high-demand academic programs and announced plans to enhance facilities. (It is important to remember that EMU is the second-oldest public university in Michigan, and our facilities often show their age). In the coming months and years, we will continue those efforts and launch new initiatives to position EMU for the next chapter in our history.

  • In the last 18 months, we have launched new academic programs in mechanical engineering, electrical and computer engineering, data science & analytics, teaching English to speakers of other languages, finance (master’s degree), religious studies, and information technology. These programs are designed to meet the demands of both employers and prospective students.
  • A new health center is being built on the northwest section of campus in partnership with St. Joseph Mercy Health System and Integrated Healthcare Associates. The center will serve students, employees, and the community with state-of-the-art care, enhanced technology, and expanded hours.
  • The Rec/IM will undergo a significant renovation and expansion, thanks in large part to a dedicated student fee advocated by Student Government. A state-of-the-art Rec/IM is important to recruiting and retaining students.
  • The Student Center has undergone significant renovations with the addition of new food venues and renovation of the food court. An Amazon store – the first of its kind on a college campus in Michigan – opened next to the Bookstore.
  • We will update our Strategic Plan to identify specific institutional initiatives to, among other goals, improve retention, highlight and invest in high-demand academic programs, and expand experiential learning opportunities for students. This collaborative process will begin this fall.
  • We will continue to develop and launch online academic programs to meet the skyrocketing demand for such programs from “Millennial Generation” students and non-traditional students who balance work, school, and family. Providing flexible learning opportunities must be a core component of our mission as an institution of opportunity.
  • We are committed to expanding international enrollment and programs. Our #YouAreWelcomeHere campaign received national acclaim, and we are launching a global engagement center to coordinate international opportunities and partnerships for students and faculty.
  • We intend to launch our next comprehensive fundraising campaign in the coming months to lay the foundation for future decades of supporting students and faculty.

These initiatives are exciting and vital to our future. They also require resources. We must make difficult decisions now to ensure that the University has the resources available to invest in our future. Those steps include:

  • We recently eliminated 60 staff and administrative positions, 16 of which were occupied and 34 of which were vacant. No instructional positions were eliminated. Prior to that action, we eliminated dozens of other positions through a voluntary early retirement program. Since January 2016, we have eliminated 10% of all staff and administrative positions.
  • EMU eliminated four sports programs to reduce spending and align EMU with our peers in the Mid-American Conference (MAC) division; EMU previously offered 21 sports – the most of any MAC school. This was a difficult decision, but great care was taken to mitigate the impact, such as offering all impacted student-athletes their academic scholarship for as long as they remain at EMU and meet academic eligibility requirements. Contrary to what has been claimed in some media stories, the expenses for these sports programs exceed the revenues generated by these programs. Universities across the country are taking similar steps.
  • EMU’s partnership with Chartwells to manage Dining Services yielded positive financial returns and resulted in new capital and technology improvements. A recent survey of students showed that satisfaction improved in nearly every category since Chartwells began managing Dining Services.
  • A new partnership for EMU’s Parking Operations, announced in May 2017 and approved in December 2017, will result in a substantial one-time payment that will be deposited into EMU’s reserves and support borrowing for important facility improvements. The partnership agreement includes new technology and capital investments, and limits parking rate increases to amounts that are smaller than increases imposed by EMU over the last six years.

Conclusion

I am committed to ensuring that EMU remains a vibrant academic institution and community anchor for decades to come. Change is always difficult, but we must adapt to evolving trends including how students learn and how higher education is perceived and funded. Although we are not alone in facing these challenges, that cannot be an excuse for failing to address those challenges. Inaction is not an option. We have a bright future and I ask for your continued support as we develop and communicate that future to EMU’s numerous stakeholders.

As always, I remain eager to hear from you, and work with you, as we undertake this endeavor.

Sincerely,

James M. Smith, Ph.D.

President

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