Dave Lewis
Budget Director
[State of Montana]
Editors' Note: On August 23, 1993, Dave Lewis sent a memo to Governor Racicot outlining "...potential reductions in general fund expenditures for the current biennium." Below are those items which pertain to higher education. At the time the memo was written, it was estimated that the university system's share of the cuts would total about $25 million. On September 8, Governor Racicot recommended that the MUS reduction be $12 million. He did not specify where the cuts were to be made but left that up to the regents. Presumably the items below from Mr. Lewis's original list are still to be considered. The editors thought the faculty should have the list available to them. Further, we encourage faculty members to comment and/or propose other ways of reducing expenditures. We will be pleased to print your comments and suggestions in a later issue.
The Licensed Practical Nurse program runs for one year at Helena and Great Falls Vo-Techs and three semesters with a summer off at Butte, Missoula, and Billings Vo-Techs. There appears to be no academic reason to keep the three-semester program. Making all LPN programs one year would save faculty and overhead for the same number of graduates. In addition, each LPN program has its own director. It may be possible to reduce the number of directors to one or two in order to run a more effective program for less cost. The general fund savings from these actions would be about $50,000 in FY94 and $100,000 in FY95.
Western and Northern are beginning the process of becoming NCATE (nationally) accredited for their education programs. The missions of these schools do not require national accreditation which would mandate higher levels of expenditures The expected general fund savings from ending this accreditation process would be $100,000 per year, plus future cost avoidance.
Currently each school has its own finical aId director and various levels of staffing. The personnel at each unit would be reduced to one or more counselor(s) and clerical support. The financial aid function would be organized under one director, with a reduced number of specialized persons to keep up with federal regulations and programs, and would provide improved student services with school counselors. The expected general fund savings from this restructuring would be about $50,000 in FY94 and $200,000 in FY95.
Historically the state policy has been that all excess six mill levy revenue above the appropriated levels reduces general fund by a like amount. The policy was changed in FY93 during the January 1992 special session. Prior to FY 1993, general fund was used to fill in the MUS budget to the level appropriated by the legislature. Returning to this former policy would save general fund of about $1.8 million in FY94 and $0.8 million in FY95.
The regents recently passed a rule similar to this proposal, but it will be three years before the new rule will affect any students. This proposal would implement the rule in FY95, thereby increasing revenues in the 1995 biennium. It is very difficult to project what fiscal impact this may have given that students may or may not continue their education under the rule.
Complete elimination of funding for intercollegiate athletics was recommended by many citizens of the state in response to the Governor's request for budget cutting ideas. Others recommended replacing lost general funds with an optional local resort community tax, if residents of university communities adopted the tax due to economic benefits from sporting events. Potential general fund savings from elimination of state funding would be about $6.2 million in FY95.
Non-resident tuition still is not unreasonable when compared to other states and is less than many western states. The following tuition rates were for FY93:
Increasing non-resident tuition from the $5900 rate in effect for FY94 to approximately $7500 for the universities and from $5450 in FY94 to $5500 in FY95 for the colleges would raise an additional $7.0 million in FY95.
The state funds some remedial education through the higher education system. According to the Commissioner's office, the cost of these programs does not exceed the tuition. Therefore, the savings from this proposal would be small, but would respond to numerous suggestions from citizens that students be academically prepared for study before entering one of the six units.
A 10 percent surcharge for recipients of these student assistance programs would add $500,000 per year of student payments to offset state general fund subsidies. Legislation would be required to implement the surcharge.
Through FY87, each unit of the university system was allowed to retain 15% of its indirect cost recoveries from federal and foundation grants and contracts. In the 1989 biennium, the legislature allowed each unit to keep 50 percent of its indirect cost revenue and replaced the other 50 percent with general funds in the appropriated budgets. Since FY91, 100 percent of the IDC money has been used by the campuses to fund research, grants, and other non-current unrestricted activities. This proposal would restore indirect cost recovery to the appropriated MUS budgets. The general fund savings in FY95 are projected at approximately $4 million.
Until FY92, all reverted appropriations from the university system went into the general fund like other state agencies. If these reversions were used to offset general fund appropriations, the general fund savings may approach $1 million.
Increasing faculty work loads to six classes per year would reduce faculty costs by as much as 20 percent for provision of the current number of classes and would be consistent with what many other states have been requiring in recent years. Expected general fund savings would be about $838 million in FY95.
Butte Vo-Tech has only 300 FTE students and is going through a transition phase that will leave its curriculum compatible with the Montana Tech curriculum. The primary focus of Butte Vo-Tech will be business, civil engineering technology, environmental technology, and nursing. All programs except nursing have a related program at Tech. These schools are close in proximity and under this proposal would share many resources. Expected savings from this merger would be about $200,000 per year beginning in FY95.
Beginning in FY95 the state would no longer fund its portion of the salaries of county extension agents. Counties would make the decision to fund the salaries, consolidate with other counties for no local government cost increase, end the services of these individuals, or develop plans to utilize the bulletin board and telecommunications options to obtain information from regional extension agents or MUS in Bozeman. Legislation changing the millage allowed by counties to fund this position may be needed. Expected savings from this action would be approximately $500,000 in FY95.
The current laws and rules concerning the sale of surplus property make it unattractive to the university system to sell its surplus property. Surplus property may include not only excess equipment but also portion of the MUS art collections, golf course and other property not related to the mission. Changing the property rules would allow for sales revenue that would supplant general fund or be used as seed money to create the restructured system during FY95. This would require a Department of Administration rule change and change in the surplus property law. There is no estimate of the savings/revenue that this option may generate.
It should be noted that this recommendation could be made generally for all of state government as a management incentive.
Moving the law school from UM in Missoula to Helena may offer both cost savings and benefits:
COST SAVINGS
Reduced library expense over the long term. Combining the State Law Library with the law school library may reduce administrative overhead, duplicate holdings, and duplicate files. This may also improve the library by adding depth to both libraries.
Vacating the law school in Missoula could provide a relatively new building for the business school to move into, thereby eliminating the need for a new business administration building.
OTHER BENEFITS
Potentially improved law education in Montana as a result of being in a larger law community with the Montana Supreme Court, Federal Court, Attorney General, the State Bar Association, and Agency Legal Services Division. Within this larger community many opportunities for internships and other cooperative arrangements could be developed.
The current business school and law school are located close to each other. The law building (57,475 sq. ft.) is more than twice the size of the current business building (27,770 sq. ft.). The new business administration building (104,600 sq. ft.) authorized in HB5 was to be almost four times the size of the current business building.
Student services and administrative support could be provided by Helena Vo-Tech at a cost no greater than these functions currently cost at UM.
The preliminary cost assumptions shown below are based on legislative authorization to have the Board of Investments build a new law school on the Capitol Complex with associated space for either a consolidated state law library or the combined agency legal services suggested during the last session.
ADDITIONAL COSTS
On-going costs
Annual lease in Helena for new facility--$500,000. Assume the going rate in Helena and comparable space.
One-time costs
Remodel the law building for business administration use--$250,000. This cost could be paid from some of the private donations (the total is about $2 million) already raised for the new business school.
Relocation of professional staff, faculty, and law school--$280,000. Assume $10,000 per person + $100,000 for school moving expenses.
REDUCTION IN COSTS
On-going costs
Cost of the new business buIlding--$15,500,000. The annual general fund debt service cost for 20 years: $1.27 million.
Annual operating cost of new UM business administration building--$828,000.
Reduction in library expenditures is assumed to be none in the first year or two due to increased equipment needed for the program and remodeling or moving as necessary. Long-term savings in library expense is expected to be $100-300K per year.
NET REDUCTION IN COSTS
Assuming that no space would be available in Helena until FY96, the following savings would occur.
FY94: none
FY95: Reduced general fund expenses:
$828,000 maintenance of business building. Note that no additional funds were given to UM for the maintenance of this building in FY95. MaIntenance would be paid for under its current physical plant budget for FY95 and additional costs would occur in FY96.
$1.27 million bond payment if financing plan includes payments in FY95.
FY96: Additional general fund expenses
$500,000 rent in Helena
$280,000 moving expense
FY96: Reduced general fund expenses
$828,000 maintenance of business building
$1.27 million bond payment
Net reduction to general fund: $48,000 plus $1.27 million bond payment in section F.