DULUTH, Minn. -- Facing a $5.4 million budget shortfall next fiscal year, the University of Minnesota Duluth announced Thursday that it will make budget cuts over the next several years.
The university will reduce its budget by $600,000 in fiscal year 2019, which begins July 1, UMD Chancellor Lendley Black announced Thursday, Jan. 11, in employee town hall meetings.
Beginning with 2020, UMD is planning to make cuts that could range from an estimated $1 million to $1.5 million, but those amounts could fluctuate depending on revenues and expenses. If UMD's budget model is realized through 2023, the university would be in the black in five years, he said.
"We're not broke. We are paying our bills," Black told the Duluth News Tribune Thursday. "We do have some fairly large carry-over funds that carry over from one fiscal year to the next. We also continue to get considerable assistance from the Twin Cities, from the system in a variety of ways. It's not a dire situation, but it is a serious situation that we have to resolve."
The cuts for 2019 are expected to be finalized in February and will occur across all major areas — academic affairs, student life, finance and operations, and the chancellor's unit — although the biggest cuts are expected to be made in academic affairs, said Fernando Delgado, the executive vice chancellor for academic affairs at UMD.
Each year's cuts are less than 1 percent of UMD's annual budget, presuming that the university doesn't receive a significant revenue increase from student tuition or state funding, Delgado said.
The reductions will have an impact, he said, but it's a small amount considering UMD's roughly $155 million operating budget.
"I think we have the capacity to make some really tough decisions and at the same time, make them in the mind that we can reallocate resources to shore up areas that are most critical and make the most impact on attracting and retaining students," Delgado said.
UMD's budget shortfall is expected to increase from $3.2 million this year to $5.4 million in 2019. Black said the increase is due to UMD receiving a one-time state allocation totaling $878,000 this year that won't be in next year's budget. Additionally, the budget for next year assumes an increase of 2 percent in salaries for faculty and staff, but that amount hasn't been finalized.
Part of the answer lies in retaining more students. If UMD retains 5 percent more students annually, that would result in about 100 more students enrolling in the university each year, Delgado said.
UMD is "not going to stop innovating during this period" and will add programs if needed, Black said. It's not about only making cuts, but rather, repositioning and reallocating based on UMD's strengths. The University of Minnesota has also provided UMD with $2 million for new recurring expenses that include more mental health counselors and enrollment management initiatives.
Black said he feels "reasonably confident" that UMD has a solid plan and time to solve it, noting the new chemistry building being constructed and enrollment growth as good things happening on campus.
UMD's annual shortfall began several years ago. At one point, it was $9.4 million due to an enrollment decline that occurred at the same time as a decrease in UMD's state funding allocation.
"Ever since then, we've been continuing to address the problem and we have made good progress," Black said.
While the situation isn't dire, he said, the budget shortfall puts a "shadow" over the university.
Black said his focus is positioning UMD for the future. In order to thrive in a competitive higher education environment, UMD needs to be financially healthy, he said.