Minnesota higher ed in crisis, administrators tell Legislature

Minnesota’s public colleges and universities face steep financial shortfalls during the COVID-19 pandemic, higher education officials told legislators Tuesday.

Between dwindling enrollment, canceled events, refunds for students and the real possibility that campuses won’t reopen this fall, Minnesota’s public colleges and universities could lose hundreds of millions of dollars in revenue, amounting to nearly 10% of one system’s total budget. Funding from a federal stimulus package will partly cover the losses, but the extra expenses come at a time when some campuses were already experiencing budget woes; at least one Minnesota college recently announced across-the-board job cuts.

Higher education system is just one of many sectors thrust into crisis by the global pandemic, as restaurants, hotels and retail stores sit empty, health care providers forego lucrative elective surgeries and K-12 schools fear drastic budget cuts. Minnesota’s lawmakers will be forced to make tough choices in an election year with all 201 legislative districts on the ballot. 

The University of Minnesota and Minnesota State systems, which enroll a total of more than 300,000 students, have both implemented cost-saving measures like hiring freezes and pay cuts for administrators. Still, unexpected costs have piled up in the past two months as schools scrambled to move classes online, cancel travel and events and refund room and board fees for students who left campus housing early.

The Minnesota State system was already facing a $31.4 million deficit out of a total $2 billion budget this year, and the pandemic has further strained finances. Chief Financial Officer Bill Maki said during a state Senate Higher Education Committee hearing Tuesday that pandemic-related expenses will total between $35 million and $40 million this spring alone.

The University of Minnesota lost $34 million in revenue this spring after issuing refunds to students for room and board and other unused fees after they moved out of campus housing in mid-March, about halfway through the semester. University officials initially planned to give students flat refunds of $1,200 but changed course following criticism from legislators and students.  

Campuses across the state also anticipate enrollment declines next fall but say it’s too early to know just how much smaller classes might be. Minnesota State projects that if enrollment declines 5% to 20%, the system could lose between $63 million and $194 million in revenue, Maki said — nearly 10% of its total budget.

At the University of Minnesota, fall enrollment is trending about 10% down so far, U President Joan Gabel told legislators. The U expects international and out-of-state student enrollment — both important sources of revenue for colleges, as these students pay higher tuition than in-state students — to drop significantly. The university also froze next year’s tuition for almost all students, which Gabel said will be a “painful” loss of revenue.

For the fall semester, the U is preparing for a number of scenarios, including a best-case scenario where in-person instruction can resume and a worst-case scenario where campuses remain closed through the end of 2020. In that case, the system could lose up to $324 million in revenue, Gabel said. That amounts to nearly 8% of its total budget.

Both public and private higher education institutions will receive federal relief through the Coronavirus Aid, Relief and Economic Security (CARES) Act. The law established a $14 billion fund for colleges and universities, half of which must go directly to students.

The University of Minnesota will receive about $36 million, and Minnesota State will get a little over $93 million. The sum will offset some of Minnesota State’s losses; still, the system’s financial situation next year will be “anything but typical,” Maki told legislators.

Minnesota State University Moorhead announced in April that it would cut 66 jobs — roughly 11% of full-time positions — and drop 10 majors in the face of a $6 million budget gap for fiscal year 2022. The COVID-19 pandemic has created additional challenges for the school, but the shortfall is “not a direct result of the state’s stay-at-home order,” according to a press release.

Days after Minnesota reported its first confirmed case of COVID-19, University of Minnesota announced classes would move online and encouraged students to move out of campus housing unless absolutely necessary. Minnesota State also announced closures in early March, extending spring break at many campuses to prepare for remote instruction.

This story has been updated with information about the Minnesota State University Moorhead budget cuts.