DATE:  June 25, 2002

TO:  Board of Regents of Higher Education

FROM:  Rod Sundsted, Associate Commissioner for Fiscal Affairs

SUBJECT:  Proposed 3.5% General Fund Reduction Plans

Although the OBPP is still reviewing general fund revenue collections before a final certification of the FY03 general fund (GF) reduction amounts, they have directed agencies to begin processing documents that reduce FY03 GF spending by 3.5%. The OBPP has indicated that they will have final reduction amounts by no later than the end of this week.

Attached to this memorandum you will find summaries of the campus/agency recommended plans to meet the 3.5% GF reduction. In addition to the 3.5% reduction, the MSU campuses have recommended additional reductions to offset the reductions in the student assistance program so that Baker Grants (MTAP) to students will not be reduced. The UM campuses are not recommending additional reductions to offset the student assistance reductions so these reductions ($144,407) will be passed along to students on the UM campuses in the form of reduced grants. I have prepared the summaries so that they include the original 3.0% GF reduction plans submitted by the campuses and transmitted to you on May 8, 2002. I have also segregated and identified any changes recommended by the campuses to increase the GF reduction to 3.5%. Some of the campuses/agencies 3.0% GF reduction plans identified reductions that were slightly higher or lower than the required amount actually calculated based upon their FY03 total GF. In those cases I have included their actual submission and then detailed the incremental changes recommended to meet the 3.5% reduction target.

The recommendations from the campuses/agencies to meet the additional .5% GF reduction include a combination of increased tuition surcharges, operating reductions, and reserve reductions. MSU-Bozeman ($1.50 to $2.00/SCH), MSU-Northern ($2.60 to $3.44/SCH), MTUM ($3.24 to $3.50/SCH), and HCOT ($2.45 to $2.86/SCH) are recommending increases in their proposed tuition surcharge as part of their additional GF reduction. The GFCOT ($1.00/SCH) and UM-Missoula ($2.50/SCH) continue to recommend the same tuition surcharge, UM-Western is recommending a decrease in their proposed surcharge ($3.32 to $3.30/SCH), and MSU-Billings has not recommended a tuition surcharge as part of either the 3.0% or 3.5% GF reduction plan. The tuition surcharges proposed by the MSU campuses are applied only up to the flat spot (12 SCH) while the proposed tuition surcharges for the UM campuses apply to all credits taken by the student.

The University of Montana is recommending that the Missoula campus absorb an additional reduction of $188,117 in building maintenance to backfill the reductions at MTUM ($108,447), UM-Western ($49,086), and HCOT ($30,584). With these transfers from UM-Missoula and the proposed tuition surcharges, these campuses will not be required to reduce spending with the exception of UM-Western that is recommending $5,000 in reductions to lower the tuition surcharge. It should be noted, however, that each of these campuses is likely to have a revenue shortfall as a result of lower that projected enrollments.

Along with the attached summaries, I have also included the campus narratives associated with the 3.5% reduction plans and a spreadsheet that identifies by campus/agency the 3.0% calculated reduction, the actual amount included in the 3.0% plan submitted, the variance, the calculated 3.5% reduction, and the addition reduction required.