Bemidji State University Board Early Separation Incentive (BESI

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					                                  Bemidji State University
                      Board Early Separation Incentive (BESI) Program
                                     February 23, 2010

Institutional Integrated Planning from 2007 through 2009

Bemidji State University utilizes integrated planning to guide decision-making, assess outcomes,
determine actions, allocate resources and prepare for the future. Guided by its mission, the university
continually reviews and adjusts its planning processes in order to assure the quality of its education, its
capacity to fulfill its mission, and its ability to respond to anticipated and unanticipated challenges and
opportunities (2010 Continuing Accreditation Self-Study Report, p. 32).

The demographic trends for the northwest region of the state and particularly for the eleven surrounding
counties indicate projected population growth of approximately 28% between 2000 and 2030. However,
the university will not be able to rely on an expanding school age population base as a resource for future
students since the overwhelming trend in Minnesota is for a much older population with a stable
population predicted for the 25-44 year old category and only a slight increase in the 15-24 year age
group. The university will need to continue to work hard at attracting students from outside the region
while also improving the attendance rate of the regional population. These challenging market and
cultural trends along with a difficult financial environment require that the university be flexible in its
approaches in the utilization of resources as the operational environment will change faster than it has in
the past.

In 2007, the university undertook a process to significantly realign its budget. A NCHEMS study was
commissioned in 2002 and 2006 to compare our expenditures and offerings to those of approximately 35
other peer institutions in the United States. Both reports revealed strongly that, given our enrollment size,
we have more academic programs than nearly all our peer institutions. This report along with
progressively worsening financial circumstances at the university required that a significant change
needed to occur to keep the university financially viable. The three fiscal year 2008-2010 budgets were
developed primarily in response to internal changes and needs and increased the percent of dollars
dedicated to direct instructional cost (based on IPEDS data).

Senior leadership set forth a $5 million, three-year budget restructuring plan. Guiding the budget
deliberations were five criteria:

        First, every attempt must be made to minimize the impact on the entirety of our students. Second,
        every consideration should be given to minimizing the impact of budgetary decisions on
        permanent and probationary University faculty and staff. Third, enrollment growth potential for
        the University must be strengthened. Fourth, careful consideration should be made on how we
        might more effectively provide services through innovative approaches. Fifth, consideration must
        be given to how decisions will impact the University’s commitments and reputation.

At the time, the recently completed master academic plan (MAP) guided the direction of the academic
budget deliberations. The 2005-2010 MAP expressed six designated outcomes:

        1. High quality programs (Provide high quality educational programs and services that support
        students’ professional, personal, and citizenship development.)

        2. Excellent faculty (Hire and support excellent faculty.)
        3. Secure future for northern Minnesota (Help build the future of northern Minnesota.)
        4. Diverse student, staff and programming (Enhance diversity.)
        5. Excellent teaching and learning environment (Support the teaching and learning environment.)
        6. Financial stability (Secure financial stability through appropriate growth and program

After months of deliberation, the university began implementation of the three-year (FY2008-2010)
budget readjustment plan in April 2007. We used three approaches to meeting this goal of long-term
viability: budget reductions; restructuring of offerings; and new investments. The adjustments by area
within the university were to increase discretionary revenue by $1 million; decrease expenditures by $1
million each in direct instruction and institutional support; decrease expenditures in intercollegiate
athletics by $750,000; decrease expenditures in physical plant by $550,000; decrease expenditures in
academic support by $450,000; and decrease expenditures in student services by $250,000. New
investments included increasing investments in repair and betterment, equipment, and the addition of
academic programs and student services that provides an opportunity for enrollment growth and enhanced
retention efforts. Through attrition and retirements, there was an overall reduction of approximately 25
positions by 2010. During this process, the university designated departments per IFO Article 16, Sub. 4.
The departments designated were computer science, English, and professional education. This action
resulted in two retirements in English and six in professional education. In the end, the budget
readjustment plan, involved no retrenchment of present probationary or permanent faculty and no layoffs
of permanent non-teaching staff

The original proposal from the administration involved realigning some faculty positions for four
programs: Economics, German, Theatre and Early Childhood Education. The Faculty Association
objected to a piecemeal approach to realignment and requested that a more comprehensive approach be
undertaken. This led to what became known on campus as “Reorg,” a realignment of the colleges and
redefinition (per IFO-MnSCU Master Agreement) of departments (2010 Continuing Accreditation Self-
Study Report, p. 45).

After a year-long process, a new college structure was implemented in July 2008. The new structure
sharpened and consistently presents Bemidji State’s identity as an arts and sciences university with select
professional programs. It honors the university’s heritage as a liberal arts institution and supports, through
professional programs, regional health services, social services, businesses and industries. The College of
Arts and Letters, College of Professional Studies and College of Social and Natural Sciences were
restructured into the current configuration of the College of Arts and Sciences, the College of Health
Sciences and Human Ecology and the College of Business, Technology and Communications.

University-wide scenario planning that occurred in 2006 and 2007 paved the way for the university’s
2008 strategic plan update. During the scenario planning process, a cross-functional campus team
examined issues of enrollment, demographics, generational shifts, economic and social valuation of
higher education, regional and global workforce challenges and other critical external factors. Ultimately,
they identified key internal characteristics that the University must have in order to prepare for the
external forces that will drive its future. These, along with “robust” strategies that were identified along
the way were incorporated into the University 2008-2013 strategic plan.

The strategies of the 2008-2013 University Plan indicate a refinement of focus toward student success,
engagement, innovation and mission:

        • Strategy A: Engage Students for Success in Careers, Communities and Life

        • Strategy B: Promote Vital Communities through Involvement
        • Strategy C: Innovate for a Changing World
        • Strategy D: Optimize Resources to Achieve the University’s Vision and Mission

Bemidji State’s current resource base is described in goals eight, nine and ten for Strategic Direction D:
Optimize Resources to Achieve the University’s Vision and Mission in the University Plan 2008-2013.
By way of example:
Strategic Imperative: Effectively manage and increase enrollment and resources in support of the
university’s vision and mission.
Goals and Measurements [Italics and bracketed comments added.]
        • Goal Eight Improve undergraduate and graduate enrollment, retention, and graduation rates.
        [I.e., tuition revenue.]
        • Goal Nine Improve revenues from external funding, including alumni giving, capital campaigns,
        and grants.
        • Goal Ten Address MnSCU efficiency measures and standards (2010 Continuing Accreditation
        Self-Study Report, p. 45)

The national economic crisis in late 2008 had a significant impact on the State of Minnesota’s finances.
Governor Pawlenty used his unallotment authority in December 2008 to balance the current year’s state
budget. The unallotment impact to the university was nearly $600,000. That was just the beginning as the
state is faced with a five billion dollar deficit each of the next two biennia through 2013. The nearly two
million dollars in federal stimulus funds that the university received for FY2010 and FY2011 helped
buffer the nearly three million dollar loss in state appropriation that will occur before the start of FY2012.

During spring semester 2009, the university developed a budget reduction plan to permanently reduce its
budget by two million dollars by the end of FY2011. The plan concentrated on preserving the
university’s core, on positioning for continued success, and ensuring the budget is in balance. A plan was
implemented to identify $1.25 million in permanent budget reductions for fiscal year 2010 and an
additional $750,000 in fiscal year 2011, for a total of $2 million. The reductions came from the

        • $1 million from academic affairs
        • $400,000 from finance and administration
        • $400,000 from University-wide and/or fixed costs
        • $150,000 from student development and enrollment
        • $50,000 from the Office of the President

 The Academic Affairs Division saw a $676,000 reduction and realignment in FY2010 and will reach its
goal of $1 million in total reductions and realignments in FY2011. Proposed changes in the academic
affairs division included eliminating four vacant probationary faculty positions – one each in geology and
in professional education and two in mass communication. Two fixed-term positions in psychology and
one in English would also be eliminated. Plans also call for reducing supplies and equipment
expenditures as well as one support staff position in technology.

Student Development and Enrollment Division included eliminating a vacant, part-time position;
accepting a voluntary request to reduce staff hours; shifting some health and counseling center salary
dollars to a revenue fund; reviewing operational options for the Campus Child Care Center by the end of

In the Finance and Administration Division changes included adjusting workloads to reduce the
equivalent of 1.5 positions, adjusting service hours in the division’s business and logistical services areas,
considering alignment services with Northwest Technical College, holding an administrative position
until 2010, reducing overtime and temporary costs, and reducing supplies and expenses by five percent.
It is anticipated that approximately $288,000 in savings is expected in 2010 from these cost-cutting
measures with another $400,000 in savings anticipated in 2011.

Cost-savings within the Office of the President include reducing $25,000 in University support to the
BSU Foundation and cutting $25,000 in expenses from areas such as hosting, travel and external
contracts. In addition, the number of externally funded positions in the BSU Foundation and Alumni
Association will be reduced. Areas of fixed cost savings include eliminating some leases and improving
energy conservation.

A summary of the personnel reductions were as follows:

    •   Elimination of 1.0 FTE MMA position in technology
    •   Layoff of 1.0 FTE AFSCME cashier position
    •   Layoff of 3.0 FTE AFSCME stationery engineer positions. Three new 10-month (.83 FTE)
        seasonal positions were then created.
    •   Reduction of part-time AFSCME customer service specialist position from .75 FTE to .50 FTE
    •   The elimination of nine vacancies (mostly IFO positions)

Current Financial Situation

The November 2009 State of Minnesota Economic forecast then worsened indicating that the state faces a
deficit in the current biennium (FY2010/2011) of $1.2 billion and a deficit of at least $5.4 billion in the
next biennium (FY2012/2013). With MnSCU expecting to lose at least another $10.5 million in FY2011
after the $50 million unallotment this past summer, the university finds itself with a new budgetary
shortfall of approximately $400,000 for fiscal year 2011 with total accumulated shortfalls upward of $5
million by fiscal year 2013 if further budget adjustments or reductions are not made.

As the University enters a new phase of significant budgetary planning and deliberations, it is in our best
interest to use BESI as a tool to reduce long-term expenditures before looking at other options to balance
our budget. By using BESI, the University would ultimately meet all the goals of the incentive program:
reducing salary and benefit obligations in anticipation of reduced state funding; reallocating resources to
departments and programs in response to changing needs or strategic objectives; or achieve other cost
savings or efficiencies.

Bemidji State University BESI Structure

 BESI will be implemented with four of our bargaining units. BESI would be made available for all
eligible employees in the following bargaining units: AFSCME, MAPE, Commissioner’s Plan, and IFO.
BESI would not be available to: MMA, MSUAASF, MNA, Managerial Plan, and MnSCU (Excluded)

The eligibility requirements of being at least 55 years of age and having five years of continuous service
with the university need to be met at the time of separation. For the IFO the date of separation would be
May 11, 2010 and for AFSCME, MAPE, and the Commissioner’s Plan the date of separation would be
specified by the President, but no later than June 18, 2010.

For the classified units (AFSCME, MAPE, and Commissioner’s Plan), we will use the following model:

        2.5% of current base annual wage times years of service at the university

Years of service (after five continuous years) as of June 18, 2010 will be rounded up to the nearest whole
number for any partial years of service.

For the IFO, we will use the following model:

        A one-time lump sum payment of $40,000

The $40,000 was calculated by taking approximately 50% of the average salary of the faculty members
eligible for BESI. The average salary of eligible IFO faculty is approximately $78,200.

Each individual that meets the university criteria to be eligible for BESI would be sent information via
U.S. mail on February 23, 2010 of their estimated benefits if they elected to take it. The deadline for the
BESI election would be on March 19, 2010. For the IFO the date of separation would be May 11, 2010
and for AFSCME, MAPE, and the Commissioner’s Plan the date of separation would be specified by the
President, but no later than June 18, 2010.

There would be approximately 53 classified staff eligible for BESI under this program. Long-term
savings would have to be calculated after it was determined who took advantage of it. In some cases,
positions may be able to be eliminated or consolidated, which would provide full position salary savings.
In other cases, the savings would be the difference between an individual likely at the top step of the wage
scale to the replacement coming in at a lower level. Long-term savings are projected to be conservatively
between $80,000 to $100,000.

There are approximately 56 IFO faculty eligible for BESI under this program. Again, long-term savings
would have to be calculated after it was determined who took advantage of it. The salary savings per
position if the position was refilled is projected to range from $20,000 to $45,000 per person. There are
some faculty positions that may not be refilled. Long-term savings could range anywhere from $25,000
to $500,000 depending on the replacement status of the positions that become vacated.

The university would be able to afford up to $1,000,000 in BESI. In the event, there were more BESI
requests than funds available, a lottery would be held to determine who will receive the incentive. The
funding sources for the payments will be:

1.) Federal Stimulus Funds - $300,000.

2.) Tuition funds from FY10 enrollment growth due to Spring Semester - $300,000.
The October 2009 budget projected an annual FYE of 4,430. That amount can be increased further to
4,465. The 35 additional FYE along with growth in on-line credits has generated unanticipated income.

3.) FY2009 carryforwards and FY2010 salary savings - $400,000. This would be using one-time funds
    or savings for this one-time event.

Post-BESI Planning

After the outcome of the implementation of BESI is known, the university would then move into its next
phase of long-term planning. The hope is that BESI would provide some opportunities to look at
reallocating resources to departments, programs, or services that are growth areas or are in need of
additional staff while simultaneously achieving long-term cost savings.

The University would complete its review of programs and services. This transparent process would help
establish further actions that needed to be taken in order to balance the university’s budget for the
2012/2013 biennium. Utilizing BESI may give the university more flexibility in determining future
actions needed to balance the university’s long-term budget.