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Regents facing big quandary on budget

ALBUQUERQUE, N.M. — University of New Mexico regents are starting to sweat their daunting task of keeping the university finances on an even keel amid projected shortfalls of between $3 million to $5 million and anticipation the state won’t be offering much additional help as tax revenue from oil and gas drops along with prices.

There is a minimum $3.5 million in projected new fixed costs and no new revenue, Andrew Cullen, UNM’s associate vice president for planning, budget and analysis, told regents Friday.

“So that’s really the conversation in a nutshell,” he said.

UNM President Bob Frank said the school is “facing very substantial fiscal challenges.”

Enrollment is down and not anticipated to rise, at least next year. For each 1 percent drop the university loses about $2 million in revenue.

A program to entice students to graduate faster is working but also contributing to a $1.5 million drop in revenue.

“It is the right thing to do for the students, but not so good for our budget,” Frank said.

Health insurance costs for the university have steadily increased and are expected to increase next year by about 11 percent, costing the school an anticipated $4.3 million more in fiscal year 2017.

The university currently spends about $42 million on health benefits and next year is predicted to spend about $46 million for employees and retirees.

About $1 million in raises and academic affairs expenses already have been promised. And utility costs also are predicted to rise $600,000.

Elusive revenue

Regent Jaime Koch, backed by other regents, said the school needs to operate on the assumption the state will not increase the tax money it shares with the school and a tuition increase is not an option.

Oil revenues make up a sizable portion of the state’s income and, in turn, in the money the state Legislature makes available to UNM. Oil prices were at about $40 a barrel on Friday. In 2014-2015 the state provided about $322 million.

Koch has said regents plan to approve a preliminary 2017 budget in December that contains no increase from this year’s projected budget containing $325 million from the state.

Though the next budget doesn’t have to be sent to the state Higher Education Department until May 1, regents are beginning now in anticipation of making difficult decisions.

Frank said the school needs to cut costs or find new sources of revenue. He has consistently argued the school needs to recruit more students but Provost Chaouki Abdallah told regents Friday that the population of college-bound youth in the state, even if most come to UNM, is not enough to provide the necessary boost in revenue.

So, the regents last month approved a nearly $2 million advertising and rebranding campaign aimed at recruiting in state, out of state and internationally. It should make its first rollout in January, said Cinnamon Blair, the university’s chief marketing and communication officer. But the school doesn’t expect to see a return on that investment immediately.

Considering cuts

Regents also are considering cutting at least 100 currently vacant positions.

Regents are tentatively scheduled to convene again Dec. 11 and expect to hear more details about potential budget cuts, possible ideas about merit-based pay raises for professors and a plan to investigate outsourcing departments and functions at the school.

In meetings this week, they learned there are actually about 375 vacant positions at the school, almost all of them staff positions including administrative staff, medical technicians, police, reporters and some high level administrative positions. Some of the positions are funded through outside grants.

UNM human resources is going through each open position to see if it is necessary, if the funds for it are being used for other purposes or if it is filled by an interim employee.

Crystal Davis, president of the UNM staff council, told regents Friday that the possibility of cutting those positions and a proposal to give merit raises to some professors but not staff is hurting morale among staff.

“We are unsure of the value of the staff as seen through the eyes of … regents,” Davis said.

Last year, she said the school’s budget shortfall was absorbed by the school’s reduction in its health insurance benefits to retirees. The school still pays up to 80 percent of some employee health care plans.

“This year, the budget will be supplemented by staff positions,” she told regents.

She said staff are taking up the slack by doing the jobs of up to three people, staying late and working hard.

“Shouldn’t that money be used to fairly compensate the staff taking over those duties?” she asked.

Frank, however, has said the school needs to realize it can’t continue at its current levels.

“We are going to review every position that comes open in the university,” Frank said last month. “We need to right-size ourselves and recognize that we will have slightly fewer students in the future.”

In other news at the Friday meeting, regents responded positively to a discussion about charging an additional $5 per credit hour for all UNM classes to spread out the cost of online class infrastructure, which now is borne only by students enrolled in online classes even though many in-person classes use online elements. This plan would not generate revenue, but would allow the current online class delivery program to break even, said Monica Orozco Obando, the school’s vice president of extended university.