ANALYSIS

With $183M in reserve, UMaine System pressured to either save money or faculty

Kent Ryden, head of the free-standing American and New England studies graduate program at the University of Southern Maine, which is being considered for elimination, defends his program at an all-campus forum in Portland on March 19.
Kent Ryden, head of the free-standing American and New England studies graduate program at the University of Southern Maine, which is being considered for elimination, defends his program at an all-campus forum in Portland on March 19. Buy Photo
Posted March 26, 2014, at 6:33 a.m.
Last modified March 26, 2014, at 1:29 p.m.
 University of Southern Maine President Theo Kon alikow waits in an empty gym on campus in Portland Monday as students and faculty members walked out of classes at midday protesting deep cuts that would eliminate four full programs.
University of Southern Maine President Theo Kon alikow waits in an empty gym on campus in Portland Monday as students and faculty members walked out of classes at midday protesting deep cuts that would eliminate four full programs. Buy Photo

BANGOR, Maine — At the center of protests over a dozen faculty layoffs at the University of Southern Maine on Friday and into Monday is $183 million the University of Maine System holds as reserve funding.

System officials say dipping into reserves would only delay current financial problems and detract from planned projects, but critics, like the rallying students and faculty, believe this funding should be used to stave off layoffs.

“There’s no budget crisis,” Susan Feiner, a professor of economics and women and gender studies, told attendees at a rally at USM on Monday. “They’re lying… They’ve got historic reserves. There’s no need for cuts.”

Defined as “unrestricted net assets” by accountants, the university system is not legally bound to spend that portion of its budget — which totals about $700 million — on any particular project.

Between 2000 and 2012, the system’s reserves increased by more than 300 percent, while the cost of running the system went up only 41 percent, according to an analysis from the Maine Center for Public Interest Reporting. In 2013, those reserves went up $5 million more.

System officials say the reserves are are committed to worthy projects across its seven campuses.

“The point is that for the 5½ years that I have been here, people are always talking about this one line in our financial statement … and believing that that is somehow something that would stop us from having to balance our budget,” Rebecca Wyke, the system’s vice chancellor for administration and finance, said Tuesday. “And it’s not.”

Almost three quarters of the “unrestricted” money resides on the campuses. Wyke, in an email, said the funds will be used for “capital projects, deferred maintenance, scholarship, and so forth.”

The rest of the reserve money, which amounts to $49.8 million, resides at the system office.

“That amount includes the reserve for the self-insured health plan covering all UMS employees ($20.5 million), system-wide IT projects in development ($3.6 million), collateral for internal loans to campuses and a reserve to cover deductibles for risk management ($6 million), and a number of other, smaller allocations,” Wyke said.

There is still another $15 million, which Wyke called “the true ‘rainy day fund.’”

“We are at a point where we agree that it is raining and we are probably going to have to dip into this,” Wyke said. “The question is how much.”

Each of the seven campuses have requested help from the system office in balancing their budgets for next year. In addition, the Legislature has proposed reducing the amount that the state gives the system by $6.4 million.

If all requests are funded and the state appropriation goes down, the $15 million will be wiped out, Wyke said.

She likened depleting the fund to an individual spending money that had been saved over time in one fell swoop.

“If you just spend down your savings account and your salary does not increase, you would be in trouble,” she said.

University systems have come under fire across the country for the amount of funds they hold in reserve. Last year, lawmakers ripped into the University of Wisconsin System after they learned that the system had $1 billion in unrestricted reserve funds, which amounts to 25 percent of the system’s operating budget — roughly the same portion as UMS.

Wisconsin administrators said that portion is comparable to the amount other public universities and systems hold in reserve, according to Inside Higher Ed.

Public universities in Michigan, California and Ohio have also been scrutinized for having large reserve funds, Inside Higher Ed reported.

Administrators at each university contend that the money is essential to remain financially responsible and to fund future projects in order to stay competitive.

“One-offs are not a strategy,” said James Page, UMS system chancellor, earlier this month.

“We want to do it not reactively,” he said, referring to how the system will reduce its budget by $36 million next year. “But we want to use the fact of the matter to really think hard about what vision is guiding us. Not just in making cuts, but in how we’re going to rebuild and reposition.”

With a $14 million deficit, USM accounts for the largest part of the budget shortfall, according to system administrators. As a result, that campus will likely see the starkest cuts heading into next fiscal year.

After a review of the number of students enrolled in and receiving degrees from USM’s programs, president Theo Kalikow recommended the university cut four programs: American and New England Studies, Geosciences, Arts and Humanities at the Lewiston-Auburn campus and Recreation and Leisure Studies.

“We are faced with declining demographic trends, a lagging economy, and reduced state funding which pose challenges to our mission and our ability to remain solvent,” said Kalikow in a speech to the faculty senate on March 14.

System administrators said that declining enrollment, flat funding from the state and tuition that has been frozen for two years, coupled with increasing costs, have accounted for the system’s budget shortfall.

The system’s board of trustees will vote on the proposed budgets of all seven universities in May.

 

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business