Everyday on cable news networks across the globe stock tickers are showing more red. The “almighty dollar” is doing little to earn its title as it drops in value, and the already cash-strapped state of Maine is sharpening the budgetary machete for a new round of cuts.
“Recession” can be a scary and alarming word, and even more alarming to a university that is slowly discovering its own financial woes.
How might a national recession affect USM?
UMaine system administrators promise that academic quality is the first priority, but can a school like USM – in the face of multi-million dollar deficits – weather the tough economic times ahead?
Timing is everything
“This came at a really bad time,” says Charles Colgan of the recession. Colgan is a professor in USM’s Muskie School of Public Service, and chair of the State of Maine Consensus Economic Forecasting Commission.
“USM built up budget problems when things were going well – then things crashed along with the nation and state as they weakened.”
USM is not the type of school that can easily deal with sudden economic downturns, he says, “this university is under-funded in good times.”
Add to the list of problems a looming budget deficit of $8.2 million, which USM has addressed by taking out an internal UMaine System loan, set to be paid back by 2014.
The community has been left asking what led to such a deficit.
Murky budgetary and reporting practices have been blamed. However, UMaine System Chancellor and former USM President Richard Pattenaude has a different view.
“The budget system made it harder to understand where we were,” he says, “but it didn’t not cause the budgetary problems.” Instead, Pattenaude sees declining enrollment as a more viable answer.
Finance professor Joel Gold points to what he calls “an unfair share” of the UMaine System allocation to USM as a likely culprit – USM has gotten about 30 percent of the allocation for the last 30 years, despite doubling in size.
Gold sees growth as a worthwhile goal for USM, and one that is already showing some positive return.
“We spent a lot of money, (under former president Pattenaude) but you need to do that sometimes,” says Gold. “Pattenaude grew the university despite low budget money, but I think if you look at the campuses and the faculty, you’ll see that (USM is) a lot better than it has been.”
Flat-funding & tuition increase
A troubled Maine means a troubled USM, according to Colgan, and the latest round of budgetary cuts by the state legislature reflects this. The UMaine System has been “flat funded” for the upcoming fiscal year, which means that it will receive the same $187 million from the state that it received last year.
“This is basically a cut” says Colgan, noting that the practice of “flat funding” doesn’t take into consideration issues of inflation, the slumping economy, or massive energy cost increases.
USM has very few low-impact strategies available to deal with economic problems.
Termination of positions and tuition increase are some of the only means through which the school can control its finances, and both are met with fierce opposition by faculty, staff and students.
A tuition increase is currently in the works, to be decided upon at a May 8 meeting of the Board of Trustees. Pattenaude hopes that the increase can be kept under ten percent, though others think this is a low estimate.
“Tuition increase is the resource of last resort,” Pattenaude says, but he recognizes that pre-existing budgetary problems like those at USM are made even more dramatic when the state budget doesn’t increase.
Pattenaude does note that the system will increase financial aid at the same rate as tuition in an effort to ease the burden on students.
Looking forward
Colgan helps the state of Maine to prepare its annual economic forecast, given this year at a breakfast in January, but even he admits that it’s hard to see what’s coming.
“This recession has had a lot of surprises in it,” Colgan says. He mentions the collapse of the fifth largest investment firm, Bear Stearns, earlier this year, as one major surprise. A rapidly falling dollar and skyrocketing gas prices are some of the other unforeseen events in this current slump.
Colgan foresees Maine as only experiencing a mild recession with some job loss followed by quick job recovery. He expects this mild recession to last until 2011, but notes that in that same year, Maine’s Brunswick Naval Air Station will close for good, meaning a huge loss of jobs and state revenue.
One unintended benefit of the weak American dollar might be rising international enrollment at U.S. schools. With the euro currently worth $1.60, foreign students might flock to the U.S. for a cheaper education, infusing the nations economy with foreign currency.
Pattenaude mentions that USM’s application numbers (of all students) are up for next fall, a good sign for the university’s financial well-being, although it has been noted by other administrators that the admissions system has changed such that comparing numbers right now might not mean much.
Colgan wants to wait until all the numbers are in to make his final predictions on Maine and USM. “It really depends on there not being a lot more surprises.”
This concludes our three-part series covering the economic recession and its affects on USM, its students and the community. Part one, by Abigail Cuffey, looked at the job market and prospects for USM graduates. Part two, by David O’Donnell, examined the historical effects of national recessions on USM enrollment. Part three, by Matt Dodge, put USM within the context of the state, looking at how the national and state-wide struggles will fit alongside the university’s own financial hard times.