MSU outlines financial conditions for layoffs, furloughs

Missouri State developed a plan to implement employee furloughs or layoffs, but only if the funding shortfall for next year exceeds $16.7 million.

MSU President Clif Smart recently presented scenarios to the Board of Governors as part of ongoing budget talks for the upcoming school year.

"As we develop this budget, we want to be transparent and we want to communicate widely and we want input from stakeholders — and we've done that," he said. "We have tried hard to communicate how we are managing things."

The state's second-largest university is planning for the possibility of a significant drop in state funding and a loss of revenue if enrollment shrinks more than the predicted level: 834 students.

MSU was looking at ways to cut spending for the 2020-21 year before the coronavirus pandemic prompted widespread closures, job losses and the economic downturn. Now, cuts are expected to be deeper.

This month, the MSU administration is expected to present the board with a proposed budget that includes $10 million in cuts because there is "almost no scenario" where the reductions will not be needed.

Smart also plans to present the board with "an additional $10 million in reductions" to the budget, which can be implemented if needed.

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He said the university can typically predict accurate state funding and enrollment by this point in the year. However, the COVID-19 outbreak and its aftermath created uncertainty and budget adjustments will likely be needed in the coming months.

"We don't know how much the governor is going to withhold on July 1 and we don't know really very clearly what our enrollment is going to be in the fall and may not know until Aug. 17, on the first day of classes," said. 

Smart said the initial $10.2 million in proposed budget cuts will include:

• Freeze 68 open positions through June 20, 2021
• Eliminate internet incentive payments for faculty to teach online courses
• Delay opening new residence hall for one year
• Reduce allocation for facility repairs and classroom supplies

If more cuts are needed, travel budgets will be cut in half and less will be allocated for facility repairs, classroom upgrades and academic equipment. The enhancement fund controlled by the president, which is discretionary, will be slashed.

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The contingency plan calls for pulling up to $4 million out of university reserves before any personnel cuts. The reserve fund is required by board policy to remain above $40 million and is expected to end this fiscal year at $58 million.

Smart said until the state funding level and revenue shortfall are clear, he is hesitant to use additional reserve funds because they may be needed in the future.

"I think we need to have our reserves in reserve," he said.

Smart said all those steps plus a tuition and fee increase for next year and a series of separate spending decisions made this spring will allow the university to absorb up to $16.7 million worth of a funding shortfall for the 2020-21 year.

However, if more spending cuts are needed, the university developed scenarios to save at least $3.3 million by laying off 53 employees or implementing furloughs.

"We could do furloughs a slew of different ways," he said.

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Smart said one option is for employees paid between $40,000 and $100,000 a year to take an unpaid day every other month, for a total of six a year. "That is the equivalent to about a 2.3 percent reduction in pay."

Employees paid more than $100,000 a year, including Smart, would be required to take one unpaid day off each month. That is a pay cut of 4.6 percent.

He said 500 employees, paid less than $40,000 a year, will not see a pay cut under the furlough option.

Beverly Miller Keltner, a member of the governing board, said the impact on employee morale needs to be a factor in deciding which way to go.

"We need to keep in mind, first and foremost, which of those would have the least amount of impact on our academic quality," she said. "That is something I am very concerned about."

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Smart said the university is on track to eliminate or freeze 169 positions in a four-year period including 144 that were vacant, including the 68 frozen for the next year. Other openings came through layoffs, retirements and resignations.

"That is a pretty significant reduction when you consider we have about 2,200 full-time people," he said. "If we were to actually lay off another 53, we would have reduced our workforce by more than 10 percent, so I tend to be in the furlough camp."

Claudette Riley is the education reporter for the News-Leader. Email news tips to criley@news-leader.com and consider supporting vital local journalism by subscribing. Learn more by visiting News-Leader.com/subscribe.