Minn. State may shift funds to struggling universities

Officials with the Minnesota State colleges and universities system are expected to vote Wednesday on a proposal to shift funding from some of its smaller colleges to help two universities that are struggling financially.

The plan would reallocate up to $25 million each year for the next four years to “financially challenged” institutions. Most of that amount — a total of up to $15 million each year — would go to two schools: St. Cloud State University and Bemidji State University.

The money would be shifted from the Minnesota State system’s other institutions, with the majority coming from two-year colleges.

Leaders say the stopgap measure is needed to financially support St. Cloud State and Bemidji State, which have faced enrollment declines and structural deficits.

Drops in enrollment

At St. Cloud State, for example, the number of students has fallen by 40 percent over the past two decades to just under 10,000 this year. Both universities have already cut academic programs and reduced their workforce.

Minnesota State officials say it’s not unprecedented for the system to financially support its institutions. But it’s the first time the system is proposing to transfer funds from its smaller colleges to some of its largest universities, and at such a large scale.

“We are starting to see individual institutions’ financial health weaken beyond an unacceptable point, where serving the students at those individual institutions is at jeopardy,” said Bill Maki, Minnesota State’s vice chancellor for finance. “And those institutions have already made significant budget reductions, several rounds of them.”

Maki said the funding shift is a temporary solution and not a perfect one. But he said the board needs to take action now while it works on a larger plan to realign the system.

“It’s intended to be for up to a four-year period, but knowing that Minnesota State is going to need to look different,” Maki said. “Because what we can’t do is create a situation where we’re creating more institutions that are having financial difficulties by supporting the ones that currently are.”

Minnesota State has a structural deficit of about $30 million, which is projected to grow to $100 million in two years if no action is taken. Chancellor Scott Olson said recently the system needs to “right size” itself, and that could mean closing some institutions or campuses.

Minnesota State leaders recently announced they plan to close the community and technical college campus in Detroit Lakes as soon as the summer of 2028.

Objections to the proposal

The proposed funding shift has met with some pushback. Two-year colleges have raised concerns about the impact on their bottom lines.

Kevin Lindstrom, president of the Minnesota State College Faculty, said his organization understands that some institutions occasionally need support from the entire system. But he questioned the amount of the transfer and whether it will be any help.

Lindstrom noted that up to $40 million could be transferred to St. Cloud State over the next four years, which he called “an extraordinary amount” that would have negative consequences for two-year colleges.

“It all seems to be done without the prospect or some sort of clear indication that it’s going to make a difference,’ he said.

Two-year colleges have had to make tough choices in recent years and tend to operate pretty efficiently on lean budgets, Lindstrom said. Some could carry the burden of the financial shift, but for others, it could be a problem, he said.

Lindstrom and others question whether it makes sense to keep supporting struggling universities when there’s no sign that the current financial picture will change in the near future.

The financial challenges aren’t limited to Minnesota State higher education institutions. Colleges and universities across the U.S. are facing declining enrollment due in part to a shrinking number of college-age students, a problem known as the demographic cliff.

There’s also been a decline in people’s perceptions about the value of a college degree and whether it’s worth the cost of tuition in a changing job market.

Minnesota’s state colleges and universities have also faced rising costs and flat state funding that hasn’t kept up.

Minnesota State officials plan to continue working on realigning the system of 26 colleges and seven universities, which serves about 270,000 students. They will present options for restructuring to the board of trustees in January.

Maki said they likely will be asking the Legislature for additional one-time funding for the realignment plan, and to help some schools demolish old buildings to save on maintenance costs.