THE MISSOURI BUDGET AND IMPLICATIONS FOR HIGHER EDUCATION Paul Wagner, Deputy Commissioner

Overview of Missouri’s state budget Nature of the federal stimulus package The state’s current balance sheet The outlook for higher education budgets Challenges for Southeast Missouri State

Don’t we have $23 billion dollars? Yes, but... $7.8 billion are federal funds for dedicated purposes (Medicaid, K-12, public safety). $7.5 billion are “other funds” for dedicated purposes, such as the conservation sales tax, gas taxes, gaming proceeds. So that leaves us with about $7.8 billion of general revenue – discretionary dollars.

Where does the $7.8 billion go?

The Current Situation The State finished FY 2009 about $550 million below FY FY 2010 collections are expected to be down another 6.5%, $480m below FY So if it weren’t for the stimulus money, we would be around $1 billion in the hole. The projected growth for FY 2011 (3.6%) will still leave the State $775 million behind FY 2008.

What about federal stimulus funds? Stimulus v. Stabilization Stimulus – direct grants and competitive opportunities Stabilization – “free money” for states to preserve programs and services (and FMAP)

How reliant are we on stabilization money? There is currently about $1.2 billion in the FY 2010 operating budget. About $775 million is in the regular operating budget – mostly supporting on-going programs/services like higher education. The remainder is primarily in the capital improvements budget – one-time expenditures.

FY 2010 Spending of “Education” Stabilization Funds Reduce State Funding to FY 2006 level, then backfill to FY 2009 level with stabilization funds: $104,786,639 Higher Education Institutions $479,413,871 K-12 Foundation Formula $584,200,510 TOTAL $188,971,825 FY 2011 Remaining FBS Funds

But really, what kind of shape is the state budget in now?

What are the implications for higher education funding?

FY 2011 Potential Scenario $961,515,803 FY 2010 Higher Education - base funding -$104,786,639 less FBS funding used in FY 2010 $856,729,164 Base GR funding for FY 2011 (FY 06 level - cannot go below) $35,680,807 plus Higher Education's proportion of remaining FBS money (18.5%) $892,409,971 equals FY 2011 "no increase" base for Higher Education Institutions -$69,105,832 shortfall from FY 2010 level (-7.2% )

What about FY 2012 and beyond? Without some other intervention – we’ll finally be forced to live within our means. Any withholdings or FY 2011 cuts will have to become permanent, and other major reductions will have to take place. The business of state government will have to fundamentally change.

How to approach the problem? Hancock II Missouri’s political culture The Governor’s approach Letters from the Budget Director The Governor’s actions

Challenges for Southeast Missouri State Unfunded FTE growth Existing demographics Emerging demographics Regional relationships – cooperation or competition

Advantages for Southeast Missouri State Entrepreneurial focus Flexibility and responsiveness Broad mission ________________________

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