EAST LANSING, MI — Michigan State University President Kevin M. Guskiewicz promised to keep faculty and staff updated on developments with the budget deficit. The school is facing significant financial challenges, Guskiewicz says.
Guskiewicz released a letter today on the school’s website. It comes a week after state lawmakers proposed millions in budget cuts to Michigan State University. The letter is printed here in its entirety:
Dear faculty and staff,
I write to follow up on our efforts to address Michigan State’s financial challenges, which I promised to keep you apprised of when I wrote you last month.
I want to begin by thanking colleges and units across the university for their diligent work on budget planning. I know this has been difficult, and I am grateful to all Spartans for showing patience and continuing to advance the university’s critical teaching, research and outreach missions amid uncertainty. We are all in this together, and through our collective efforts, we will ensure the university’s financial health moving forward.
Alongside our Finance Office, the university’s executive vice presidents and I have started to carefully review administrative unit and college budget proposals. We can clearly see the care with which unit leaders and their financial teams have proposed spending cuts, focusing first on things like external contracts, hiring freezes, travel allotments, programmatic costs and other areas before considering actions that would impact current personnel.
This is a moment of shared sacrifice, and the Office of the President will absorb its full 9% cut in the coming fiscal year, as well as additional cuts the following year. There are also plans across units to not fill vacancies and eliminate executive positions as well as to reduce administrative layers within the organization.
I recognize there are still questions about how we arrived at this financial situation. So, I would like to elaborate on the challenges before us and our process for addressing them.
Contributing factors
Our structural deficits stem primarily from double-digit increases in the cost of centrally funded employee health care and other operating cost increases, plus a general fund budget deficit from unbudgeted headcount and financial aid at the end of last year. While MSU has operated with modest recurring deficits that we’ve been able to cover in prior years, we now view these as unsustainable.
We also anticipate reduced income from federal actions, such as research cuts and restrictions on international student enrollments — and possibly additional state appropriations shortfalls — although the magnitude of these effects is uncertain. These, too, will add to our financial and planning challenges. So, we must address our current budget and the significant increases in health care and operating costs to better navigate uncertainties.
Other significant budget considerations include state appropriations and our provision of student financial aid. While we are grateful for state support, appropriations per resident undergraduate student have fallen by 44% since fiscal year 2000 when adjusted for inflation. Yet, over the past 10 years, we’ve managed to hold tuition increase rates to the lowest level of all Michigan public universities. And we have consistently increased university-funded financial aid in recent years, which has grown by an average of 7% annually.
Such investments are aligned with our values, and we will continue to allocate resources that advance our mission — from supporting employee raises to advancing college affordability.
I also want to address questions about continued investment in the university’s infrastructure. Facilities projects are often funded through non-general fund sources, public-private partnerships or the recently launched comprehensive fundraising campaign. Such investments in our future are critical to generating new opportunities, expanding our reach and contributing to Michigan State’s long-term success. At a time when general fund resources are limited, it is more important than ever to tap into other revenue sources to advance our university in creative and innovative ways, but those sources often come with more restricted uses.
Financial planning
Regarding process, our budget office had been working on structural improvements to our financial planning and practices even before my arrival in March 2024. When I became president, I shared that one of my initail priorities would be to comprehensively assess MSU’s financial health and consider how we can best invest our resources to achieve operational excellence. Since then, I have looked closely at our budget model and the state’s appropriations formula and have examined stress points, available reserves, hiring and spending trends, and forecasted operating budget trends.
Following my listening and learning tour in the spring and summer of 2024, we initiated preliminary conversations with university leaders that included saving expenses — particularly in new hiring. We’ve already seen fewer job postings across the university this calendar year.
Earlier this spring, we brought our deans and vice presidents into more detailed discussions around broad ideas to identify strategies and potential budget savings, as well as specific actions that could be taken to help relieve the budget pressures. We subsequently asked all units to submit budget proposals to us by June 6 that target general fund reductions of 9% over two years, with two-thirds of the savings scheduled for the coming fiscal year.
That brings us back to our current reviews of budget proposals. In addition to considering alignment with university goals and priorities, we are looking for potential economies of scale and potential conflicts or overlaps across unit submissions. The reviews with executive leaders will be completed by the end of June, and those leaders will communicate next steps directly with units.
I recognize the understandable concerns about how our financial challenges will impact our community. So, I do want to be clear that we are not in a financial crisis. Rather, we are making thoughtful, proactive reductions now to help avoid more severe, reactive cuts in the future. That means ensuring Michigan State has the flexibility to navigate our uncertainties, challenges and opportunities.
Thank you all again for your dedication. I expect to be able to provide more details about our financial planning as we move through the summer.
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