University budget survives first hearing

The university's 2011 budget remained largely unscathed after its first budget hearing in Annapolis on Friday. Although the proposal received no recommendations for significant cuts, state funding to the university will likely decrease about a third of a percent in the coming year.

Gov. Martin O'Malley budgeted $411 million in state funds to the university for the upcoming fiscal year — up about $21 million from last year's allowance — but after mandatory costs and the loss of more than $15 million from the expiring Higher Education Investment Fund, the university stands to lose about a third of a percent in state funding this year.

The impending loss of the Higher Education Investment Fund — a pool of money set aside to shelter universities from economic strife that is set to expire over the summer — has spurred the creation of a new bill that would make the fund permanent and add a new reserve pool that would attempt to prevent unpredictable spikes in tuition.

A similar bill was proposed and defeated last year because of its high price tag, and some fiscally conservative state senators think any bill of the sort is just as unlikely to be approved this year due to the poor state of the economy. But some state and university officials are concerned about how the loss of this fund and the dip in state funding will impact college affordability.

"I think it's a good idea, but I don't think we can afford it," said Sen. James Lowell Stoltzfus (R-Somerset, Wicomico and Worcester), who serves on the committee that reviewed the state budget Friday. "If you look at it as a stand-alone thing, you determine ‘we have to be able to afford it,' but there are so many problems across this state that you have to balance that against."

If the Higher Education Investment Fund is reinstated, the university's Director of Budget and Fiscal Analysis John Blair said it would have no impact on next year's budget, however.

"What will happen is there will be a swap," Blair said. "If the state approves the higher education fund, then they'll reduce the general fund by that amount."

For many senators, the question of how affordable higher education in the state really is remains a point of concern.

The state's Department of Legislative Services, which performs a yearly analysis of the university's budget, questioned a 14-percent gap in minority graduation rates compared to white student graduation rates and how at-risk students may be impacted by a projected decrease in need-based aid relative to an increase in merit aid.

University President Dan Mote said in his testimony to the committee that the increase in merit scholarship expenditures was intended to reflect the increased costs of attending this university — in-state tuition is set to increase about 3 percent next semester. Mote also noted recent changes in federal policy prevent the university from participating in loan programs that could lose about $1 million in need-based aid for students.

"The loss of this revenue stream for the campus is quite significant in the current economic climate, where we continue to receive more and more financial aid appeals each year," Mote said, according to his written testimony. "The campus has committed to base budget an additional half million dollars for financial aid in [this year] to offset part of this loss, but we simply do not have the financial resources available to cover the entire loss."

In his testimony, Mote also emphasized the university is still supremely underfunded when compared to its peer institutions — University of Michigan at Ann Arbor, University of North Carolina at Chapel Hill, University of Illinois at Urbana-Champaign,  University of California at Los Angeles and University of California at Berkeley. This shouldn't be the case, he said, as the university benefits the state in many ways, particularly economically.

"We would need $108 million additional funds to come up to the peer average, assuming 30,000 full-time students," Blair said.

apino@umdbk.com