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University of Maine System Chancellor Richard Pattenaude responded to concerns that the system overstated the precariousness of its financial situation in an e-mail to employees Jan. 20.
Two recent independent analyses of the system’s finances, one commissioned by the Associated Faculties of the Universities of Maine and the other by the University of Southern Maine student senate, asserted the system has large cash reserves it is unwilling to tap into.
“Any suggestion that the University of Maine System is broke or out of money is preposterous,” wrote Howard Bunsis, professor of accounting at Eastern Michigan University, in his analysis for USM’s student senate.
Without directly responding to either analysis, Pattenaude sought to tamp down concerns the system is not using its reserve funds while the economy is in a downturn.
“You cannot make long-term commitments using one-time money,” Pattenaude wrote. “This is tantamount to buying a car because you have enough savings to pay the first few months’ payments, but not enough income after that to cover the ongoing costs.”
Pattenaude also stated that much of the system’s funds are restricted, meaning they are reserved for a specific use such as scholarships.
According to the system’s most recent annual financial report, it has nearly $132 million worth of restricted funds and $83.6 million in unrestricted funds. Restricted funds are down $14.7 million from 2008-2009, but unrestricted funds are up $6.4 million. Pattenaude said the system is currently aided by federal stimulus funds, which can not be counted on in the future.
“The next direct challenge, following the current year budget cut of $6 million, will be the permanent loss of $5.9 million in stimulus funds after FY [fiscal year] 2011,” Pattenaude wrote. “Stimulus funds are helping us handle the current budget cut, preserve jobs, pay the bills, and hold tuition increases down.”
“We cannot accept the idea that state revenues will return quickly to former levels and that enrollments can be increased with ease,” Pattenaude wrote in the e-mail. “Nor can we simply ignore the costs of retiree health care or deferred maintenance for several years.”
The system is projecting flat enrollment for the next several years, according to system spokesperson Peggy Markson. The system’s enrollment has decreased 4.3 percent over the last five years.
Bunsis, a certified public accountant accountant, said Wednesday that universities generally use overly pessimistic projections and that enrollment at institutions of higher education generally increase when the economy is in trouble.
“I think the [University of] Maine System has more financial flexibility than they are claiming,” Bunsis said. Bunsis based his findings on expendable assets, which include unrestricted and some restricted assets, he said.
The accountant rejected the assertion that the system is in trouble. “I really think that’s unfair,” Bunsis said. “I really think that borders on irresponsibility.”
The system spends too much money on administrative costs and should cut in those departments before furloughing or cutting faculty, Bunsis said.
“The University of Maine System is not putting enough dollars into education,” Bunsis said.
