Financial Impact

“I am humbled by the sacrifices shared by so many of you in our community. I sincerely appreciate all that each of you do to help MSU continue to provide a world-class education, conduct high-caliber research, and offer impactful outreach and engagement locally and globally.” — President Samuel L. Stanley Jr., M.D.

Due to the COVID-19 pandemic, MSU and institutions across the nation are facing significant financial losses due to lost revenues and increased expenses. Many difficult budget and employment decisions have impacted the campus community, and we’ve shared several financial updates, all of which can be viewed on the president’s webpage.

Budget difficulties

First, the university experienced a decline in tuition revenue beginning in 2020, before the pandemic, due to substantial changes in the mix and number of students across international, out-of-state domestic and in-state students. Second, the university experienced increased costs related to COVID around testing, personal protective equipment and other health and safety measures. Third, the university continued to experience increased costs unrelated to COVID as a result of inflationary increases to the cost of health care, utilities, supplies and services.

This combination of declining revenue and increased expenses resulted in the university’s general fund facing a $108 million general fund budget deficit in fiscal year 2021 and an additional $169 million general fund budget challenge in fiscal year 2022.

Since spring 2020, through shared sacrifice, MSU has saved hundreds of millions of dollars due to:

  • Furloughing hundreds of full-time, student and on-call temporary employees,
  • Salary reductions,
  • Decreased retirement contributions,
  • Cuts to unit budgets and discretionary expenses such as office equipment, travel and conferences,
  • A hiring chill, and
  • Delayed construction projects. 

Even with that sacrifice, there remains a financial challenge. We are grateful for several rounds of Higher Education Emergency Relief Funds (HEERF) from the federal government totaling $157.6 million, of which $70.9 million is in the form of emergency grants to students. The remaining funds were used as institutional relief funds.

Where we stand now 

  • We had one of our largest first-year classes for the 2021-22 academic year. However, the year before, our fall incoming class was not as large, and that decline in enrollment impacts our budget for the next three to four years. We also have been down in international students over the past several years.
  • Our endowment earnings performance is strong. Endowment funds themselves are restricted and must be spent in the specific ways they were given, such as for scholarships or professorships. While the vast majority of the earnings in the endowment cannot be spent, we will have higher than anticipated payouts, which affords us some one-time funds.
  • Early in the pandemic, faculty, academic staff and executive management took temporary pay reductions and received a decrease in their retirement contributions. The temporary salary reductions were ended after one year, and the pre-pandemic university contribution to retirement was restored, effective Jan. 1, 2022. In April 2022, it was announced that all affected faculty, academic staff and executive management would receive a payment representing 12 months of employer retirement contributions that were not made during the pandemic. The details are still being finalized, but it is MSU's intention the payment is made in summer 2022.
  • In January 2022, it was announced that a vast majority of support staff would see an 18-month reduction in their retirement contribution, from 10% to 5%. Also in April 2022, it was announced that MSU is in collaborative conversations to end that reduction 12 months earlier than initially planned. 
  • With our university fiscal year that started July 1, 2021, units across campus are still operating under the second year of incremental 3% reductions.
  • A university-wide hiring chill remains in effect, and the filling of vacancies will be limited. 

Looking forward

The university is now working through our next budget process, which started in spring 2022 and integrates priorities and principles from our strategic plan. These include improving our financial sustainability and dedicating resources to align with the plan. Further, our current planning includes a return to the regular cycle of merit increases in October 2022 for faculty and academic staff and the continuation of support staff increases in accordance with newly negotiated collective bargaining agreements.

Next year’s budget also does not contemplate further unit budget reductions. We expect the general fund budget to remain challenged over the next several years and to use one-time reserves to allow us to cover the anticipated annual shortfalls. While unsustainable for the long term, we plan to continue using one-time funds to balance the fiscal 2023 and fiscal 2024 budgets, as the impact of the pandemic will continue to be felt for the next few years.