Minnesota State colleges and universities could take $75 million-$280 million hit from COVID-19

The financial toll of the pandemic on Minnesota's system of public universities and community colleges could be devastating, officials said Wednesday as they projected a budget hit ranging from nearly $75 million to $280 million.

Minnesota State system officials mapped out sobering scenarios during a board of trustees meeting Wednesday detailing financial hits that could come with possible fall enrollment drops. General fund and revenue losses for the Minnesota State system could total $74 million if enrollment were to drop 5% in the fall. The system could lose $157 million if enrollment drops 10% and $279 million if it drops 20%.

"Prior to COVID-19 pandemic, the system faced difficult financial conditions. … This particular pandemic has exacerbated that particular problem," said trustee Roger Moe, vice chairman of the board. "We are entering a time where we're going to have to make very tough decisions."

As of Monday, fall semester enrollment for Minnesota State colleges and universities was down more than 20%, officials said. Summer enrollment was down about 13%. But those gaps have narrowed in recent weeks.

Minnesota State joins public colleges across the country that are bracing for bruising budget hits because of the pandemic. The University of Minnesota System is projecting similar losses of $75 million in the best-case scenario — if the pandemic subsides in the spring — to $315 million if the virus continues into the fall semester.

Like U officials, top Minnesota State administrators won't get a salary bump any time soon. Minnesota State Chancellor Devinder Malhotra has taken a 10% pay cut.

The disruption of the spring semester alone will cost the Minnesota State system at least $35 million to $40 million in revenue and expenses. That loss includes $17 million from student room and board refunds and up to $13 million from canceled travel, events, summer camps and trainings.

The impact of potential enrollment losses would be felt differently at each of the system's 30 colleges and seven universities, said Bill Maki, Minnesota State's vice chancellor for finance and facilities.

"Institutions such as our state universities take a much larger immediate hit than some of our other institutions because their mix between their state appropriation and tuition is much more reliant on tuition," Maki said.

The Minnesota State system will receive $93 million in federal stimulus aid from the CARES Act to help soften any losses. But half of those funds, nearly $47 million, must be earmarked for direct aid to students such as emergency cash grants.

Officials say the funding is helpful but not enough to cover long-term institutional losses.

"It's really not a stimulus package. It is really a recovery package" of immediate damages, Malhotra said.

Should there be another round of stimulus aid, trustee Dawn Erlandson said, she hopes any funding would prioritize colleges that need it the most, not large universities with robust endowments.

"It's all a limited pot and to the extent we can carve out those institutions that are the most wealthy and will never have … an enrollment problem … more money could be provided to other institutions like those in Minnesota State," she said.

Trustee Louise Sundin questioned the bleak enrollment scenarios presented Wednesday and asked why there was not one accounting for a potential enrollment increase. She noted that colleges, including those in the Minnesota State system, have historically attracted more students during economic downturns.

While unemployment rates have skyrocketed, Malhotra said this pandemic-induced recession is different from others. Personal incomes have dropped significantly, he said, making people less likely to take on student debt. And many will be anxious about congregating in public spaces, such as classrooms, for the foreseeable future.

"The general sense across the country when we talk to other higher education institutions is that there is some expectation of enrollment decline," Malhotra said.

Ryan Faircloth • 612-673-4234

Twitter: @ryanfaircloth