The education of USM | Maine's second largest university grapples with a widening budget gap, shrinking enrollment and anxious staff. What's next?

As Marie Follayttar walks through the gleaming lobby of the Abromson Center on the University of Southern Maine's Portland campus, she shakes her head.

"None of these," she says, gesturing to two empty classrooms, "none of these classrooms are available to students." To explain the presence of young students in the corridor, she says they're "walking through to get to the parking lot," referring to the new garage attached to the building.

Follayttar, a 31-year-old undergraduate student of psychology and art at USM, is the student liaison to the University of Maine System board of trustees. In this position, Follayttar has the responsibility of listening to students and relaying their opinions to university decision makers.

"The average student says, 'Look at this beautiful building, and we can't use it,'" she says. "Why are they building that when we need a student center and ceilings are leaking in Bailey Hall, and other buildings as well?"

The Abromson Community Education Center, which includes a new 1,200-car parking garage, was completed in 2005 for $25 million as a center for community outreach and continuing education. Local organizations or businesses can rent the center's Hannaford Lecture Hall, which seats 520, or the six or so classrooms for professional and personal development programs. If professors want to use a classroom, they must pay a discounted rental fee of $90 a day.

The building is an example of the public university's response in recent years to community and political pressures to serve as a regional economic engine, fueling the state's southern economy with skilled graduates and opportunities for business advancement. In the last decade, 12 buildings have been erected or renovated on USM's three campuses in Portland, Gorham and Lewiston at a cost of upwards of $128 million. Paid for by different combinations of state bonds, legislative appropriations, private donations, federal funding, and student or user fees, the buildings present a grand face to the public of a growing, vibrant academic community.

Richard Pattenaude, who led USM from 1991 to 2007 and drove its expansion, was widely viewed as an inspirational and accessible president who raised the university's academic reputation. Pattenaude was hired as the University of Maine System's chancellor in February 2007, and a Portland Press Herald editorial at that time gushed, "USM's loss is UMaine System's gain; the University of Maine System's new chancellor leaves behind a host of admirers."

But budgetary disturbances began to poke up in 2005, and then broke out in a rash in the past year as the university realized it faced a multimillion-dollar deficit that necessitated layoffs, the elimination of positions and possible suspension of some academic programs.

"It looks like USM has been booming in recent years," says Joseph Medley, an associate professor of economics at the university. "[But] our offices are in a little house on Bedford Street. The classrooms that we're using were probably built in the 1960s in Payson Hall. The College of Arts and Sciences is operating with a physical plant that existed 20 years ago."

This year, the university is scrambling to correct yet another multimillion-dollar deficit: It faces a projected $3.1 million budget gap this year, after posting a $3.5 million deficit the previous year and a $3.9 million deficit during the 2005/2006 academic year. USM's current situation begs the question: Has its pursuit of development and community outreach come too fast and at the expense of students?

"I think [USM] has been trying to do too much for too many and I think it needs to refocus and restrain that focus a bit," says Margaret Weston, chairwoman of the University of Maine System's board of trustees. "They're really trying to look at the needs of students and needs of the institution and the core of the university."

Pattenaude, who has publicly taken responsibility for USM's financial difficulties, admits, "There are always additional things you can do." He adds, "The buildings and programs, the progress in the last 10 years, was in response to the needs expressed by the community."

The current administration is now scaling back by implementing budgetary controls, paring down employees and searching for new sources of revenue. Joseph Wood, USM's interim president, is eying a minimum $6 million cut to next year's budget. "We're coming as close as we can to fix a problem in as short a time as we can, so we can regroup," he says.

A question of priorities
From the first sign of budget troubles, the university's message was that USM had been hurt by declining enrollment figures and overly optimistic enrollment projections, as well as rising prices for line items such as energy and employee benefits. Many blame Maine's booming community colleges, where enrollment has increased by nearly 40% since 2002, for the USM's shrinking enrollment.

Indeed, USM's student body peaked at 11,382 in the fall of 2002. By the fall of 2007, enrollment had dropped to 10,453 students. During that time, however, the number of total credit hours did not drop off so steeply, slipping just 1.7% to 99,439 in the fall of 2007. Meanwhile, the cost of credit hours increased from $134 in 2003 to $198 in 2008. (The disparity between credit hours and enrollment is explained by an upswing in full-time students, who take more courses, and a decline in part-timers.)

"A lot of blame has been put on enrollment decreases because of community colleges, and that has been enormously exaggerated," says Jerry LaSala, a professor and chair of the university's physics department.

Professors are not seeing significant changes in their classroom sizes. USM graduated 1,705 total certificate, undergraduate and graduate students last year. In 2003, that number was 1,483. But between 2001 and 2007, the percentage the university spent on faculty salaries gradually dropped from 33% of total educational and general budget expenditures to 27%. (USM spokesman Robert Caswell, though, warns against comparing year-over-year numbers because of ongoing changes since 2004 in how such numbers are calculated.) The College of Arts and Sciences, LaSala's college, lost 12% of its full-time faculty in the last five years. And he says more part-timers are teaching full classes. While the headcount of part-timers also dipped, their paid hours on the university's roster have increased by 62% from 2000 to 2007.

The budget unraveled
In January, PricewaterhouseCoopers, a firm hired in November for $40,000 by Pattenaude and the University of Maine System trustees to audit USM's budget, completed its report. (Officials from PricewaterhouseCoopers declined to be interviewed, citing a policy of client confidentiality.)

With the completion of this audit, USM's community and the public got a wider look at factors behind the financial dilemma. The report revealed years of an irregular budgetary system that allowed the university to function as money floated around in what appeared to be an ornate and abstract system. While this system held up as the university thrived and student enrollment climbed, it began faltering when fewer students came and costs continued to rise.

In four years of a failing budget, the university has posted a collective deficit of nearly $12 million, and it has had to borrow $8.2 million in emergency aid from the University of Maine System, which it plans to pay back by 2014. (For more on the university's financial picture, see "Annual revenue and expenses, 2004-2010," below.)

USM's basic operating budget during the 2007/2008 academic year was roughly $134 million, with a state appropriation of about $43.5 million.

So far, nine staff members have been laid off and 50 positions have been eliminated, mostly through attrition. A minimum of 90 positions will have to be erased because salaries and wages with benefits make up between 75% and 80% of the university's budget.

According to university records, Pattenaude in 2003 began publicly referring to money shortages on campus caused by external factors. In 2006, Pattenaude instituted a plan for action, which included a hiring freeze. In his opening speech that year informing the academic community about the freeze, however, he did not suggest the budgetary system itself might be in danger of hobbling the university.
And William Steele, president of the full-time faculty union chapter and a theater professor at USM, says the audit "revealed a lot of problems that were not divulged to the faculty."

Although tenured faculty members have been reassured they will not lose their jobs, Steele says "there is a palpable sense of anxiety running through the faculty. We feel horrible that some of our professional [e.g., administrators, advisors] and classified [e.g., secretarial and custodial workers] colleagues are being laid off through no fault of their own, and we feel concerned that there is not more transparency about these budget matters by the administration in their communication to us."

Part of this may be due to the murkiness of the budget itself. Steele recalls the theater program operating with a "creative budgeting process." "It was a culture of 'don't worry — you spend enough to do your job and we'll cover it,'" he says, adding that money was picked up "in some place we never talked about."

Lorrayne Carroll, interim dean of the Women and Gender Studies program and an associate professor of English, describes the sense she had of working with "fictional budgets." "It's difficult to communicate the obscurity of this process and the challenge for faculty to work with this," she says.

And Medley wonders whether the obscurity of the budget actually aided the school. Although the audit does not indicate any reason behind prior budget practices, Medley asks whether the system enabled administrators "to keep the balls juggling in the air and keep the university growing in a very focused way."

USM spokesman Robert Caswell says the budget's looseness helped encourage entrepreneurialism in the development of programs and services. "It wasn't an especially transparent process nor was it widely understood," he says. But "at the end of each fiscal year, reallocations were able to be made so indeed the budget was balanced."

Richard Campbell took over the position of chief financial officer last year from Samuel Andrews, who managed the university's budget from 1980 to February 2007, when he retired. Campbell explains that part of the confusion resulted from practices such as excluding student course fees from budgets. When these fees would arrive, extra money would be funneled to departments. Now Campbell says he's anticipating annual course fees and adding them to department budgets at the beginning of the year. (Andrews did not return two calls left at a Cumberland answering machine seeking comment. )

The audit also backs up Campbell, reporting a practice of using temporary funds to pay salaries for long-term employees. Problems then were compounded when enrollments were weaker than forecast and fuel and employee benefit projections were inaccurately low.

Next steps
The university is now trying to right itself. "What we're really doing is going back to scratch and writing rules" for the budget, says Joseph Wood. (Dr. Selma Botman, executive chancellor of City University of New York, recently was hired as the university's president, and will replace Wood July 1. For more on Botman, see "The new chief," below.)

Part of the new strategy, recommended by the auditors, is to assess capital project funding. Campbell, the university's CFO, also says, "I think we need to screen construction very carefully and that any construction that takes place meets the needs of the university."

The finance office also is taking more control of the budget. Campbell has instituted formal reviews with university budget managers such as vice-presidents, department deans and the facilities director. Meanwhile, a "resource review committee" is looking at every expense over $2,500, with the exception of standard expenses that only Campbell reviews.

The university's other efforts to get out of the budgetary quicksand include seeking new sources of revenue, such as from online courses, and it plans to sell a dormitory on Congress Street. The university is focusing as well on pushing up retention rates of first-year, first-time students, so that more than the current 68% stay on for the second year.

The university is also investing in marketing, something it failed to do much of before, Wood says. So far, the university has invested $200,000 in a new marketing campaign. Wood says that going into the future, the university would like to budget half a million dollars for marketing.

Scott Steinberg, director of undergraduate admissions, says his office has been stepping up visits to community colleges to entice second-year students to apply their credits to USM and finish their four-year degree there. Wood agrees that community colleges will eventually be more of a help than a detriment to USM. "We always talked about how community colleges would be good for us in the long run," he says. "We can be less of an access institution, and we always expected they would increase the number of students interested in college."

One of the more controversial measures is asking 26 undergraduate, graduate and certificate programs with low graduation rates to come up with plans to boost enrollment or face possible elimination. "We can't justify having faculty teaching courses for three, four students in a major," Wood says.

Several of the targeted programs are in the College of Arts and Sciences. Dean Devinder Malhotra says even though his college is generating sufficient revenue to cover expenses, he supports the program review as a means of moving toward even more prudent management. "It is my perspective that out of this reflection process will emerge certain strategies and approaches that might ultimately strengthen these programs," he says.

But some professors are skeptical. LaSala, for example, says that physics is important to the university's mission of providing a foundation in liberal arts and sciences, and that one third of USM's physics majors end up teaching in Maine's public schools. Physics graduated only one major last year, though. "I think it is shortsighted," he says. "In many cases, there is very little money to be saved in these programs. Most of them will lose revenue and will discourage students from attending USM."

LaSala, who has a plan to improve enrollment that includes collaborating with York County Community College on a joint physics program, also asks why USM should repay the system's recent $8.2 million loan. "Since what happened was not the fault of anyone here now, and responsibility lies in part of those who have oversight of the budget, it seems appropriate that we get more support from the system than what seems to be happening," he says.

Pattenaude says he is open to the possibility of forgiving the debt. The University of Maine System currently has a total of $75.8 million in contingency funds — $28.7 million of which is in undesignated funds. "Trustees are willing to be flexible," Pattenaude says. "They have not been asked about forgiveness of the debt. But this [loan] is not intended to punish the institution, so if there are stresses or strains, all aspects are open to discussion."