The Vermont State Colleges System is bracing for another difficult budget season.
The chief culprit of this upcoming financial cycle’s woes is the same problem that has plagued the rest of state government: skyrocketing health insurance costs. The colleges have avoided large premium hikes in recent years, but VSCS chief financial officer Steve Wisloski told a subcommittee of trustees Monday that the system’s insurance broker had warned a double-digit increase was almost certainly coming.
“Our medical spend is about 20 million a year or so. So a 10% increase is going to be about $2 million more on the system level,” he said.
This will be compounded by problems elsewhere. The system’s “medical reserve” – a fund that combines the annual surplus or deficit from the VSCS’s medical, prescription drug and dental self-insurance programs; workers’ compensation; and tuition remission expenses – is nearly depleted. That’s in part because of higher than expected medical and workers’ compensation claims, and an unexpected uptick in the use of tuition waivers.
“In the last five years this is probably, on its face, the most challenging beginning of a budget season that I’ve seen,” Wisloski said.
There is some good financial news, according to Wisloski. Tuition is set to go up next year by an average of 2.9%. And, following a market study, schools could raise their dorm room rates by as much as 7.5%. The system has also taken advantage of low interest rates to refinance certain bonds, and is set to save $5.4 million in debt service over the next four years. And discussions about restructuring the Chancellor’s Office could glean more savings.
But he warned trustees not to be overly optimistic.
“On balance, the pressures exceed the potential good numbers,” he said.
The system, meanwhile, is projecting its $182 million budget will run a $4.2 million operating deficit in the current fiscal year. That’s largely because fewer students enrolled than expected. Tuition and fees are projected to bring in $2 million less than what system leaders budgeted for; room and board is down another $1.5 million.
The VSCS includes Castleton University, Community College of Vermont, Northern Vermont University, and Vermont Technical College. NVU is carrying the largest share of this year’s projected deficit – $3.3 million – although every school, except for VTC, is also facing shortfalls.
A bad budget year comes at a difficult time for the state colleges, which are contemplating larger reforms in an attempt to deal with the demographic headwinds buffeting higher education. The schools are unlikely to get additional help from Montpelier: the Legislature and Gov. Phil Scott bumped the VSCS’s annual appropriation to $32 million last year, a $2.5 million increase, but the system is expecting level-funding this year.
“We obviously have heavy lifting to do here,” said VSCS Chancellor Jeb Spaulding.
The board of trustees will spend the next several months working on the system’s budget. Trustees are expected to approve a final spending plan in mid-June.