The Minnesota State Board of Trustees received an update on the system27s fiscal year 2026 operating budget that outlined enrollment gains, rising insurance and compensation costs, and planned budget-balancing steps.

Vice Chancellor Brian Mackey told the Finance and Facilities Committee the board approved the FY26 operating budget in June but staff wanted to update trustees on key budget variables as fall enrollment finalized and the next legislative session approaches. Mackey said the system27s biennial budget request submitted last November sought $465 million across four priority areas; none of that new operating request was funded in the 2025 session, though the board advanced some capital priorities into the capital program.

Mackey said the most significant cost pressures are higher insurance premiums and compensation increases tied to negotiated contracts. "Insurance costs are expected to go up significantly," he said, noting health insurance is the main driver and that cost increases reduced flexibility for salary increases. The board had approved a bargaining agreement that included a 3% salary increase in year one and a 0.5% increase in year two; other settlements averaged about 5% per year, Mackey added. Those compensation and insurance dynamics increased projected total compensation costs to four to five percent in many institutions.

On revenue, Mackey reported better-than-expected enrollment figures. The system now projects about 117,007 full-year-equivalent (FYE) students for FY26, up from earlier projections and implying a 1.1 percentage point improvement in the year-over-year projection (from 1.7% to 2.8%). "Summer was up about 7% and fall was up about 4.2% in headcount," he said, and noted the system counts FYE using 30 undergraduate credits and 20 graduate credits per year in its budget methodology.

Mackey reviewed typical campus budget-balancing actions: hiring freezes, holding non-personnel budgets, recruiting pauses, and voluntary early separation incentives (the BESI program). He said six colleges, one university and the system office had used that incentive as of Oct. 10 and others were proposing plans. Presidents who spoke to the committee described tiered approaches to reductions and investments tied to updated enrollment and revenue data.

Trustees also discussed timing for tuition and budget conversations: Mackey said the board has the authority to set tuition without legislative mandate and that earlier conversations about tuition planning could begin in the next board cycle. He previewed future items including a detailed presentation on FY27 operating budget parameters, monthly one-page financial health snapshots for trustees, and an upcoming financial statement and audit committee review.

Ending: Mackey and the committee said the update was informational; trustees asked staff to continue monitoring enrollment, insurance, and compensation developments and to return with refined projections and budget parameters in coming meetings.