One financial model put together by Minnesota State colleges and universities projected an annual budget deficit of $66 million in nine years unless the system fundamentally changes how it does business.

The biggest problem with this forecast isn’t its dismal conclusion for Minnesota State (formerly called MnSCU). It’s that it seems far too optimistic.

Can the board of trustees expect that employees of this sprawling education system will readily agree to no increases in wages or salaries year after year beyond a cost of living increase? Oh, and also expect them to pick up more of their benefits costs?

As for revenue growth, will the board really agree to raise tuition 3 percent every year on students already sore about the increasing cost of higher education?

The financial forecast, along with a far more pessimistic one also created for a task force working on financial sustainability, used real-world assumptions to show how big of a financial hole Minnesota State will be in, according to Laura King, the system’s vice chancellor and chief financial officer.

The more pessimistic case she and her colleagues prepared also may not be especially realistic, but it sure is sobering. This one assumed wages and employee benefits costs would increase 3 percent per year while the state wouldn’t provide any more tax dollars and the board wouldn’t agree to raise tuition at all. This one also assumed the total enrollment will actually decline by 1 percent a year.

That seems excessively pessimistic, and for all involved it had better be, because this is the forecast that showed the annual budget deficit swelling to nearly a half-billion dollars in 2025.

“The object was really to try to bookend our future potential,” King said, explaining that she and her colleagues did not use language like “best case” or “most likely case” to describe these forecasts.

With the working group’s report now out, Minnesota State officials will gather comments before going back to the board in October with thoughts on which of the panel’s recommendations, if any, they want to try.

Faced with a similar set of circumstances in the corporate world, the board of directors would have already been considering a recommendation from the CEO about options for division shutdowns, divestitures and restructuring actions. Or it would be considering searching for a new CEO.

As a public system of colleges and universities, Minnesota State can’t move as fast as a for-profit company, yet King didn’t shy away from the language of corporate management when describing the system’s long-term financial problem.

“I don’t know how much you know about our business,” she said, as we sat down to discuss its finances. She took a few minutes to describe who attends one of the system’s colleges or universities and the position of its programs in the market.

This is a sprawling, truly statewide system, educating nearly 400,000 students a year at 37 institutions. Altogether it’s about a $2 billion a year operation.

As it stands now, Minnesota State is the “value” provider, described by King as “low cost in the marketplace by every measure possible.”

Looking back at its results over the past 15 years or so, aside from a spike in enrollment during and after the time of the Great Recession, what stands out is a big shift in mix of revenue.

Thinking about this education system as a business, Minnesota State has one very big institutional customer for its services in the form of the state government, and then a slew of consumers, the students and their families.

Of the core revenue of the system, tuition plus state appropriations, the state 15 years ago provided almost 67 cents of every dollar. That’s since dropped to less than 56 cents, meaning that a lot more of the money has to come from consumers.

“The popular press would say we are raising tuition unbridled, that we’re not controlling costs and we’re just running up tuition up every year,” King said. “Then when you look at [the numbers] it’s not borne out. We are just trading sources, we are not increasing revenue overall.”

The new fiscal year has now started, and once again the system has had to balance its budget. That feat suggests a chronic financial problem and not a crisis, but King hesitated to say when a genuine financial crisis arrives. “On the one hand I could say it’s today,” she said. “What these assumptions said was that in ’17 the campuses had to cut somewhere between $30 million and $40 million to balance their budgets. And that’s the kind of number that runs out forever” in the financial forecasts.

That’s another way of saying that the easiest line items to cut from the budget are already long gone. One way Minnesota State has saved money is by scrimping on maintenance of its aging portfolio of buildings, as the deferred maintenance total has inched up to around $800 million.

Delaying a parking lot resurfacing rarely makes the news, but it sure made news when St. Cloud State University announced this spring that six sports teams would soon be gone. The total annual savings were reported to be about $250,000.

Next year, under the assumptions in the pessimistic, Case B scenario, across the Minnesota State system administrators will have to find ways to cut more than $93 million in spending from the combined budget.

That’s about 370 more cuts just like the one that took out six sports teams in St. Cloud.