General Fund Budget Narrative

Throughout the last year, University of Iowa academic, administrative and shared governance leaders continued its efforts to develop a new, value-based budgeting process.  With the goal of establishing a process that empowers unit leaders to prioritize funding in order to support their respective missions and to improve financial transparency, additional components to the model were confirmed and enhanced to assist in developing the FY 2019 budget:

New Budget Model - Characteristics

  • Value-based, transparent, and shaped by guiding principles (Student Success, Quality Indicators, Our Values, Our Future)
  • Flexible design to support and finance the 2016-21 University of Iowa Strategic Plan
  • Based on annual increases/decreases to the GEF “Collegiate Economic Analysis” report

New Budget Model - Goals

  • Maximize annual net tuition revenue
  • Improve predictability and stability in the face of a generational decline in state support
  • Incentivize new revenue generation
  • Provide recurring/non-recurring  funding for strategic initiatives
  • Ensure collegiate/non-collegiate unit financial accountability
  • Improve salary competiveness
  • Reward collaboration within and among colleges
  • Fund salary and benefit adjustment and/or other inflationary increments through new revenues, efficiencies or reprioritization
  • Provide guidelines for equitably sharing centralized costs
  • Develop multi-year revenue/expense projections

This collaborative process and budget model allowed the University to develop a General Education Fund budget reinforcing its principles and mission of education, research and discovery, while also addressing downward adjustments in state appropriations.

All other University of Iowa FY 2019 budgets were developed simultaneously with the General Education Fund budget and under similar and, in most instances, identical policies and budget guidelines.

 

A. REVENUE PROJECTIONS

 

$ 739.7  million FY 2018 Original GEF Budget 
$    (5.2) million FY 2018 State Appropriations (mid-year)
$     3.2  million FY 2019 State Appropriations
$     5.5  million Tuition 
$     1.8  million Indirect Cost Recoveries
$     5.3  million Total Revenue Increase
   
$ 745.0 million FY 2019 GEF Budget

 

State Appropriations

The University’s General Education Fund (GEF) support from state appropriations at the beginning of FY 2018 was $216.8 million or 29% of the University of Iowa’s GEF budget.

During FY 2018, state appropriations to the University were permanently reduced by $5.2 million (-2.4%).

For FY 2019, the Board of Regents requested an additional $5.0 million for resident undergraduate student aid at the University of Iowa.

Based on appropriation legislation passed by the Iowa General Assembly and approved by the Governor, the Board of Regents received a lump-sum increase of $8.3 million in FY 2019 to be allocated by the Board to SUI, ISU and UNI.  In June 2018, the Board approved an allocation of $3.2 million to the University of Iowa to be used for financial aid for undergraduate students from Iowa. 

Tuition

In June 2018, the Board of Regents approved the following base tuition increases for FY 2019:

  • 3.8% increase for resident undergraduate students
  • 2.1% increase for nonresident undergraduates and most graduate and professional students

In addition to base tuition increases, the Board approved a tuition supplement increases for Tippie College of Business for the recently approved Master of Science in Finance (MSF) degree program and an on-campus Masters of Science in Business Analytics program.  These adjustments are estimated to yield an additional $0.2 million in FY 2019.

For the fall of 2018, the University is anticipating a smaller incoming freshman class.  Focused enrollment management efforts plan to yield a diverse yet more prepared freshman class allowing for improved retention and time to graduation.  Graduate and professional student enrollments are anticipated to remain the same.  

In total, the University is projecting an additional $5.5 million in tuition revenue.  This increase includes projected enrollment changes, tuition rate increases, and tuition supplement increases.

The FY 2019 estimated total gross tuition budget is as follows:

 

Resident

NonResident

Total

Undergraduate

$117,490,000

$250,221,000

$367,711,000

Graduate

35,651,000

8,906,000

44,557,000

Professional

45,223,000

23,148,000

68,371,000

Other

908,000

1,292,000

2,200,000

Total

$199,272,000

$283,567,000

$482,839,000

 

Other Income

The University is estimating a $1.8 million (4.2%) increase in indirect cost recoveries due to the on-campus F&A rate increase to 52.5% that occurred July 1, 2016 and an anticipated increase in federal research activities.

Interest and other income within the General Education Fund are estimated at similar levels for FY 2019.  All earnings of General Education Fund balances remain within the General Education Fund for budgeting and expenditure purposes.

Reallocations/Reprioritization and Cost Saving Measures

While reallocating resources toward institutional priorities is a fundamental part of the new budget development process, mid-year reductions in state funding continue to negatively affect the University.

As such during FY 2019, the University will be using the new budget model to identify, evaluate and possibly discontinue or close activities including University centers and institutes in which state resources are no longer sufficient to support these functions. The University must ensure available resources align with the University’s strategic plan and sustain financial viability.  Scarce resources will continue to be directed to student success, research, and economic development programs.

B.  EXPENDITURE PROJECTIONS

Collegiate and Central Core Unit Allocations

The University’s new budgeting process provides a framework for accelerating advancement in strategically targeted areas while maintaining and contributing to the high quality in core missions and central programs.

Distribution of new revenues to collegiate and central units are calculated utilizing predetermined methodologies to improve transparency and predictability for units.  For example, new revenue generated by a college that is subject to share, such as tuition and fees, allows for seventy percent of new revenue to remain with the college. Thirty percent is distributed to central service units responsible for providing core administrative services to collegiate and/or auxiliary units.

Increases or decreases in state appropriations are also distributed by apportionment to collegiate and central shared services units.

Once revenue distributions are calculated, collegiate and non-collegiate units set priorities and create spending plans guided by the four budgeting principles (Student Success, Quality Indicators, UI Values, and UI Future).

Salary and Fringe Benefits

In recent years, the University has not set a campus-wide salary policy and has instead empowered Deans, Vice Presidents and other unit leaders to make decisions based on their unique needs, priorities, and market conditions.

Faculty and Non-Bargaining Professional and Scientific (P&S) Staff

For FY 2019, University leadership determined that potential performance and/or cost-of-living increases for Faculty and Non-Bargaining P&S staff will be moved to January.

This was not done as a cost savings measure but as a prudent reaction to multiple midyear rescissions from state government.  Waiting until January will give the University a clearer picture of tuition revenue following September enrollment counts and of any potential state budget changes following the state of Iowa’s December meeting of the Revenue Estimating Conference.

Average salary increases awarded to Faculty and Non-Bargaining P&S staff will be calculated in January as individual colleges and units continue to set their own salary policy decisions.

This delay in salary increases does not affect UI Health Care or promotional raises.

Collective Bargaining Units

The University will fully implement the terms and attendant costs of all collective bargaining agreements.  General Education Fund salary costs of the agreements are estimated to increase by $0.6 million for AFSCME staff and $0.4 million for COGS represented staff (graduate assistants) in FY 2019.

Fringe Benefits

In February 2018, the University completed negotiations with the federal government establishing the FY 2019 fringe benefit rates for each employee category. Annual changes in the approved rates are attributable to cumulative historic costs of covered benefits, salary changes, and employee utilization of benefits.

For FY 2019, changes in fringe benefit rates on the existing General Education Fund compensation base will decrease total benefit costs. Costs related to AFSCME bargained merit staff will decrease $2.1 million and P&S and faculty costs will increase $1.1 million.  The net change results in an estimated decrease of $1.0 million.

Student Aid

Due to several decisions over the last year, the University is estimating to decrease its overall student aid budget in FY 2019 by $0.5 million.

In November 2017, following state appropriation cuts and resulting financial concerns, the University decided to discontinue its Summer Hawk Tuition Grant program upon completion of the 2018 academic summer session.

In June 2018, the Board approved an allocation of $3.2 million to be used for resident undergraduate students.

The University of Iowa is committed to identifying new ways of meeting the needs of its students and will focus efforts on sustainable means of helping students graduate on time and receive the highest value education it can provide.

Opening New Buildings:  Costs to occupy new, improved or reassigned space

The estimated change in utilities, custodial services, information technology, and general maintenance and renewal costs for new or improved General Education Fund-supported buildings in FY 2019 is $0.7 million.

This net increase includes new costs associated with the Engineering Bldg. offset by reductions associated with the partial demolition of Seashore Hall.

Utility Inflation (non-salary)

The University continues to explore opportunities for reducing purchased fuel costs, decreasing its reliance on coal and reducing the University’s carbon footprint by burning renewable fuels.  Because of these efforts and building energy conservation improvements, the General Fund non-salary utility expenses are expected to remain the same for FY 2019.

The University’s General Fund support of utility expenses for the Oakdale Campus will continue in FY 2019 as other revenue sources, including state appropriations, for the campus remain flat or continue to decline.  The campus houses the State Hygienic Laboratory, a major consumer of utility services on the Oakdale campus.

Strategic Investments

In the spring of 2018, previous Central Service Unit review committees were reformulated as advisory committees to provide ongoing reviews of each business unit and forward proposals for either operational cost savings or increases for consideration to a newly formed administrative Budget Review Board.

For FY 2019, the Budget Review Board approved $0.9 million to ensure the University’s highest operational priorities receive adequate funding.  The proposed initiatives support the University’s mission and will provide innovative opportunities for students, faculty, and staff.  

The University will continue to use the seven advisory committees to evaluate and implement additional initiatives throughout the fiscal year.