General Fund Budget Narrative

Throughout FY 2017, University of Iowa academic, administrative and shared governance leaders continued its efforts to refine and enhance its 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 identified to assist in developing the FY 2018 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”Increasing the value/return-on-investment of choosing our institution

New Budget Model - Goals

  • Maximize annual net tuition revenue
  • Accommodate future state appropriations at flat or reduced levels
  • Incentivize new revenue generation
  • Provide recurring/non-recurring  funding for strategic initiatives
  • Ensure collegiate/non-collegiate unit financial accountability
  • Improve salary competiveness
  • Fund salary and benefit adjustment and/or other inflationary increments through new revenues, efficiencies or reprioritization
  • 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 2018 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

 

$ 736.0  million FY 2017 Original GEF Budget 
$ (15.4)  million State Appropriation
$   17.6  million Tuition 
$      1.8 million Indirect Cost Recoveries
$    (0.3) million Interest Income
$      3.7 million Total Revenue Increase
   
$  739.7 million FY 2018 GEF Budget

State Appropriations

The University’s General Education Fund support from state appropriations at the beginning of FY 2017 was $232.2 million or 32% of the University of Iowa’s General Education Fund.

During FY 2017, state appropriations were unexpectedly reduced by $9.2 million (-4.0%).

For FY 2018, the University and Board of Regents requested a $4.6 million (2.0%) increase for the University of Iowa.  Based on appropriation legislation passed by the Iowa General Assembly and approved by the Governor, the University of Iowa’s General Education Fund appropriation for FY 2018 will be reduced by an additional $6.2 million    (-2.8%).

These combined reductions prompted the Board to approve additional tuition increases above those approved in December 2016.

In addition, the state’s FY18 appropriation action excluded additional funding for the Oakdale Campus or State Hygienic Lab, both of which receive General Education Fund support to sustain operations.

Tuition

In December 2016, the Board of Regents approved the following base tuition increases for FY 2018:

  • 2.0% increase for resident undergraduate students
  • 2.5% increase for nonresident undergraduates and all graduate and professional students

As stated above, the University requested an additional tuition increase in June 2017 to the already approved rates to offset the lower than anticipated state appropriations.  The University requested the following:

  • $216    increase for resident undergraduate students
  • 3.84%  increase for nonresident undergraduates and all graduate and professional students

In addition to base tuition increases, the Board approved a tuition supplement increase for College of Engineering undergraduate students and a new tuition category for the College of Dentistry’s Iowa Dental Advanced Standing Program (IDASP).  These adjustments are estimated to yield an additional $1.5 million in FY 2018.

For the fall of 2017, the University is anticipating a smaller incoming freshman class than those of recent years.  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 $17.6 million in tuition revenue.  This increase includes projected enrollment changes, tuition rate increases, and tuition supplement increases.

The FY 2018 estimated total gross tuition budget is as follows:

 

Resident

NonResident

Total

Undergraduate

$101,802,000

$259,001,000

$360,803,000

Graduate

35,876,000

10,923,000

46,799,000

Professional

42,924,000

24,635,000

67,559,000

Other

836,000

1,364,000

2,200,000

Total

$181,438,000

$295,923,000

$477,361,000

 

Other Income

 

The University is estimating a $1.8 million (4.3%) increase in indirect cost recoveries due to the on-campus F&A rate increase to 52.5% as of July 1, 2016 and an anticipated increase in federal research activities.

Interest and other income within the General Education Fund will decrease by $0.3 million to reflect actual earning activity.  All earnings of General Education Fund balances remain within the General Education Fund for budgeting and expenditure purposes.

Reallocations/Reprioritization and Cost Saving Measures

Reallocating resources toward institutional priorities is a fundamental part of the new budget development process.  For FY 2018, collegiate and non-collegiate units are expecting to reallocate/reprioritize approximately $11.7 million (1.6%) within their existing General Fund budgets. These reallocations are being created through collegiate and vice presidential unit’s thorough review of programs and resources to allow for reinvestment of funds into more critical needs.  Operational efficiency efforts, including those through TIER (Transparent, Inclusive Efficiency Review), continue to provide successful savings throughout campus.

B.  EXPENDITURE PROJECTIONS

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.

For FY 2018, an initial allocation of $6.3 million of incremental revenue was distributed to collegiate units only for budget development.  The majority of the allocation, $4.9 million, was provided to colleges to improve faculty salaries and close the gap on the institution’s goal of raising average salaries of full-time tenured and tenure-track faculty to 95% of the University's peer group median.

Collegiate and non-collegiate units set priorities and created spending plans guided by the four budgeting principles (Student Success, Quality Indicators, UI Values, and UI Future).

Salary and Fringe Benefits

The salary policy provided collegiate and other major units latitude in establishing unit-specific salary policies, regardless of the source of funds.  It also enabled units to reward high-achieving faculty and staff contributing significantly and in a measurable way to the success of the University.

Salary increments for faculty and non-bargaining P&S staff will be distributed differentially to individual staff based upon performance and market competiveness demands.

Faculty

The University is estimating the average July 1 GEF salary increase for all faculty at approximately 2.0%.

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

The University is estimating the average July 1 GEF salary increase for all non-bargaining P&S staff at approximately 1.5%.

Collective Bargaining Units

The University will fully implement the terms and attendant costs of all collective bargaining agreements.  Costs include current year contract costs and previous year annualization of mid-year changes.  General Education Fund salary costs of the agreements are estimated to increase by $1.4 million for AFSCME staff and $0.3 million for COGS represented staff (graduate assistants) in FY 2018.

Fringe Benefits

In March 2017, the University completed negotiations with the federal government establishing the FY 2018 fringe benefit rates for each employee category. Annual changes in the approved rates are attributable to cumulative historic costs of covered benefits, salary changes, University driven cost saving measures, and employee utilization of benefits.

For FY 2018, fringe benefit rate changes on the existing General Education Fund compensation base will increase costs a total of $7.5 million.  Costs related to AFSCME bargained merit staff will increase $3.8 million and P&S and faculty costs will increase $3.7 million.

Student Aid

In FY 2018, the University will increase its student aid budget by $4.7 million.  This adjustment will address tuition inflation and growth in eligibility for individual scholarship award programs.  The increase in student aid will help students with the cost of attending the University and help more students graduate in four or fewer years.

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

The projected cost of utilities, custodial services, information technology and general maintenance for new, improved, or reassigned General Education Fund-supported buildings in FY 2018 is expected to be $2.2 million.  Buildings included in this total are the Engineering Bldg. and the Pappajohn Biomedical Discovery Bldg.

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.  As a result of these efforts and building energy conservation improvements, the General Fund non-salary utility expenses are expected to remain flat for FY 2018.

The University’s General Fund support of utility expenses for the Oakdale Campus will increase 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 recipient of utility services on the Oakdale campus.

Strategic Investments

The FY 2018 General Fund budget allowed for $4.6 million of incremental/reallocated dollars to be identified for supporting the University’s mission and provide innovative opportunities for students, faculty, and staff.

The fund was created to ensure the University’s highest priorities receive adequate funding.  These additional resources will be distributed in the fall once enrollment and revenue projections are confirmed. 

The University will also continue to use the recently created Strategy Implementation and Operations teams to evaluate and implement additional initiatives during the fiscal year.