FSU Board of Trustees Finance Subcommittee Agenda Athletic Center, PCR2 March 16, 2017

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1 FSU Board of Trustees Finance Subcommittee Agenda Athletic Center, PCR2 March 16, 2017 FY2018 Budget Development Discussion Context and initial parameters identified to inform development of the FY2018 budget Danforth Art Discussion

2 FY2018 Budget Development Discussion FY2017 and Historical Budget Context FY2018 Preliminary Budget Development Approach March 10, 2017

3 FY2018 Budget Development Discussion FY2017 and Historical Budget Context 1

4 FY2017 Budget Review FY2017 Budget Review Operating Budget FY2017 state appropriation support of $27.9M an increase of 1.0% Collectively-bargained personnel contracts salary increases of 3.5% Fringe Benefits cost increases of 14.1% Day enrollment decrease of -4.3% Selective increases in staff and faculty positions Comprehensive student costs $400 below Massachusetts sister state universities average Budgeted general operations (College Operations and State Maintenance) deficit of $400K; current projected end-of-year deficit of $200K Impact after accounting for additional expenditure reductions and net revenues accounting for projected investments returns 2

5 FY2017 All Funds Budget Review Framingham State College FY2017 "All Funds" Budget College Operating Budget - FY2017 All Funds Budget BOT Approved Budget General College Operations Revenues State Ret. Tuition College Residence Gen. Purpose/ Continuing Academic College Student Other Appropriations Revenues Operations Life Auxiliary Ent. Education Athletics Support Center Library Activities Trust Funds Total Total Budgeted Revenues $37,177,000 $1,080,000 $33,782,500 $16,030,800 $10,784,700 $7,909,000 $1,481,300 $1,850,000 $1,020,632 $627,925 $562,000 $770,170 $112,876,027 A&H;He a lth;ca reer;p o lic e Expenditures State Ret. Tuition College Residence Gen. Purpose/ Continuing Academic College Student Other Appropriations Revenues Operations Life Auxiliary Ent. Education Athletics Support Center Library Activities Trust Funds Total Total Budgeted Expenditures $37,177,000 $1,080,000 $34,182,500 $16,148,800 $10,619,700 $7,909,000 $1,481,300 $1,873,000 $1,018,382 $627,925 $561,000 $761,510 $113,440,117 Transfers In/Out from Reserves $400,000 ($400,000) Budgeted Net Income Result $0 $0 $0 ($118,000) ($235,000) $0 $0 ($23,000) $2,250 $0 $1,000 $8,660 ($564,090) College Operating Budget - FY2017 All Funds Budget March Projected FY17 Budget Revenues State Ret. Tuition College Residence Gen. Purpose/ Continuing Academic College Student Other Appropriations Revenues Operations Life Auxiliary Ent. Education Athletics Support Center Library Activities Trust Funds Total Total Budgeted Revenues $37,177,000 $1,000,000 $33,900,000 $15,833,000 $10,982,000 $7,500,000 $1,475,000 $1,850,000 $1,015,000 $625,000 $550,000 $760,000 $112,667,000 A&H;He a lth;ca reer;p o lic e Expenditures State Ret. Tuition College Residence Gen. Purpose/ Continuing Academic College Student Other Appropriations Revenues Operations Life Auxiliary Ent. Education Athletics Support Center Library Activities Trust Funds Total Total Budgeted Expenditures $37,177,000 $1,000,000 $34,100,000 $16,003,000 $10,597,000 $7,600,000 $1,480,000 $1,873,000 $1,018,000 $625,000 $560,000 $760,000 $112,793,000 Transfers In/Out from Reserves $200,000 ($200,000) Budgeted Net Income Result $0 $0 $0 ($170,000) $185,000 ($100,000) ($5,000) ($23,000) ($3,000) $0 ($10,000) $0 ($126,000) Notable Differences: (major assumption:investment returns holding through end of fiscal year) Represents two-thirds of All Funds Budget Increase in Revenue (invest. returns) & Reduction in Expend. Reduction in Revenues & Expenditures Incr. in Revenue Decrease in (invest. returns) & Revenues & Reduc. in Expend. Reduc. in Expend. Note: While operations will have a negative net income, FY2017 Change in Net Assets will increase significantly due to state funding transfers for capital projects. Net revenues down $209K over original budget (current: $112.7M); Expenditures down $647K over original budget (current: $112.8M); Aggregate net income up $438K (current: $126K) 3

6 Context General Operations Historical Support General Operations Support The impact of reduced state funding during the recession on general operations was somewhat mitigated by increases in student revenue (combination of rates and enrollment increases) and use of federal stimulus support resulting in relatively stable general operations funding during the recession; from FY2012-FY2016, general operations revenues grew significantly while FY2017 saw marginal growth. General College Operations Budget (State Appropriations and College Operations) 1.5% 8.2% 1.8% Average Annual Operations Change (FY09-FY17): 5.9% (Impact of both enrollment-based costs and annual costs increases) Average Annual Enrollment Growth (FY09-FY17): 2.4% (Day Program) 4

7 . revenues Context Trust Funds Historical Support Trust Funds Support Trust Funds that have revenue generating capability (Residence Life, Continuing Education, and Food Service) have experienced changes based on student enrollment and rates while other local trust funds (Athletics, College Center, Library, Academic Support, and Student Activities) have seen changes based on enrollment impact and changes in College Operations transfers support. Trust Funds Budgets FY08-FY17 (Percentages note Average Annual Change) $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 4.3%* FY08 FY17 Residence Life DGCE 4.2%* 3.2%* G.P./Food Service Average Annual Increase in General Operations: 5.9% Average Annual Enrollment Growth: 2.4% $2,500,000 (Percentages note Average Annual Change) $2,000,000 ** $1,500, % 9.3% $1,000, % 3.5% 6.5% $500,000 $0 FY08 FY17 0.2% * Residence Life has assumed some additional utilities costs and increased have been directed to debt service and operations for the new hall. The increase in FY2012 is due to the opening of North Hall and the increase in FY2017 is due to the opening of West Hall. * DGCE revenues reflect both rate and enrollment changes; annual transfers in support of College Operations have increased, on average, 2.7% annually. * Food Service revenues have also supported dining capital renovations. ** Academic Support FY16 and FY17 increases reflect transfer of expenses/ funding from College Ops to Academic Support; noted annual percentage increase reflects FY08-FY15. While not a separate Trust Fund, college-funded financial aid expenditures have increased 37.6% annually from FY08-FY17. Note: FY2018 trust funds will be impacted by decreased student fee revenues. 5

8 Context Historical and Future Key Variables Historical Support Major Variables: FY2012-FY2017 Five Year Annual Average Change State Appropriations 5.2% Student Enrollment (FTE) 0.7% Faculty Growth (TT / FTE) 2.6% / 2.9% Staff Growth (FTE) 2.6% Tuition and Fees (Day) / Comp. Costs 4.6% / 4.5% Student Financial Aid 9.5% Modeled Projected Future Support Major Variables: FY2018-FY2022 Five Year Annual Average Projected Change State Appropriations 3.5% Student Enrollment (FTE) (Steady by FY2020) -0.7% Faculty Growth (TT / FTE) 1.1% / 0.2% Staff Growth (FTE) (Excluding FY18 Danforth positions) 0.6% Tuition and Fees (Day) / Comp. Costs 5.0% / 4.2% Student Financial Aid 5.0% 6

9 FY2018 Budget Development Discussion Preliminary FY2018 Budget Development Approach 7

10 FY2018 Budget Development Parameters FY2018 Operating Budget Objectives Develop the annual budget within the context of a five year balanced budget plan Account for impact of projected short term enrollment decreases with stabilization by FY2020 Increase tenure track faculty and staff levels in selective areas of identified need Continue to increase Full-Time Faculty/Visiting Lecturers ratio Minimize impact on student costs Maintain cost position (no higher than average) within the state university segment Provide additional financial aid to support the most needy students and deploy aid as part of a comprehensive enrollment management strategy Maintain reserves and manage debt consistent with Financing Policy financial ratio targets Complete capital projects as scheduled within the FSU Capital Spending Plan Major projects: Arts Center, Maple Athletic Fields, Crocker Hall, Library, Danforth Fund Strategic Priorities Initiatives Preliminary Examples (with other initiatives and timing TBD): Financial Aid Increases World of Work Initiative New Tenure Track Faculty Initiative Targeted Equipment and Technology Strategic Capital Projects Priorities New Dean of Business Danforth Museum Initiative Proposed MetroWest Education Center Initiative New Targeted Staff Positions Initiative Math Emporium Debt Service for Future Financed Capital Projects New Hospitality Management Program 8

11 FY2018 Budget Plan Assumptions FY2018 Budget Development Assumptions Category Collective Bargaining State Appropriations Student Charges Enrollment Inflation Staffing Levels Strategic Priorities Fund Trust Funds Support Budget Plan All three contracts (MSCA, APA, AFSCME) currently not settled; budget assumes 2.5% annual salary increases (CC increases precedent). Initial FY2017 budget development plans based on anticipated increase of $280K (1.0%) to be allocated through the BHE funding formula; and, supplemental funding (assuming 2.5% cost increases) for collective bargaining. Tuition and Fees increase of $590 (6.3%); aggregate comprehensive student cost increase (including room and board adjustments) of $1,000 (4.8%). Aggregate Day enrollment target of approximately 3,900 total FTE UG (fall) students (represents 100 students, or -2.5%, decrease based on level number of new students). General assumption of 2%-3% inflation; major exception is fringe benefits chargeback rate that is increasing at a faster rate and student financial aid increase of 5.0%; equates to approximately 2.5% adjustments on average. Current FY18 budget assumptions based on hiring of carry-over tenure track positions plus additional 1.0 tenure track position and 0.0 additional staff (excluding assumption of Danforth Art positions) Strategic Priorities Initiative Fund allocations to support FY2018 initiatives. New investment of $600K in FY18 represents $150 of proposed fee increase. Trust fund managers have been directed to submit FY2018 budgets accounting for level College Operations support and to account for impact of anticipated enrollment reduction. 9

12 FY2018 Budget Plan Preliminary Overview FSU s FY2018 Preliminary Budget Overview Personnel Incremental Costs (3.0% aggregate increase) Collective Bargaining ; Additional Faculty and Staff; Fringe Benefits Cost ($1.1M) Fee Impact $290 Includes new Faculty tenure track positions and new Staff positions; add. benefits costs Non Personnel Inflation/Close Deficit (2.5% net increase) Operations; Maintenance; Equipment; IT; and Debt Service ($0.6M) $150 Strategic Priorities Initiatives Funding (SPIF) Incremental (net) costs of SPIF initiatives ($1.4M from reallocations/other sources) Net Impact of Reduced Enrollment ($0.6M) $150 ($0.9M) $230 State Funding Line item Appropriation ($28.8M) Assumes FY18 Formula allocation and Collective Bargaining supplemental funding Student Net Revenue Incremental Charges Impact $0.9M ($230) $2.3M ($590) 10

13 FY2018 Projected Student Costs State Universities Projected Student Cost Comparison: AY Peers Tuition and Fees, Room and Board - Inflated (conservatively) at 4.5%/3.3%/3.0% FY18 Resident FY18 FY18 FY2018 Total % Tuition and Fees Room Board Total Increase Increase Bridgewater $10,200 $8,230 $3,800 $22,230 Fitchburg $10,380 $7,140 $3,480 $21,000 Framingham $9,930 $8,260 $3,560 $21,750 $1, % Salem $10,170 $9,020 $3,630 $22,820 Westfield $9,700 $8,400 $3,800 $21,900 Worcester $9,630 $8,564 $3,726 $21,920 Sister Universities Average $10,020 $8,275 $3,687 $21,950 Framingham Rank - Sister Colleges 2nd Lowest FSU $ Difference from Avg. -$90 -$15 -$127 -$200 FSU % Difference from Avg. -0.9% -0.2% -3.4% -0.9% Assumptions: Fees: $590 increase (6.4%) Revenue Impact: 6.7% Rent: $300 increase (3.8%) - weighted avg rate Board: $110 increase (3.2%) Comprehensive Charges: $1,000 Increase (4.8%) 11

14 FY2018 Preliminary Sliding Fee Schedule Preliminary Fee Schedule College Operations Associated Fee Ranges Based on Various State Funding Levels and Current Enrollment Assumptions State Funding Level College Operations Fee Increase (Preliminary) At Current Funding Level - $27.9M $790 Governor s Budget Submittal - $28.2M (1.0%) $740 (7.9%) With Anticipated $28.4M $690 Supplemental Funding $28.6M $640 At Preliminary Budget Level - $28.8M (3.5%) $590 (6.3%) $29.0M Net Income Restoration / Trust Funds Restoration $29.2M (4.7%) $540 (5.8%) Note: For every 25 students above the budgeted enrollment figure, student fees can be reduced $50 from the noted amounts (e.g., at 100 additional students level aggregate enrollment and state funding at $28.8M, proposed student fees increase would be $390 or 4.2%; representing comprehensive costs increase of $800 or 3.9%). 12

15 FY2018 General Operations Initial Budget Parameters Assumptions Major Factors Assumptions (based on enrollment and state support update) FY2017 FY2018 FY2019 FY2020 FY2021 State Appropriations Support (net with coll. barg. reserves funding) $27,913,720 $28,880,000 $29,877,000 $30,908,000 $31,975,000 % Annual Increase 1.0% 3.5% 3.5% 3.5% 3.5% Student Generated Net Revenues (rate and enrollment impact) $30,057,000 $31,098,000 $32,413,000 $33,721,000 $35,121,000 % Annual Increase 2.9% 3.5% 4.0% 4.0% 4.2% Enrollment (Day FTE) Projections (assumes 760 new /380 transfer students annually) 4,009 3,909 3,865 3,850 3,850 % Annual Increase/Decrease (steady state by FY2020 at 3850; target level of 4000) -4.3% -2.5% -1.1% -0.4% 0.0% Student Financial Aid (Institutional Grants/Waivers) Support $2,520,000 $2,645,000 $2,780,000 $2,920,000 $3,070,000 % Annual Increase 5.0% 5.0% 5.0% 5.0% 5.0% Annual Debt Service Projection $4,396,270 $4,644,000 $4,765,000 $4,890,000 $4,906,388 Debt Burden Ratio (including projected future issuances) 4.7% 4.7% 4.7% 4.6% 4.5% New Strategic Priorities Fund (includes reallocations and other sources funds) $2,072,000 $2,101,000 $2,752,000 $3,127,000 Day Faculty Positions (FTEs) Day TT Positions (FY18 positions include carry overs; +1 TT position annually) Students per FTE Faculty (FY11 Ratio: 16.5:1) Staff Positions (6.5 Danforth FY18; World of Work FY19; Bus Dean +1 FY20; FY21-22: +1+1) Students per FTE Staff - including Deans positions (FY11 Ratio: 12.7:1) Personnel Costs (including projected fringe benefits costs increases) $34,459,720 $35,596,000 $36,758,000 $38,149,000 $39,500,000 Annual Percentage Increase 3.4% 3.3% 3.3% 3.8% 3.5% Projected Annual Net Income (outyears to be adjusted as process proceeds) $0 $0 $0 $100,000 $200,000 Projected Fund Balances Reserves Use ($200,000) ($100,000) $0 $0 $0 Student Costs Assumptions FY2017 FY2018 FY2019 FY2020 FY2020 Projected Student Charges: Tuition and Fees $9,340 $9,930 $10,510 $10,990 $11,470 Increase over prior year $640 $590 $580 $480 $480 % Increase 7.3% 6.3% 5.8% 4.6% 4.4% Rent (weighted avg.) $7,960 $8,260 $8,560 $8,850 $9,140 Increase over prior year $300 $300 $300 $290 $290 Board $3,450 $3,560 $3,680 $3,810 $3,940 Increase over prior year $110 $110 $120 $130 $130 Framingham Costs $20,750 $21,750 $22,750 $23,650 $24,550 State College Peers Costs (with conservative out-year cost projections) $21,150 $21,950 $22,750 $23,650 $24,550 Difference - FSU vs Peers ($400) ($200) $0 $0 $0 Rank 2nd Lowest 3rd Lowest Middle/Average Middle/Average Middle/Average Aggregate Annual $ Increase $1,050 $1,000 $1,000 $900 $900 Aggregate Annual % Increase 5.3% 4.8% 4.6% 4.0% 3.8% 12

16 FY2018 Budget Development Process FY2018 Budget Development Process The University s Five Year (FY2018-FY2022) Strategic Plan will identify strategic priorities with associated budget implications. Development of the FY2018 Budget & Five Year Pro Forma Budget anticipates funding of selective strategic initiatives in support of that plan. Final consideration of the FY2018 University budget will be scheduled for the FSU Board of Trustees meeting in May. FY2018 Budget Development Process Governor s Budget Recommendation Trust Fund Budget Development Guidelines Issued Trust Fund Managers Develop Initial Budget Recommendations Administration, BPC, and BOT Review Budget Assumptions House Budget Recommendation Administration Refinement of Proposed Budgets Senate Budget Recommendation Board of Trustees Review/Approval of Final Budgets Reconciled Budget/Governor Veto Process FSU Process March March March April May State Process February April May June 14