Five-year Financial Plan Orientation

Transcription

1 Five-year Financial Plan Orientation

2 Agenda Budget Overview Five-year Financial Plan Initiative

3 Budget Overview

4 Financing the Future The Financial Challenge Ahead Operating budget history Projects for the future Disruptions Occurring in Higher Education Focus on net price compared to value (job placement/outcomes) Expectations of life-long learning (graduates as students throughout their career continuum) Unreasonable student debt levels Debt but no degree Monthly payments too high Changing demographics Decreasing numbers of high school graduates Shifting demographics among racial/ethnic groups Increasing market of individuals with some college (non-completers) Accountability Performance funding = awarding more degrees State fiscal environment Pensions Affordable Care Act (Medicaid) Revenue Shortfall

5 Financing the Future What can we control? Achieving optimal balance between investments in operations (faculty/staff, academic programs, student services, research, etc.) and capital facilities and technology Education, Research and Engagement/Service Missions Enrollment (class size and residency mix) Sticker price and net price (tuition rates, fees, institutional scholarships) Productivity (administration, faculty and staff across all facets of the institutional missions) Self-Generated Revenues Philanthropy Investment income (endowment, operating cash) Entrepreneurial Activities (new degree programs, credentials, lifelong learning opportunities, business partnerships, corporate relationship management)

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7 Consolidated Operating Budget 21.3% of the budget can be managed aggressively ($781M / $3.7B) FY18 Budget - $3.7B $1.6B UKHC $48M Other Undesignated* $466M Tuition $416M Other Designated ($204M Clinical) $386M Restricted (Gifts, Grants and Contracts) $277M Fund Balances (Prior Year Savings) $211M Auxiliaries ($97M Athletics) $267M State Funds ($86M Mandates) *Includes balancing solutions 7

8 Undesignated General Funds: Budget Decisions In millions FY FY Change Revenues State Appropriations Tuition Other $ $ $ $ $ $22.7 Expenses Institutional Student Aid $ 8.9 Faculty / Staff Pay (2.5% Merit; 2 mos FY17 increase; faculty promotions and fighting fund) 12.8 Fixed Costs 6.0 Strategic Investments 3.3 $ 31.0 Funding Gap $ -8.3* *May not total due to rounding

9 FY In millions Undesignated General Funds: Budget Decisions How did we cover the gap? Funding Gap $-8.3 Balancing Solutions: Savings from reduction in misc. fringe benefit rates $2.6 Adjust unit to self-operating.3 Energy Conservation Program 1.1 Enhanced investment strategies 4.3 Funding Gap $0 9

10 Looking at Our Past Decisions Undesignated General Funds Budget Summary, in millions FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Cumulative Total Total Increase in Expenses $25.1 $52.3 $35.0 $40.7 $45.1 $31.0 $229.3 $38.2 Faculty and Staff Salary Increases 2.0% 5.0% 2.0% 3.5% 2.0% 2.5% 2.8% College Incentive Funding $1.3 $6.5 $6.0 $2.5 $7.0 $2.5 $25.9 $4.3 Annual Average Net Revenue Increases Available $2.8 $35.6 $26.3 $38.1 $33.3 $22.7 $158.9 $26.5 Tuition Rate Increases ( Resident/Nonresident ) 6% / 6% 3% / 6% 4% / 7.5% 3% / 6% 5% / 8.5% 3% / 6% 4% / 6.7% Budgeted First-Time Cohort Class* 4,500 4,800 4,800 5,250 5,100 5,100 4,932 Change in State Appropriations -6.4% 0.0% -1.5% 0.0% -4.5% 0.0% -2.1% Balancing Solutions: Funding Gap ($22.3) ($16.8) ($8.7) ($2.6) ($11.9) ($8.3) ($70.4) ($11.7) Base Budget Reductions -3.7% Vertical Cuts, Targeted Reductions, Revenue $3.1 Enhancements and Other Savings Reduction in benefit costs *For FY18, includes 200 additional transfer students. -2.7% $33.0 $3.0 $8.7 $2.6 $11.9 $8.3 $37.5 Reduction in Reduction in Replace Energy Reduction in benefit costs Debt Service recurring conservation benefit costs; Pool; Redirect funding for program; Energy allocations for retirement ARC vertical cuts to conservation data center, with non- CAFÉ, COM, program; leases, recurring funds Facilities, etc. Enhance reserves investment strategies 10

11 Projecting Our Future Undesignated General Funds Budget Proformas, in millions FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Cumulative Total Total Increase in Incremental Expenses $41.2 $36.8 $37.5 $38.2 $38.9 $ % Annual Faculty and Staff Salary Increases College Incentive Programs Utilities - inflation M&O - new buildings Capital and Utility Renewal Operating Expenses Debt Service - $60M Modernization Debt Service - $30M Annual Capital Projects $16.5 $10.0 $1.3 $2.0 $1.5 $4.4 $3.3 $2.3 $16.9 $10.0 $1.4 $0.3 $1.5 $4.5 $0.0 $2.3 $17.4 $10.0 $1.5 $0.3 $1.5 $4.6 $0.0 $2.3 $17.9 $10.0 $1.5 $0.3 $1.5 $4.7 $0.0 $2.3 $18.5 $10.0 $1.6 $0.3 $1.5 $4.8 $0.0 $2.3 $87.3 $50.0 $7.3 $3.0 $7.5 $23.0 $3.3 $11.3 Net Incremental Revenue Sources Available ($17.7) $2.5 $2.7 $2.7 $3.0 ($6.8) State Appropriation Reductions Tuition revenue assuming no rate increases and 4,900 first-time undergraduate cohorts Misc. Revenue ($16.1) ($3.5) $1.8 $0.0 $0.7 $1.9 $0.0 $0.8 $1.9 $0.0 $0.6 $2.0 $0.0 $0.9 $2.1 ($16.1) ($0.5) $9.8 Funding (Gap) / Surplus ($58.9) ($34.3) ($34.7) ($35.5) ($35.9) ($199.3) Base Budget Reductions -9.8% -6.0% -6.1% -6.2% -6.3% -34.3%

12 Five-year Financial Plan

13 Five-year Financial Plan Concept: Facing a cumulative $200 million funding gap over the coming five years, University leadership deployed five concept teams to identify $8-10 million in net recurring, University-wide, savings and/or new revenues for the next fiscal year,

14 Timeline October 2017 November 2017 December 2017 January 2018 University leadership met with deans to identify future funding needs Five concept teams were deployed to identify recurring, general fund, net savings and/or new revenue Concept teams met and turned in reports which consisted of 34 ideas University leadership prioritized ideas and selected eight ideas with which we will begin

15 Phase One Ideas Teams 1 & 5 Team 2 Team 3 Team 4 New Revenues & Structures & Staffing Other Revenues Efficiencies & Effectiveness Outreach & Service Concepts for Phase One Business Plan 1. Project Graduate & Undergraduate Completer Degrees 2. First-time freshman enrollment 6. Intellectual Property 7. Procure-to-Pay 8. Carbon Reduction Program with Nature Conservancy 3. Improved Retention 4. Online Professional Masters 5. Summer Courses

16 Team Membership Each concept team consists of deans, staff members, a University Senate representative, a Staff Senate representative, and a student Workgroup, which is made up of staff members, exists to support the concept teams in writing phase one business plans for the eight ideas

17 Concept Team Charge Identify funds to solve a $200 million funding gap over five years, or $40 million per year. Net, recurring, University-Wide The concept teams will serve as an advisory board for the workgroup to create business plans for each of the eight ideas Concept teams will likely meet once per week; Business Plans are due February 28, 2018.

18 We re Not Stopping In spite of the financial challenges to be solved, our momentum remains strong: We are the flagship institution for our Commonwealth We are educating and graduating more students We are healing more Kentuckians We are seeking answers through research to more challenges We are serving more people than at any time in our more than 150-year history We will continue to do this together

19 Q & A