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UNIVERSITY OF MINNESOTA Financial Overview

UNIVERSITY OF MINNESOTA Financial Overview. University of Minnesota Financial Management Organization. Fiscal Year 2007-08 Total Operating Budget. What is the amount of the University’s annual budget? Current Non-Sponsored Expenditures $2,515,519,819 & Mandatory Transfers

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UNIVERSITY OF MINNESOTA Financial Overview

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  1. UNIVERSITY OF MINNESOTA Financial Overview

  2. University of MinnesotaFinancial Management Organization

  3. Fiscal Year 2007-08Total Operating Budget What is the amount of the University’s annual budget? Current Non-Sponsored Expenditures $2,515,519,819 & Mandatory Transfers Current Sponsored Expenditures $ 534,000,000 Total Current Fund Operating Budget $3,049,519,819

  4. All-Funds Budget Structure Sponsored Funds $534 Million Non-Sponsored Funds $2.5 Billion Local Unit Generated Revenues$1.053 Billion Centrally Allocated & Attributed$1.462 Billion State O & M/Other Misc. $258 Million Auxiliary Operations $795 Million Clinical Income Restricted Income Grants & Contracts Business & Industry Sales & Services Fees Endowment Income State Specials Tuition University Fee Indirect Cost Recovery Central Reserves

  5. University of Minnesota Revenue Sources All Funds FY2007 Capital Grants/Gifts/Appropriations: 3% Gifts: 4% Tuition and Fees: 19% Educational Sales/Contract Activity: 11% Auxiliary Enterprises: 11% State Appropriation: 26% Federal/State/Other Grants and Contracts: 26%

  6. University of Minnesota Revenue Sources All Funds FY 2007 Capital Grants/Gifts/Appropriations: 3% Gifts: 4% Educational Sales/Contract Activity: 11% Tuition and Fees: 19% Auxiliary Enterprises: 11% State Appropriation: 26% Federal/State/Other Grants and Contracts: 26%

  7. FY 2007–08 Revenues: $1.2 billion Student Tuition and Fees Why Are These Revenues So Important? • 70% of total spending on instruction • 77% of total spending on student services • 72% of total spending on faculty compensation • 93% of the total budget of CLA • 78% of the total budget of IT • 75% of the total budget of CFANS StateAppro-priations

  8. Two Budget Processes • Biennial Budget Request to the State - completed every two years • Annual Budget Process - conducted every year 9

  9. Where the Money GoesState of Minnesota General Fund Budget / $34.58 Billion2010-11 Biennium • 77% of State Budget • K-12 Education • Property Tax Aids & Credits • Health & Human Services

  10. Legislative Outcome* 2007-082008-09 Request $58,900,000 $64,500,000 Actual $67,447,000$14,310,000 Difference $ 8,547,000 ($50,190,000) Biennial Math = Request $182,300,000 Actual $149,204,000 Difference ($ 33,096,000) *Excludes $25,000,000 onetime U/Mayo Partnership

  11. Current Non-Sponsored Funds Fiscal Year 2006-07 Expenditures / $2.2 Billion By Object of Expenditure By Function Academic Support & Student Services Student Aid Institutional Support Public Service All Other Research Salaries & Fringe Supplies & Services Op. & Maint. of Plant Utilities Instruction Equip. & Capital Assets All Other Consultants/ Purchased Personnel

  12. State of MinnesotaFinancial Context – FY2008/09 & FY2010/11

  13. Historical Annual Incremental Investment Framework: $80.0 M Safety and contractual obligations = $3.0M or 3% 100% Student aid = $5.0M or 6% Infrastructure investments and support = $7.0M or 9% Facility operations = $12.0M or 15% Programmatic investments = $18.0M or 22% Employee compensation = $35.0M or 45% 0%

  14. DRAFT FOR DISCUSSION ONLY2010-2011 Biennial BudgetConceptual Framework University Responsibility [Tuition and Internal Funds] State Responsibility Compensation 75% State Share Compensation 25% U of M Share Research Enhancement Program Core Academic Support (cost pools, etc.) Educational & Instructional Programs Student Aid

  15. Biennial Budget Request: 16

  16. Biennial Budget Timeline Complete Entry of Biennial Budget Information into State System DOF Budget Instructions Finish Principles, Prel. Write Ups & Financial Plan For September BOR Review Present Biennial Request to Board of Regents Review Present Biennial Request to Board of Regents Approval Establish Conceptual Framework July August Sept. Oct. Nov. BOR Docket Deadline 8-24-08 BOR Docket Deadline 9-28-08 UMD Meeting Agency Plans Due to MN Legislature Nov 30, 2008 Preliminary Cost Estimates 17

  17. Three critical economic issues The University’s biennial request funds: Compensation for University faculty and staff. Middle income scholarships for Minnesota students and their families. Research enhancements to meet growing demand for capacity and evolving statewide needs.

  18. Compensation for faculty and staff Request 3% annual compensation pool increase = $95.2M for biennium Rationale Higher education is people-intensive and highly competitive. Nearly two-thirds of the U’s annual operating budget is compensation. Minnesotans have seen prices rise by 5.6% since July 2007. Top faculty are highly sought-after — making them challenging to recruit and retain.

  19. Middle income scholarship program Request Middle-income scholarships to reduce tuition by 5% to 40% depending on income = $16M for biennium ($8M recurring) Rationale Many middle-income students receive little scholarship support. Middle-class Minnesota families are struggling with rising costs. Low-income students already attend the U with free tuition. It’s time to provide ongoing scholarship support for middle-income students.

  20. Research enhancement program Request New investments to enhance research capacity = $30M for biennium Rationale The U creates new knowledge that fuels the economy. Investment in research is critical to job creation and economic growth. The U competes to win $600M+ in research funding each year. Our research capacity is leveraged by the state, business and industry, and other colleges and universities.

  21. University-funded components Funding sources 4.5% tuition increase per year 1% reallocation per year University obligations The U’s share of the compensation pool increase Essential academic investment and support Debt service, utilities, leases, new building operations, safety and contractual obligations

  22. FY2010 – 2011 Biennial budget request

  23. Budget Development Activities IMG “Shared Responsibility” Or “Common Good” Phase “Earned Income & Full Cost Model” Phase Pre IMG “Infante” Phase IMG “Install” Phase 1992 ------1997 1998 ------1999 2006 ------ ???? 2000 ------ 2005

  24. Reforming Resource AllocationModels for Revenue Distribution Previous Model Current Model State Appropriations Indirect Cost Recovery Tuition Revenue State Appropriations Indirect Cost Recovery Tuition Revenue 50.5% Central Funds Central Funds 49.5% 100% Allocations to Academic & Support Units Allocations to Support Units Allocations to Academic Units 25

  25. Reforming Resource AllocationWhy Institutional Revenue Sharing? The challenge of funding institutional common goods and academic priorities Local Unit Generated Revenues IRS – recognition that all units should share in providing resources for meeting institutional needs & budgetary responsibilities. Centrally Distributed Revenues

  26. Institutional Revenue SharingFiscal Year 2004-05 Approved Budget Academic Institutional Revenue Sharing = Total Revenues X 8.5% Part 2 Subtract “3.75% Sales & Services” Assessment from 8.5% IRS and collect remaining assessment from collegiate/campus units Part 1 Calculate revenue yield @ 3.75% of “Sales & Services” Revenue* * [Includes Central Support Units] Estimated FY05 Yield = $11.9 m Estimated FY05 Yield = $87.3 m

  27. Why Build Upon the IMG Model? IMG Largely A Success - However Transparency Simplicity/Fewer Levers All-Funds/All Costs Analysis Accountability – Units & Leadership NEED MORE Internal Assessment Base + / - Methodology NEED LESS

  28. Minnesota’s Budget Development Story Earned Income-Full Cost Earned Revenues Tuition ICR FeesGifts Sales Etc. Allocated Costs Utilities Facilities Ops Debt Leases Libraries Research Technology Student Serv. Classrooms Administration Academic Units Allocated State Appropriation

  29. 9 Cost Allocation Pools • Facilities – Operations & Maintenance (ASF/Space Data Base/Twin Cities/Standard Service Levels) • Utilities - (Consumption by Building/Buildings Metered/Monthly Bill) • Debt & Leases - (Occupancy/General Purpose Classrooms) • Office of Information Technology (Centrally Allocated/Unweighted Headcount/Tiered) • Administrative Service Units - (Total Expenditures/Tiered) • Research (Sponsored Services/3 Yr. Rolling Avg. Sponsored Expenditures) • Libraries - (Weighted Student & Faculty Headcount/Law Library Nuance) • Student Services (3 “buckets”/Primarily Student Headcounts/Aid Programs Included) • General Purpose Classrooms (Student Course Registrations/Future Incentive Refinements)

  30. Summary of Cost Allocation RecommendationsX = Primary “type” assignment

  31. Medical School College of Biological Sciences College of Liberal Arts Carlson School of Management

  32. 6-Year Capital Improvement Plan Board of Regents Policy directs the administration to develop a capital budget with a “6 year time horizon, updated annually” 6-Year Capital Improvement Plan Part One: May/June Capital Improvement Budget Year 1 Part Two: Oct./Nov. Capital Improvement Plan Years 2 - 6

  33. Operating & Capital Budget Development Board of Regents Board Meetings • Review/Action/Discussion • Policy • Background/context • Oversight • Strategic positioning Key Tools State Biennial Request – even years Annual Operating Budget – every year State Capital Request – odd years Six Year Capital Plan – every year Annual Capital Budget – every year Committees Work sessions Oversight & Approval

  34. Contacts for Budget and Financial Information Budget Office Web Site: www.budget.umn.edu Budget Office Phone #: 612-626-4517 Controller’s Org Phone #: 612-624-0874 Institutional Research & Reporting Web Site: www.irr.umn.edu 35

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