Inside Iowa State

May 18, 2006

A balanced FY07 budget relies on some one-time state dollars

by Anne Krapfl

Following the late adjournment of the Iowa Legislature, university leaders have been working to wrap up a proposed budget for the year that begins July 1. The Board of Regents, State of Iowa, still needs to approve budgets for the regent institutions. Following are answers to some frequently asked questions about state funding for Iowa State and how the university will use those funds.

What's the new state money in Iowa State's proposed FY07 operating budget?

Iowa State expects to receive about $8 million in new state dollars to help cover rising operating expenses. However, only $4.4 million of that is recurring funding to the general operating budget (or about a 1.86 percent increase over this year's recurring state funding). The rest includes:

• One-time funds of $2.48 million for building repairs.
• One-time funds of $1.12 million for operating expenses.

Is there new state money for anything besides the operating budget?

Yes, Iowa State is scheduled to receive nearly $19 million in restricted appropriations, that is, dollars with a specific use attached to them. These funds include:

• One-time building funds totaling $8 million to: plan an addition to Gilman Hall ($5 million), renovate the Veterinary Diagnostic Lab ($2 million) and build a protein processing plant ($1 million).
• $8 million to implement recommendations in the 2004 Battelle Report on development opportunities in the biosciences (Some of it -- about $2 million -- could be used for faculty endowments and salaries, but it is all one-time funding).
• $1.925 million (year 2 of a planned 10 years) from the Grow Iowa Values Fund to be used to spur economic development efforts.
• $1 million and $50,000, respectively, to support operation of the Veterinary Diagnostic Lab and a water quality research project.

How will ISU use the new recurring state dollars in its operating budget?

They will partially cover:

-- Faculty and P&S salary increases.

-- Merit salary increases, according to terms of the collective bargaining agreement.

-- A short list of unavoidable cost increases, such as fuel and utility cost increases and student financial aid.

New tuition revenues and permanent reallocations also will be needed to fund these items.

Does a disappointing state appropriation mean budget cuts at Iowa State this summer?

No, it appears there won't be reductions in either the last quarter of this year (FY06) or in the proposed FY07 budget. However, university leaders will rely on some one-time state funds and reduce the size of the Institutional Excellence Fund to cover recurring expenses in its proposed FY07 budget. The one-time state funds aren't likely to be available in FY08 and the Excellence Fund needs to be replenished.

Will the cuts come later?

In light of uncertainty about state funding and tuition increase levels next year, university leaders potentially will need to identify up to $7.5 million of reductions during FY07 as they develop the FY08 budget. President Gregory Geoffroy said the actual figure could go down as FY08 revenue projections come in next fall and winter, but he expressed doubt it could actually go to $0. Geoffroy asked for the reduction plans by Jan. 5, 2007.

What is Iowa State doing about its two responsibilities as spelled out in the regents plan for transformation --- "moderate" tuition increases and internal reallocations?

Tuition

In December, the regents approved a 4 percent tuition increase for Iowa State students for the 2006-07 academic year. However, that plan was based on Iowa State receiving about $16 million in recurring state funds, not $4.4 million. At the regents meeting May 4, board president Michael Gartner directed university leaders and board staff to develop a proposal for "additional academic revenues" for 2006-07. The board office is expected to release details of that proposal May 19, and board members would vote on it in June.

Reallocations

The board of regents has directed regent universities to reallocate $1 for every $2 of new recurring state dollars for the operating budget At Iowa State, this is $2.2 million in required reallocations. (By comparison, last year the university was required to reallocate $8 million.) Actual reallocations will exceed this amount due to:

• Changing priorities within units that are a normal part of every budget cycle.
• Central reallocations made to balance the proposed FY07 budget.

When will Iowa State's FY07 budget be finalized?

The regents will review and approve the salary policy at their June 21-22 meeting, but not give final approval to the FY07 budget until their Aug. 8-9 meeting in Iowa City.

Editor's note: Mark Chidister, assistant to the president for budget planning and analysis, provided information for this Q&A.

New state operating funds, new tuition revenue and permanent reallocations will be needed to cover additional costs -- namely compensation increases and rising utility costs -- in Iowa State's proposed FY07 operating budget.