April 1, 2010

Plans taking shape for anticipated supplemental state funds this spring

by Anne Krapfl

Iowa State would gain $10.8 million in one-time state funds yet this spring, under a supplemental appropriation that still awaits Gov. Chet Culver's final approval and signature.

When the governor signs the bill, here is how university leaders propose to use the supplemental funds:

1. Cover the refund of the student spring surcharge. $2.4 million would be used to backfill the dollars that will be returned to students yet this semester, as directed by the state Board of Regents at its Feb. 4 meeting. In December, the board approved a $100 student surcharge to help address a 10 percent across-the-board reversion in state funding ordered by Culver. When the supplemental funds first became a possibility, the regents agreed to refund the surcharge.

2. Address high-priority deferred maintenance projects. Approximately $4 million would be directed to this purpose. Associate vice president for budget and planning Ellen Rasmussen said projects would be selected from an ongoing priority list maintained in facilities planning and management.

3. Use $4.4 million as bridge funds in FY11 to help units carry out changes to their budgets that require more than one year to accomplish. Rasmussen used two examples of how these funds could be used:

  • Unit A has a three-year plan to achieve $200,000 in permanent annual savings, but can achieve 50 percent of that next year and 40 percent the second year. Bridge funds could help them get to year two.
  • Unit B plans to generate additional revenue with a new academic program, but has some start-up costs to incur before the revenue starts coming in. Bridge funds could help the unit get started.

Rasmussen said these bridge funds should not be used to replace one-time ARRA (American Recovery and Reinvestment Act) dollars used as bridge funds in the current fiscal year.

"We have been very clear that ARRA funds were to be used for one-time expenses this year. People knew to plan with that in mind," she said. She said the process of deciding which units receive bridge funds from the supplemental appropriation would begin within the month.

Update on the FY11 budget

Rasmussen will present an update on budget planning for the fiscal year that begins July 1 during a noon open forum April 1 in the Memorial Union Gallery. It is hosted by the P&S Council but all are welcome.

The Iowa Legislature adjourned March 30. State appropriations to Iowa State for FY11 will total $224.9 million, or $20.4 million less than state funding for the university back on July 1, 2009 (prior to the $24.5 million mid-year reversion). However, $24.5 million is the reduction the university will meet as the FY11 budget is finalized. The difference between the two ($4.1 million) will be used for additional bridge funding.

Iowa State also will receive a one-time allocation of $3.2 million on July 1, also to be used to help units transition to lower base budgets in FY11.

Executive vice president and provost Elizabeth Hoffman also distributed on Monday her sixth budget memo on the FY11 budget. Even with the improvement in state funding over this year's revised support and additional tuition revenues, Iowa State faces a net deficit between revenues and expenses next year of approximately $9.5 million. Rasmussen pointed out that, under the new budget model, revenues and expenses are distributed differentially among units. So, the actual net effect from unit to unit will vary.

The latest draft of the university's FY11 budget includes:

  • Projected revenue increases from tuition ($21.5 million) and indirect cost recovery from externally funded research ($1.1 million)
  • Projected cost increases ($2.3 million) to open and use two science buildings (Hach Hall and the Biorenewables Research Laboratory)
  • Projected increases in student financial aid ($6.4 million) and personnel expenses ($3.4 million). The personnel increases include costs to cover faculty promotions, merit salary increases under the contract with their labor union, employee benefits increases and the cost to raise some P&S salaries to meet pay grade minimums in the new compensation structure. Faculty and P&S salaries would remain flat. The plan still is to restore the university's contribution to employees' TIAA-CREF plans to the full 10 percent on July 1. This was reduced to 8 percent in November as part of the strategy to meet the mid-year reversion.

Units will submit their final budget plans sometime in mid-May, and the university's overall budget will be balanced during May and June.