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June 13, 2003

Administrators put finishing touches on budget

by Anne Krapfl
Iowa State officials are fine-tuning the FY04 budget in order to accommodate cuts in state appropriations, unavoidable increases to operating costs, support for some strategic initiatives and internally-funded salary increases for all employees.

A preliminary budget will be presented to the Board of Regents, State of Iowa, next week. The regents will approve a final budget at their July 17 meeting. Following is a summary of what the regents will review June 19.

Reduced state appropriation
The state appropriation for the university's operating budget for the year that begins July 1 has been reduced by nearly $7 million, or 2.9 percent, from the current funding level. The cut will be distributed proportionately to Iowa State's major budgetary units:
  • $5.5 million to the general university, which includes basic operations and Iowa State's instructional mission
  • $897,556 to the Ag and Home Economics Experiment Station
  • $571,130 to Cooperative Extension
  • $13,423 to the Leopold Center
  • $6,382 to livestock disease research

Salary increases
Salary increases averaging 2 percent for faculty and P&S staff, salary increases that range from 2 to 6.5 percent for merit employees as guaranteed in the state contract, and increases in benefit costs for all employees will cost Iowa State an estimated $9.8 million in FY04. There are no new salary dollars coming from the state, so these increases will be self-funded.

Unavoidable cost increases
Unavoidable increases to the university's operating costs will total $10.9 million in FY04. These include costs associated with:
  • New student financial aid (almost $7 million)
  • Compliance with federal regulations (ex. Homeland Security, U.S. Patriot Act, Americans with Disabilities Act, the online Student and Exchange Visitor Information System)
  • Campus safety
  • Operating the Memorial Union, which became part of the university on April 1
  • Property insurance premiums
  • Opening and maintaining new buildings

Strategic initiatives
The FY04 budget includes about $10 million in planned strategic initiatives, about 60 percent of which are at the university-level (others are college or unit initiatives). They include new faculty positions, a chief information officer, research and graduate student support and covering the rising costs of library materials and information technology, among others.

New expenditures planned in FY04 (outlined above) total approximately $30.8 million.

New revenues and reallocations
This year's higher tuition rates are expected to generate nearly $23.9 million in new revenues for Iowa State. New revenues from indirect cost recovery on external grants and contracts, and other income is expected to generate another $3.5 million. However, when the reduction in the state appropriation is absorbed, the "net" new revenue is about $20.4 million.

There remains about a $10.4 million shortfall between available new revenues and planned expenditures. A plan has been developed to make up the general university portion, a little over $7 million, with budget reductions, reallocations and new administrative fee income. Plans still are being developed to make up the remaining $3.4 million among the non-general university units, which include Cooperative Extension, the Experiment Station, Leopold Center and livestock disease research.

The non-general university units don't have access to the tuition revenue stream and must cover budget reductions and salary increase costs within their own budgets. Their reduction plans may include staff layoffs and cutbacks in services offered to Iowans.

University officials have decided to provide one-time allocations to the Experiment Station and Cooperative Extension in FY04 to cover at least one-half of the shortfalls. However, their FY05 budgets will need to fully cover these costs.

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