Inside Iowa State

March 11, 2005

Piecing together an FY06 budget

by Diana Pounds

Next year's university budget was the topic of a March 3 P&S Council open forum featuring Mark Chidister, assistant to the president for budget planning and analysis, and Ellen Rasmussen, assistant provost for budget, facilities and finance. Here are the highlights of their budget update.

Since 2001, state appropriations to Iowa State have been cut by $63 million, salary increases have been underfunded by $21 million and unavoidable cost increases have been underfunded by $38 million. Tuition and fee increases have helped, but have made up only about half of those losses, Chidister said. Administrators hope the current fiscal year is the "bottom of the curve," and that the state will appropriate new money to the regent institutions for next year.

Top priorities for FY06

Budget priorities are based on the university's strategic plan. Top items for the coming year are:

• Achieve competitive salaries for faculty and P&S staff. Salaries were competitive in the marketplace for both groups several years ago, but have slipped since.
• Keep and attract faculty who are national and international leaders in disciplines that are vital to the university. Such faculty inspire students, and help fulfill the university's research and economic development aspirations, Chidister said.
• Improve undergraduate education by reducing class sizes and increasing course offerings in areas of high demand.
• Improve the physical and electronic environment for learning. This includes upgrading classrooms and ensuring that Web-based systems that support the information infrastructure are top-notch.

"The extent to which we can dig into each of these priorities is going to depend on what we end up with in revenues," Chidister added.

Reallocation 'very different'

Last year, units had to reallocate to fund salary increases. Units made cuts and the funds were redistributed for pay raises. This year's reallocation exercise "is very different," Rasmussen said. Units have already been provided with reallocation targets, but they will be redirecting funds internally to advance the goals of their units and the university's strategic plan. "As an institution, we need to be able to tell a very strong and compelling story about how we have continued to identify resources to redirect toward initiatives and priorities that will move Iowa State forward," she added.

Current budget plans assume Iowa State will need to reallocate $8 million for next fiscal year. That figure will go down if state appropriations are below the Board of Regents, State of Iowa, request. Reallocations will be made proportionately across the vice presidential areas.

Pay increases

Under the AFSCME contract, merit employees, on their eligibility date in FY 06, will receive increases up to 4.5 percent, not to exceed the maximum of their pay grades. Contract employees at the top of their pay grades will get 2.5 percent increases on April 1, 2006.

Officials hope to fund pay raises for faculty and P&S staff and implement a multi-year plan to return ISU faculty and staff salaries to competitive levels.

State allocations

Iowa State's budget planning is based on the Regents' Partnership Plan for Transformation and Excellence, which has been endorsed by Gov. Tom Vilsack and submitted to state lawmakers. The plan seeks $40 million in new state funding to the three regents universities annually for four years. In return, the schools would match the new funding with $20 million in internal reallocations. Iowa State's portion of those figures is $16 million in new funding and $8 million in reallocations.

Tuition

Next fall, tuition will increase 4 percent. If state allocations fall below the $40 million requested in the partnership plan, it's likely that the regent universities will seek an additional tuition increase. The tuition issue is complicated by enrollment declines, caused by a drop in international students and the projected drop in high school students throughout most of the Midwest over the next decade.

"There's a real sensitivity as to how high you can increase tuition before it's a disincentive for nonresident students to come into the state," Chidister said.

As in the past, approximately 15 percent of new tuition revenue will be devoted to student aid.

Indirect costs revenues are up

Indirect cost revenues are growing, due to researchers' success in attracting research funding. Rasmussen predicts an 8 percent increase in indirect costs revenues in FY06. Sixty percent of indirect costs collected on research grants is used to encourage future research endeavors. The remaining 40 percent goes to the general university fund to defray the costs of university facilities and infrastructure that support research.

Priorities for new, reallocated funds

Officials are completing a six-month process of determining priorities for reallocated dollars and new revenue in FY06. The process began in September when President Gregory Geoffroy asked the three vice presidents to work with deans and directors to develop proposals for new funds. Geoffroy will make the final decision on priorities soon, with input from the vice presidents and the President's Advisory Committee on Budget Priorities and Planning.

ISU budget planners won't be able to finalize a budget for next year until state lawmakers make allocations to regent universities. Lawmakers are expected to make those allocations sometime in April.

Since 2001, state appropriations to Iowa State have been cut by $63 million, salary increases have been underfunded by $21 million and unavoidable cost increases have been underfunded by $38 million.