July 14, 2011

Projected high enrollment will bolster ISU budget

by Anne Krapfl

Projected tuition revenue, due to higher than previously expected fall enrollment, has crept upward, and cuts to state appropriations were not as severe as had been anticipated this spring. Those are two pieces of good news in executive vice president and provost Elizabeth Hoffman's Budget Memo No. 5 (PDF) distributed last week to university leaders.

If Gov. Terry Branstad approves the state budget for the fiscal year that began July 1, Iowa State will receive $216,625,997 in state support for its operating budget -- $11.5 million less than FY11 and roughly mirroring state support in 1994. Still, it's a smaller cut than the $16.7 million reduction university budget planners had worked with since early April.

The final reduction is 5.1 percent of the FY11 state appropriation. It reflects the loss of $3.2 million in one-time funds and reductions in the three major appropriations to Iowa State: a 3.63 percent reduction in the education appropriation, 6.0 percent reduction in the agriculture appropriation and a 5.88 percent cut in the economic development appropriation.

Because the Iowa Legislature adjourned so late this year -- eight hours before the start of the new fiscal year -- the budget reduction targets shared with units in Hoffman's April 14 budget memo (PDF) will stand for now, said Dave Biedenbach, director of university budgets. Most of the difference between the April reduction targets and the actual reductions -- about $4.7 million -- will be held in a central fund temporarily, pending discussions early this fall on how to distribute those dollars. About $460,000 of the difference will be managed by the units to whom the appropriations are directed: Cooperative Extension Service, Leopold Center, livestock disease research, Institute for Physical Research and Technology, ISU Research Park and the Small Business Development Center.

Due to this fall's high enrollments and tuition increases approved in March, Iowa State's FY12 operating budget is $535.6 million, up from last year's $513.4 million operating budget. The total budget, which includes sponsored research and auxiliary units such as athletics, printing, residence and dining, likely will exceed $1.1 billion again. This figure does not include private fund raising done by the ISU Foundation.

New revenues: $33.7 million

The most recent enrollment projections anticipate further increases in both the freshman and transfer classes. Based on the new numbers, tuition revenue this year will be an estimated $284.2 million -- or about $31.2 million over FY11 budgeted tuition revenue. About $7.3 million (roughly 21 percent) will be set aside centrally for student financial aid, and the rest ($23.9 million) will be distributed among the colleges according to enrollment and student credit hours offered.

Because of Iowa State's increasing success landing competitive research grants and contracts, the accompanying revenue from facilities and administrative cost recovery (IDC) also will be up; an estimated $2.5 million more this year than the budgeted figure for FY11.

Increased costs: $8.5 million plus compensation increases

The six central service areas in the budget model that are funded by those they serve (the library and student, facility, IT, business and administrative support services) will share an additional $5.2 million this year to cover cost increases and increased demand for their services. This is about 85 percent of the increases they requested. Biedenbach noted, though, that when the increase is combined with the six units' $2.5 million budget reduction targets, the net effect is an increase in the six service areas' spending authority of approximately $2.7 million.

Additionally, four university-wide initiatives will receive a total of nearly $3.4 million in the first of a planned three-year improvement plan. They are:

PriorityGoalCurrentFY12 funding
Institutional Excellence Fund$10 million$4.6 million$1,207,800
Deferred maintenance$6 million$1.6 million$900,822
University marketing$2 million--$630,000
Administrative software systems*$2 million--$630,000

* A long-term effort to shift many of ISU's computer software systems (financial, human resources, payroll, course registration, etc.) to an open source system. Iowa State is part of a higher education-focused collaboration to accomplish this.

The remainder of the additional revenue will be used for salary and benefit cost increases for staff and faculty and to hire additional faculty to meet the demands of higher enrollment this fall. Budget units have the freedom to reallocate funds to achieve either of these. Biedenbach said the total amount committed to salary increases university wide will be known later this month.

First, under the terms of the state's new two-year contract with AFSCME (American Federation of State, County and Municipal Employees), merit employees covered by the contract received a 2 percent increase on July 1 and will receive a 1 percent increase on Jan. 1, 2012. Merit employees who are not at the maximum of their pay grades also will receive the applicable step increases on their anniversary dates with Iowa State.

FY12 marks the first time since FY09 that there is a salary increase plan for all faculty and professional and scientific staff whose job performances warrant an increase. Under this year's salary increase parameters for those two employee groups, a minimum 0.5 percent increase had to be awarded to individuals whose work was deemed satisfactory or better. Units could award higher salary increases using new dollars or reallocations, but any performance-based increase above 5.0 percent required approval at the vice presidential level.

Mandatory salary increases for the faculty promotions announced in May ($6,000 for Distinguished Professors, $5,500 for University Professors, $4,900 for full professors and $4,100 for associate professors) don't replace or eliminate performance-based increases.