Recent History Aging infrastructure confirmed by third party studies – conclusion: Under funding R&R $20M per year Infrastructure fee proposed but rendered impractical by AG ruling Legislative solutions sought with limited success UBC focused on $40M recurring shortfall for the FY03/04 fiscal year: $ 5M Aggressive cost savings measures $25M General budget reductions undertaken $10M R&R budget reduced to cover final legislative “dings”
Legislative Session Outcome Positives Negatives 100% IDC Retention +$20M 100% IDC Retention +$20M Tuition Flexibility Tuition Flexibility Continued downward trend in State financial support Continued downward trend in State financial support GR reduction ($22M) P/T Benefits ($6M) 90 Day Wait ($2M) TX Tomorrow ($3M) B-on-Time ($?M) Higher tuition set asides $20M -$33M
Budget issues to Deal with $30M annual shortfall in R&R funding $30M annual shortfall in R&R funding –$20M annual coming into the year –$10M reduction to balance the Fy03/04 budget $15M recurring shortfall in competitive compensation funding $15M recurring shortfall in competitive compensation funding
Total University Budget Educational & General Component 59% Endowment Component 9% Research Component 20% Auxiliary Component 12% $846.7M + 6.8% University Finances FY03/04 Total University Budget $1.44B $176.6M + 2.2% $129.1M – 1.0% $292.2M + 12.6% $1.44B + 4.7% or $63M
University Finances How does State General Revenue fit into the Picture?
The Permanent University Fund (PUF) Why isn’t it enough? PUF Lands==> 02’ Market Value $6.7B PUF Lands ==> 02’ Market Value $6.7B Available University Fund 2/3 UT System 1/3 A&M System System Costs PUF Bonds UT Austin UT Austin receives about 30% of the total distributed income from the PUF UT Austin return on investment <== return on investment Fy03/04 $109.4M
Budget Accomplishments For our State Improved research competitiveness Improved research competitiveness For our Students Additional faculty positions Additional faculty positions Increased tuition & scholarship support Increased tuition & scholarship support Capacity to invest in specific programmatic initiatives Capacity to invest in specific programmatic initiatives For our Employees Preservation of a competitive benefit program Preservation of a competitive benefit program Possibility of mid-year salary program Possibility of mid-year salary program
It was a challenge to balance the budget! Efficiency Improvements $5M from Office Supplies & Credit Card changes…more to come $5M from Office Supplies & Credit Card changes…more to come Across-the-board Budget Reductions $25M total reductions…$4M from occupied positions $25M total reductions…$4M from occupied positions Reduced Infrastructure Funding $10M reduction in an area already under funded! $10M reduction in an area already under funded!
What are our Continuing Challenges? Infrastructure Funding - $30M annual shortfall
Facility Aging Drives Repair & Renovation (R&R) Requirements There is a significant bubble of R&R requirements in the near future. A substantial portion of the University’s Plant, those projects built in the 50’s through 80’s, is approaching 30-60 years old and will require substantial repair and renovation.
Why is a Near Term Infrastructure Solution Needed – Why can’t this wait? Campus & Building Safety Cost Usability / Habitability Continuity of Plant Operations
What are our Continuing Challenges? Competitive Compensation Program Funding - $15M recurring
Appropriation & Tuition and Fees Collected per FTE 1999/00 UT vs. Peer Institutions
Competitive Position – Tuition & Mandatory Fees UT vs. Other Institutions (2002 Data) Source: Morgan Stanley, based on information from the College Board and the Chronicle of Higher Education..
A Rule of Thumb for Planning Every dollar increase in tuition generates about $1M of net revenue, after set-asides, for the University on an annual basis. Therefore, a student taking 28 SCH annually would pay $28 more in tuition per year for each $1 increase in tuition.
The Challenge Summary Infrastructure Funding - $30M annual Compensation Program Funding - $15M recurring
Possible Near Term Solutions Reduce expenses elsewhere and reinvest in R&R Just completed exhaustive effort Impossible to not impact people Reduce / eliminate January compensation program Increases competitive issues Not a long-term fix Increase tuition