The University of Toledo FY 2016 Consolidated Budget Draft-4/14/2015

Overview of FY 2015 Budget FY15 Budget Target $18M Right sizing budget $4.5M Administrative Cuts $6M Main Campus improvements $2.7M Health Science Campus improvements $1.6M UTMC improvements $3.3M FY15 Budget – Actual Results Fall/Spring enrollment below budget Scholarship expense increase Salary increases for staff Investments in patient satisfaction, quality and safety Healthcare costs increased Increase in Supply expense Patient service revenue higher than budget Grant activity trending lower than budget

Highlights of the 2016 Budget

Budget Objectives All Inclusive Budget (met) GASB format (met) Invest in enrollment growth, net patient revenue growth and other key areas (met) Make good business decisions (met) Strengthen customer service to our students/patients (met) Strengthen compliance oversight (met) Address core budget issues within areas (met)

Budget Objectives Budget Investment Income at level which reflects annual averages over time. (met) Close the gap between capital investment and annual depreciation (not met) Increase net assets equal to investment income plus the principal payment on debt (not met)

Close the Gap between Capital Investment and Annual Depreciation The FY 2016 Budget does not allow UT to fund capital investments (out of operating) equal to or greater than depreciation, which is a minimal requirement over the long run. In FY 2016 the budgeted capital investment from various sources is 25% of annual depreciation. Our Five Year Plan has UT significantly closing this gap over the five year period of FY2016-Fy2020, up to 73% by 2020 (ideally at 1.2 x)

Investment in Enrollment and Other Key Areas We strategically increased and redistributed scholarships to focus on better prepared students with higher retention rates and graduation rates. The investment will result in future increased net tuition and State subsidy for in-state students. We implemented a discount for students opting to live on campus beyond their Freshman year.

Investment in Enrollment and Other Key Areas Academic resources were realigned to focus on colleges that were growing enrollment and improving student outcomes Colleges and departments were allowed to increase revenue as a way to meet our budget challenges. In many cases this was limited to 25% of their target. Human Resources received a strategic budget increase to allow a focused effort towards reduction in the growth of employee benefit expense, improved customer service and increased operating efficiency.

Making Good Business Decisions We did not make across-the-board cuts to meet our budget challenges. Non academic areas were given greater % targets than academic areas. We worked with the Senior Leadership, Deans, VPs and Department Heads to minimize cuts which would have a negative affect on student/customer service, which did not make good business sense, or merely transferred expense within the University.

Strengthening Student Services Extended food service hours to improve student satisfaction Additional dining locations/services added; more convenient locations for students Additional Success Coaches and Advisors hired Extended Library hours upon students’ request 2 new Living Learning Community Choices Doctors without Boarders Peace and Sustainability STARFISH – Student Success and Retention Tracking Software

Budget Investment Income At a Level Which Reflects the Expected Return Over Time Investment income is budgeted at a 5.5% increase, which is a conservative reflection of investment income over a 10 year period. We are committed to budget future years at the same level. While we are striving to not include investment income (as a way to balance our cash flow budget) we are including it this year to balance the budget. Investment income should be above and beyond. INVESTMENT INCOME – FY 16 Budget Compared to Previous Years (in millions) FY 16 Budget

Strengthen Compliance Oversight Funding for oversight of compliance regulations was increased as a way to improve our compliance with the ever increasing regulations related to NCAA regulations, the Clery Act, Title IX, The Higher Learning Commission, and JC.

Address Core Budget Issues Within Areas As we reviewed each operating area core budget issues were addressed. By doing this, we will minimize Deans, VPs and Department Heads coming forth during the year to ask for funding that was not resolved as part of the budget process, thus minimizing the use of contingency.

Confidence in the Budget We have made every effort to be conservative in our estimates of revenue and expenses. We have reduced the contingency to $4 million, $1million reduction from FY2015 (as a result of correcting core budget issues). Overall, we are very confident that we will meet our cash flow margin.

Future Challenges/Opportunities As indicated in our Five Year Forecast we have challenges that must be addressed in the next five years. These challenges include the following: Growing enrollment 2-3% per year. Reducing the UT “physical footprint” by up to 15%. Affiliation agreement; College of Medicine Reducing UT’s total cost of benefits.

Future Challenges/Opportunities Addressing the major shortfall in unfunded deferred maintenance. Investing in capital improvements equal to or greater than annual depreciation. Strengthening our “balance sheet” to have a positive impact on our S&P and Moody’s bond ratings. Attract and Retain top talent through competitive Reward and Recognition Programs. Eliminating waste through changes in procedures, realignment of resources, and increased use of technology.

Future Challenges/Opportunities Reducing the cost of attendance for our students by allowing them to meet graduation requirements in a more timely manner, managing the tuition/fee increases, strategically investing in scholarships, discounting room and board. Improving Auxiliary Net Revenues Increasing our unrestricted donations and gifts.

Capital Spending (all Sources) FY2016 Budget –Funding from Operations $ 0.0M State Capital Appropriations $11.8M Capital from Carry Forward $ 3.4M Total FY2016 Budgeted Capital Spend $15.2M Board approved Supplemental Capital (see above) $20.8M Prior Year Approved Capital (to be spent in FY2016) Routine Capital$ 6.0M Bond Funded$ 1.0M State Appropriations$ 5.0M Total FY2016 Capital Spend (all sources) $48.0M Total FY2016 Capital Spend (all sources) as a % of Depreciation is 80% Total FY2016 Budgeted Capital Spend as a % of Depreciation is 25%

Future Challenges/Opportunities We had forecasted a $38M deficit by 2020 if no permanent management actions were taken The plan is to close the gap over a 5 year period. The 2016 Budget addresses $6M of the deficit while still investing strategically Capital Investments were forecasted at 52% in 2016 Budget but will be spending at 25% instead