University of Arkansas FY06 & FY07 Finances Faculty Senate March 8, 2006 Faculty Senate March 8, 2006

Ordinary folk (parents, the public, university students, staff & faculty, etc.) at right after 20 minutes of trying to understand the in’s and out’s of university financial operations (after The Scream by Edvard Munch below)

FY06 Financial Issues  E&G utility budgets are less than projected expenditures by $1.75 million. With a $660K reserve, the deficit carried forward to FY07 is expected to be $1.09 million.  Annual expenditures of about $3 million for new faculty start-up and matching funds for grants are NOT in the FY06 budget.  Uncommitted & unrestricted year-end balances that are used to supplement inadequate contingencies are decreasing as a result of the carry-forward policy. Thus, it is harder to find funds for activities, like start- ups & matches, that the university cannot decide to stop doing.

FY07 Revenues  State Appropriations  FY06$104,180,511  FY07  RSA “A”$94,980,287  RSA “B”$6,861,071  RSA Total$101,841,358  EETF (9/2/05)$8,338,715  FY07$110,180,073  FY07 Increase$5,999,562  FY06 SSCH Growth in FY06 Tuition Dollars $5,064,106  Additional Revenue from Tuition Rate Increase $658K/ (% of increase)

FY07 Revenues Continued  FY07 Projected Enrollment Increases  Undergraduate6.3%  Graduate5.1%  Law(0.7%)  Revenue Growth$5 million  Remaining Unrestricted & Undesignated Revenue Adjustment (primarily to reduce expected earnings on cash management) ($267K)  Generally positive financial picture for FY07 though it is doubtful that there will be sufficient funding to do “all good things that should be done”.

Unrestricted but Dedicated Fee Revenues  Mandatory fees are part of the cost of education  Student initiated new mandatory fees:  Readership Fee  Concert Fee  Institutionally initiated fees such as:  Teaching Enhancement & Laboratory Equipment Fee (varies by College or School) has provided increased teaching support to offset the lack of departmental maintenance increases  Mandatory fees are not available for general budget considerations.

4-Year US Public vs UA Tuition & Fees

UA Enrollment

UA Enrollment ( FTE ) Note: FY06 is an estimate.

UA State Appropriation

UA Appropriation per FTE Student Note: FY06 is an estimate.

UA Appropriation per FTE Student Note: FY06 is an estimate. (’89-’90 constant dollars*) * Based on HEPI inflation rates

Two Primary Sources of UA E&G Revenue:

University of Arkansas Fayetteville for FY2006

FY05 Expenses by Function Financial Report Budget* Instruction$96,087,697$86,947,457 Research$87,513,517$11,583,474 Public Service$57,677,724$4,998,619 Academic Support$28,909,057$22,745,887 Student Services$16,292,007$14,121,582 Institutional Support$25,239,057$19,279,045 Scholarships & Fellowships$24,370,475$22,858,145 Plant Operations & Maintenance$29,503,679$22,755,944 Auxiliary Enterprises$63,467,384 Debt Service$5,805,302 Reserves$1,856,128 Depreciation$38,875,804 Total Operating Expenses$467,936,401$212,951,583 *0102, 0112 & 0372 Unrestricted Only Revised Q4

FY07 Budget  Have to budget those expenditures not previously budgeted but for activities for which the institution does not or cannot made the decision to quit doing.  Classified pay plan requires $896K  GA stipend increases cost $63K/(% of increase)  N/C Non-faculty salary increases cost $272K/(% of increase)  Faculty salary increases cost $701K/(% of increase)  Faculty promotion increases $318K  Utility E&G budget increase for FY07 cost only is $1.48 million  Additional funding for faculty positions under review

General Financial Challenges  Diversity enhancements  Student centered  Full formula funding  Budgeting revenue enhancements (i.e., investments vs. improvements; e.g. SSCH growth and grants & contracts with indirect costs)  Capital needs  Need-based scholarships  Balance need for flexibility with demonstrating full and effective use of funding  Faculty, GA, & Staff salary improvement  Base support for activities made possible by development  Unrelated business & private sector competition  Public sense that universities are not controlling costs  Deferred maintenance & renovations to modernize “Universities share one characteristic with compulsive gamblers and exiled royalty; there is never enough money to satisfy their desires.” —Derek Bok (1930- ) President, Harvard University ( )