1 / 56

Michigan State University Budget Overview: Strategic Financial Planning for 2014-2015

This budget overview for Michigan State University (MSU) outlines the financial framework and planning parameters for the 2014-15 budget, which was approved by the Board of Trustees in June 2013. It highlights the university's focus on maintaining a strong credit rating, ensuring sufficient liquidity, and managing long-term financial health despite economic challenges. The document provides insights into revenues, projected growth, and investment performance, while analyzing Michigan's fiscal environment and its impact on MSU’s financial strategies.

reese
Download Presentation

Michigan State University Budget Overview: Strategic Financial Planning for 2014-2015

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. MICHIGAN STATE U N I V E R S I T Y Budget and Planning Overview

  2. Context • Bolder by Design • Financial Framework • Budget • While maintaining credit rating and debt capacity; sufficient working capital and liquidity; investment performance and endowment; comparability to peer financial composition and performance

  3. MICHIGAN STATE U N I V E R S I T Y Budget Planning – Pro forma Preliminary 2014-15 budget approved by the BOT in June 2013 *Includes 1.5% general merit, 0.5% college market, and 0.5% provost market pool ** Includes 1.5% general merit, 0.75% college market, and 0.5% provost market pool ***Infrastructure financing

  4. MICHIGAN STATE U N I V E R S I T Y MSU Revenues: MSU planning requires $17M from two sources

  5. 1% Planning Parameters

  6. Long-Term Financial FrameworkGap Analysis to Inform Long-Range Planning Update ten-year analysis of critical university areas requiring long-term support

  7. MICHIGAN STATE U N I V E R S I T Y Budget Planning – Pro forma Preliminary 2014-15 budget approved by the BOT in June 2013 *Includes 1.5% general merit, 0.5% college market, and 0.5% provost market pool ** Includes 1.5% general merit, 0.75% college market, and 0.5% provost market pool ***Infrastructure financing

  8. MICHIGAN STATE U N I V E R S I T Y Financial Health

  9. Multi-Year Perspective • MSU has managed through the most difficult decade of economic circumstances in its recent history • Despite Michigan fiscal circumstances being more severe than in surrounding states, MSU financial indicators approximate the Big Ten median • Reflective of prudent financial policies, a focus on cost-containment, and efficient operations

  10. Economic Trends • Federal fiscal policy suggests continued pressure to reduce “discretionary” spending including research activities and possibly financial aid, next Sequester deadline is January 15, 2014 with an estimated $20B impact • In addition to the above, possible Medicare – Medicaid reimbursements including support for graduate medical education at risk • Federal Affordability of Care Act initiates most significant health care changes in decades, potentially increasing baseline health care costs beginning in FY15 • Economy improving at state level, full spring back not anticipated

  11. MSU Credit Rating and Debt • MSU’s Aa1 long term credit rating reflects its overall financial strength • Current external debt approximates $860M which includes $256M for Residential and Hospitality Services and $56M for Athletics • An additional $169M in short-term commercial paper to be repaid by internal units • Other obligations include: Internal loans of $20.5M, Federal student loans of $38M, and current leases totaling $44.3M • Ongoing need to prioritize debt funded projects, manage debt capacity, debt service availability, and ratings optimization … additional debt capacity of $300M to $500M available within current rating, additional capacity at lesser ratings

  12. Sufficient Working Capital & Liquidity • Currently exceeds targeted liquidity level of $284 million • Liquidity risk may exist if significant deviations from planned state or federal allocations occur • External line of credit established to optimize longer-term investment strategy

  13. Investment Performance & Endowment Status • Over ten years, MSU investment performance ranks in the 16th percentile versus national peers, most recent year performance at 12.1 percent ranks in the top third • Annual giving low in Big Ten but improving, donor based financial aid is lowest in Big Ten, lags median by $20 million • Endowment growth (includes return and annual giving) ranks 6th in Big Ten, total endowment is noted at $1 Billion, and includes the Foundation at $327M

  14. Peer Financials • Combined tuition & fees and appropriations per student over $1,700 less than Big Ten median, representing over $75M in annual revenue • Contracts and grants received in immediate past year at $478 million (reflects impact of Sequester), up 27 percent over 5 years • FY12 research expenditures up $53M over previous year, at 11.6 percent reflects the largest institutional increase across the Big Ten

  15. MICHIGAN STATE U N I V E R S I T Y Revenues

  16. MICHIGAN STATE U N I V E R S I T Y University Revenues 1989-1990 All Funds Revenue - $734M 2012-13 All Funds Revenue - $2.3B Proportion of Revenue Appropriations – 28% Sponsored Program – 19% Tuition– 18% Auxiliary – 16% Gifts – 6% Proportion of Revenue Tuition – 31% Sponsored Program – 19% Auxiliary – 13% Appropriations – 11% Gifts – 9%

  17. MICHIGAN STATE U N I V E R S I T Y State of the State • Manufacturing job growth leads all states • Added 221,00 private-sector jobs over 3 years • Per capita income growth tied first in Great Lakes states • Out migration trend halted, population up for first time since 2003-04 • Make Michigan a leader in STEM fields

  18. MICHIGAN STATE U N I V E R S I T Y State Issues • There remains a negative view of universities in parts of the legislature – assumption that our costs are out of control (Progress evident but not over) • Continuing push on transferability of credits • Continued efforts to micromanage several aspects of University activity – including benefits for same-sex couples, stem cell research and faculty bias • However, we are starting to see some recognition of the role the State has had in raising the costs of education

  19. MICHIGAN STATE U N I V E R S I T Y Appropriation Trends • Appropriations down 15% over last decade • State appropriations approximate 20% of general fund budget • Recent cycles have yielded modest increases ~1-2% • Future year increases anticipated given consistent funding model formulations and state economic performance • Current state economic indicators anticipate a 2.9% increase to GF/GP in 2014 and 4.4% in fiscal 2015

  20. MICHIGAN STATE U N I V E R S I T Y Appropriations History If increased at inflation, MSU appropriations would be $120M more than current levels Appropriations down $44M over 10 years

  21. MICHIGAN STATE U N I V E R S I T Y Performance Funding Model • Continuation of Business Leaders for Michigan metrics and scaling • Undergraduate critical skills degrees • R&D Expenditures • Graduation rate • Continuation of tuition restraint provisions for resident undergraduate students, particularly in the context of incremental state support • Need to address variance in per FTE funding among State’s research universities • Institutional Support as % of Core Expenses • Total undergrad FYES (scaling)

  22. MICHIGAN STATE U N I V E R S I T Y State Outlook • State financially is recovering • $900 Million Surplus • Big push for tax cut • Transportation $1 b shortfall • DCH $200 M shortfall • County winter budgets exhausted (salt, plows) • State pension liability growing • Base funding for University expected to be >3% - but how much won’t be known until Feb. • Opportunities for initiative funding – Engineering Capacity, Autism, Ag Processing/Workforce

  23. MICHIGAN STATE U N I V E R S I T Y Accelerating Growth for Michigan Food and Agriculture MSU Food Processing and Innovation Center (FPIC) • Space for high-growth companies to innovate, scale up and market new products/processes • State of the art USDA/FDA facility permits product and process development and finished products • Flexible production capabilities • Surveyed high-growth firms show interest in facility Food Processing Workforce Development Program • Partner with community colleges to establish 2-year training programs • Revitalization of fruit and vegetable lab Detroit Initiative for Advanced Food Processing and Export • Phase I – Develop advanced-processing-and-export plan while strengthening existing city capacity • Phase II- Implement and create state-of-art processing center

  24. MICHIGAN STATE U N I V E R S I T Y Accelerating Growth for Michigan Food and Agriculture

  25. MICHIGAN STATE U N I V E R S I T Y Appropriation: “What if” Analysis • Pro-forma FY15 MSU Budget projected a $17M revenue increase from a combination of Appropriations at 2% ($2.5M X 2) and Resident Undergrad Tuition at 3% ($4M X 3) • Alternatives • A 5% appropriation increase and tuition capped at 1% balances the proposal • Caps at 2% and 3% would provide additional resources of $4M and $8M, respectively • A 4% appropriation increase and tuition capped at 1.75% balances the proposal. • Caps at 2% and 3% would provide additional resources of $1M and $5M respectively

  26. MICHIGAN STATE U N I V E R S I T Y Tuition and Fee Considerations • Constrained ability to increase tuition and fee rates • Public sensitivity to non-resident student mix • Peer standing across dimensions • Resident/NR tuition rates • Residency mix • Structure

  27. MICHIGAN STATE U N I V E R S I T Y Alternate Tuition Approaches Improve existing incentives for accelerating time to degree Accommodate increasing numbers of advance placement credit and student desire to affiliate with a major sooner in academic career Maintain economic opportunity for students to attain degrees in college of choice Increase comparability of tuition and fee structure with peer institutions

  28. MICHIGAN STATE U N I V E R S I T Y Alternative Tuition Structure by Core vs Professional and Other Core college model; includes “admit when ready” modification

  29. MICHIGAN STATE U N I V E R S I T Y Michigan Resources per Student

  30. Estimated Big Ten Non-Resident Undergraduate Enrollment % MICHIGAN STATE U N I V E R S I T Y Big Ten Avg. 36% * Fall 2012

  31. MICHIGAN STATE U N I V E R S I T Y 2012 Federal Budget Sources and Uses Total Federal Budget Sources: $3.7T Total Federal Budget Uses: $3.7T Source: American Association for the Advancement of Science

  32. MICHIGAN STATE U N I V E R S I T Y Status Update • FY14 Omnibus Appropriations legislation for entire federal government passed the House of Representatives by a vote of 359-67 on January 15. • Senate passed the Omnibus on January 16 by a vote of 72-26. • Omnibus funds all federal agencies, such as USDA and the National Science Foundation, through the end of September 2014. • Some relief from sequestration provided for FY14 and FY15 in the 2013 Bipartisan Agreement Act • Sequestration cap lifted by $63 billion ($45 billion in FY14 and $18 billion in FY15). • Sequestration Cuts remain in place from FY16 to FY20.

  33. MICHIGAN STATE U N I V E R S I T Y Federal Discretionary Spending

  34. MICHIGAN STATE U N I V E R S I T Y Federal Budget Request: Research

  35. MICHIGAN STATE U N I V E R S I T Y Federal Budget Request: Research

  36. MICHIGAN STATE U N I V E R S I T Y FRIB Federal budget includes $55 Million for FRIB State of Michigan Strategic Fund to induce FRIB bonds for $91M on February 25

  37. MICHIGAN STATE U N I V E R S I T Y Pell Grants Funded at last year’s level of $22.8 billion. Increased mandatory spending will bump up the maximum award next year by $85 to $5,730. Number of recipients is expected to increase from 9.1 million to 9.3 million.

  38. MICHIGAN STATE U N I V E R S I T Y Graduate Programs Department of Education • Graduate Assistance in Areas of National Need (GAANN) and Javits Fellowship funded $29.3 million – the same level as last year. NSF • EHR/Division of Graduate Education - $846 million ($13 million more than FY13) • EHR/Alliances for Graduate Education - $7.84 million (the same as last year)

  39. MICHIGAN STATE U N I V E R S I T Y Next Steps Department of Education • Graduate Assistance in Areas of National Need (GAANN) and Javits Fellowship funded $29.3 million – the same level as last year. NSF • EHR/Division of Graduate Education - $846 million ($13 million more than FY13) • EHR/Alliances for Graduate Education - $7.84 million (the same as last year)

  40. MICHIGAN STATE U N I V E R S I T Y Expenses

  41. MICHIGAN STATE U N I V E R S I T Y Expense Considerations • Financial Aid – Federal budget funding of high-need students, distribution of family income, appropriate discounting • Faculty salaries – Peer monitoring salary/compensation; Big Ten ranging upward • Coalition salaries – Per contract • Health Care – ACA impact and planning, continuation of 5% cost cap • Utilities – Continuation of energy transition plan, commodities monitoring • Research – Federal budget impact on grants and contracts

  42. MICHIGAN STATE U N I V E R S I T Y Total Student Assistance 2012-13 Student Assistance - $625.3M 2001-02 Student Assistance - $242M Over the last five years, MSU has increased financial aid by 50% over the last five years, more than 2 times the increase to resident undergraduate tuition rates

  43. MICHIGAN STATE U N I V E R S I T Y Financial Aid Rates of Change and Tuition/Appropriation Rates of Change

  44. MICHIGAN STATE U N I V E R S I T Y Family Income Distribution Adjusted to 2013 dollars

  45. MICHIGAN STATE U N I V E R S I T Y Significant Affordable Care Act Provisions Other Notes: Other provisions include W-2 reporting, group health plan fees, preventative care additions, revised flex spending limits, auto enrollment, and employer access to state exchange. In total, anticipated cost increases of $0.3M to $0.4M are anticipated.

  46. MICHIGAN STATE U N I V E R S I T Y 2012-13 Big Ten Faculty Salaries *Median does not include Northwestern

  47. MICHIGAN STATE U N I V E R S I T Y 2012-13 Big Ten Faculty Compensation Big Ten Median $135,344* *Median does not include Northwestern

  48. MICHIGAN STATE U N I V E R S I T Y 2012-13 Big Ten Faculty Compensation (Adjusted for post-retirement healthcare) Big Ten Median $133,852* *Median does not include Northwestern

  49. MICHIGAN STATE U N I V E R S I T Y 2011-12 Big Ten RA Compensation Big Ten Median $17,652

  50. MICHIGAN STATE U N I V E R S I T Y 2011-12 Big Ten TA Compensation Big Ten Median $16,426

More Related