1 / 28

Fundamentals of University Resources 2008

Fundamentals of University Resources 2008. Financing Texas Higher Education Background. TX System of public higher education serves 90% of the 1.2 million students enrolled in higher education in Texas: 35 general academic teaching institutions (including law schools)

Lucy
Download Presentation

Fundamentals of University Resources 2008

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. Fundamentals of University Resources2008

  2. Financing Texas Higher EducationBackground • TX System of public higher education serves 90% of the 1.2 million students enrolled in higher education in Texas: • 35 general academic teaching institutions(including law schools) • 50 community & junior college districts • 1 technical college with 4 main campuses • 3 lower division state colleges • 9 health related institutions(7 medical schools, 3 dental schools & various health/nursing units)

  3. Texas Higher Education Coordinating Board (THECB) • Created in 1965; members appointed by the Governor for 6-year terms; started with 13, now at 6 (SB 286 – effective FY08). • Leadership and coordination to achieve excellence in higher education. • Recommends improvements; changes in the formula funding model; controls academic program duplication & unnecessary construction projects. • Oversight for state-sponsored financial aid programs.

  4. Texas State Legislative Budget Cycle • State Legislature convenes every two years for 140 days during an odd numbered calendar year beginning January 2nd: 2007 = 80th Legislative Session for FY08 and 09 Budgets 2009 = 81st Legislative Session for FY10 and 11 Budgets • State budget is allocated for two years at a time: • Appropriation is generally flat in the 2nd year with minor adjustments in earmarked/pass-through revenues. • Fiscal Year begins September 1; number reference is the trailing year: 2007-2008 = FY08

  5. General Appropriations Act (GAA) • Funds allocated each biennium are detailed in the General Appropriations Act (GAA). • Academic institutions receive direct appropriations via funding formula and non-formula appropriations. • Direct appropriations are identified in the informational strategies of each institution’s bill pattern in the GAA. • Revenue sources are referred to as the ‘method of finance:’ • General Revenue • General Revenue-Dedicated (Statutory Tuition/Certain Lab Fees)

  6. General Appropriations Act (GAA) • GAA specifies how state funds are allocated, not how they must be spent. • Institutions are not bound to spend appropriations within a specified strategy. • Exceptions: • TRB Debt service; • Research Development must be used per Ed Code §62.091. • Limitations: General Revenue can not be used to fund: • Construction; • Auxiliary purposes – e.g. Athletics, Parking, etc.

  7. Formula Funding in Texas • Tool used by the Legislature since 1950’s to allocate most of the funds for public universities. • Over time, the formula became more and more complex • Simplified in 1997 (Senator Ratliff) • Not intended as restricted budget line item • Universities may allocate to a college or department more or less than the amount ‘earned’ through the formula. • Intended to fund most Educational & General budget items: • 62% of all state appropriations for general academic institutions are allocated via 2 funding formulas and 2 supplements. Source: THECB Presentation: Introduction to the Texas Public University Funding Formula (November 2001)http://www.thecb.state.tx.us/AdvisoryCommittees/HEP/FormulaBriefingHindmanNov27.ppt

  8. State Appropriations: Formula Funding Instructional and Operations (I/O) Formula • Based on Weighted SCH (Base Year) • Teaching Experience Supplement Additional weight of 10% to undergraduate SCHs taught by tenured or tenure track faculty • Small Institution Supplement (under 5,000) Infrastructure Support Formula • Based on utility cost & square footage of E&G space for Operation & Maintenance of Plant (Facilities) 82.9%* 17.1%* *of total made available to fund the formula

  9. Funding Caps (SCHs that are not Funded) SCH are excluded from the formula funding base as for: • Doctoral Cap–doctoral hours accumulated by individual students in excess of 99 hours. • Undergraduate Hour Cap– SCH earned by a resident undergraduate student that exceeds by at least 45 hours the number of SCH required for completion of the student’s degree program. • Developmental Education Cap– developmental hours accumulated in excess of 18 SCH. • Third Time Enrollment Cap– credit hours attempted by a student for the third time.

  10. State Appropriations:Formula Funding Starting Point – funding for 35 Academic Institutions: State General Revenue + Local Funds(Statutory tuition + certain lab fees)= Funding Rate Statewide Weighted Semester Credit HoursPer WSCH $59.02 Funding for UTSA: UTSA’s WSCH * Funding Rate per WSCH (less SCH capped) = I/O Formula Funds Appropriated to UTSA Formula Strengths:cost based, emphasizes instructional mission. Formula Weaknesses:hurts growing institutions – adjustments occur every 2 years; motivates creation of graduate programs; doesn’t reward quality or student success; validity of weighting not demonstrated. In FY08-09 biennium, of the $47.4M in new formula funding, $28.4M was ‘Hold Harmless’ funding. It will be difficult for us to ever catch up.

  11. State Appropriations: Formula Funding Instructional and Operations (I&O) Formula Uses total weighted Semester Credit Hours (SCH) produced during base period: 12 months immediately preceding & including the Legislative session) • Summer 2008, Fall 2008 and Spring 2009 determine formula funding for FY2010 and 2011 (next biennium) • Weights based on SCH by: • Level of course (Lower/Upper/Masters/PhD) • Discipline

  12. Formula Funding Weights Reflect the Variable Costs by Discipline and Level Example: (SCH x Weight x Rate per weighted SCH) * Rate set by the Legislature • Liberal Arts Freshman taking 15 hrs = 15 SCH x 1.0 x $59.02 = $885.30 <less tuition>, net = $135.30 • Science Masters student taking 9 hrs = 9 SCH x 7.29 x $59.02 = $3,872.30 <less tuition>, = $2,972.30

  13. State Appropriation as a % of Total Revenue has Declined

  14. State Funding Variance by UT Campus

  15. Funding Sources of UTSA Operating Budget • State Appropriations: General Revenue – (“sum certain”) Formula Funding (~71%), Special Items, Benefit Cost Sharing • THECB Transfers: TX Grant (TPEG), Work-study, etc. • Statutory Tuition, Certain Lab Fees Other E&G: General Revenue-Dedicated – (“estimated”)funds ~29% of the formulae & TPEG • Designated Tuition & Fees, Misc. Revenue • Indirect Cost Recovery: Facilities & Admin Overhead • Auxiliary Enterprise Funds (29-accts) • Restricted Funds: Gifts (30-accts) Grants/Contracts (26-accts)Financial Aid (26-accts: not sourced from Designated Tuition or TPEG) State Funds 14-accounts Designated Funds 19-accounts

  16. UTSA FY 2008 Operating Budget All Revenue Sources - $404,292,502

  17. Statutory Tuition • Rates established by Ed Code($50/SCH since Fall 2005 for resident undergraduate students) • Same rate for all UT institutions. • Graduate students pay 2 times undergraduate rate, referred to as Graduate Incremental Tuition. ($100/SCH since Fall 2005) • Non-resident students pay rates equal to the average non-resident tuition at the 5 most populous U.S. states. Rates are determined by THECB per §54.051(d) of the Texas Ed Code • Statutory Tuition is a revenue source for the I/O formula(in an amount estimated in the General Appropriations Act.) • Institution bears impact of any over or under collection of budgeted revenue – worse for campuses who lose enrollment.

  18. Designated Tuition In 2003, the legislature ‘deregulated’ designated tuition rates to counteract declining state revenue. • Considered a local source of revenue; rates are set by by the Board of Regents & vary by institution • FY 07 = $92.25/SCH FY 08 = $101/SCH FY09 = $110 /SCH proposed • 20% of the amount collected from paid resident UG and 15% from resident GR over $46/SCH is set aside for student financial aid. • Very important revenue stream • Only discretionary source of new revenue in the 2nd year of the biennium to fund merit, mandatory cost increases, new faculty, strategic initiatives, etc.

  19. Mandatory & Incidental Fees New fees and or changes to the fee amounts are set for two years upon approval by the Board of Regents. • Proposals are considered prior to the Fall Semester of the 2nd year of the biennium. • Fee revenue must be spent in accordance with the approved purpose (justification) and per Texas Education Code stipulations. Mandatory Fees: • Required to be paid by all students. • New fees and/or fee rate changes must be approved by the Board of Regents (BoR) Incidental or Course Fees: • Fees that are assessed based on a student’s or user’s choices, or as a good/service is used; e.g. all students taking a particular course, lab or enrolled within a college. College/course fees are included in the Total Academic Cost formula.

  20. Facilities and Administrative (F&A) Indirect Cost Recovery • Facilities and Administrative (aka indirect cost recovery) from sponsored grants and contracts provides reimbursement for institutional expenses in support of extramural activities that cannot be directly charged to a specific grant or contract. • Facilities component includes plant operation and maintenance, depreciation, library expenses. • Administrative component includes general administration and general expenses, sponsored projects administration.

  21. Facilities and Administrative (F&A) Indirect Cost Recovery • F&A rate is negotiated with the federal government (DHHS) • On-campus rate: 41.5% • 44.5% rate just negotiated! for next 4 years • Off-campus rate: 26% rate • Modified Total Direct Costs (MTDC)is the base to which F&A (indirect cost) rates are applied when submitting a grant or contract, per OMB Circular A-21. http://www.whitehouse.gov/OMB/circulars/a021/a021.html

  22. Facilities and Administrative (F&A) Indirect Cost Recovery • Modified Total Direct Costs consist of "salaries and wages, fringe benefits, materials and supplies, services, travel, and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract (regardless of the period covered by the subgrant or subcontract). • Equipment, capital expenditures, charges for patient care, tuition remission, rental costs, scholarships, and fellowships as well as the portion of each subgrant and subcontract in excess of $25,000 shall be excluded from modified total direct costs." • Exclusions: some costs are excluded from Total Direct Costs (TDC) to arrive at the MTDC base to which F&A rates are applied. • OMB A-21 also provides for exclusions of other items of cost where necessary to avoid a serious inequity in the distribution of costs.

  23. Facilities and Administrative (F&A) Revenue Allocations • Budgeted recovery is estimated at $6 million. • Will grow as research expenditures increase and as effective rate increases. • F&A Revenue is shared internally per MOU: • Principal Investigator 10.0% • College, Center or Institute 10.0% • Debt Service 40.5% • Bldg Mtnc/Capital Imprvmts 4.5% • Academic Affairs 12.0% • Research 15.0% • Business Affairs 8.0% 100.0%

  24. Auxiliary Enterprises • Self-supporting activity providing goods or services to students, faculty, staff, departments, or incidentally to the general public. • Charges are directly related to, although not necessarily equal to, the cost of the goods or services. • Important aspect of campus life • UTSA’s Auxiliaries specified in the Ed Code and include • Bookstore – outsourced management contract (Follett) • Food Services - outsourced management contract (Chartwells) • Parking • Housing • University Center • Athletics • UTSA Card

  25. Capital Improvement Funding System authorized methods of debt financing: • Tuition Revenue Bonds (TRB) are approved by the Legislature to debt finance new construction.“Free money” to UTSA. General revenue appropriation covers debt service. Recent UTSA Buildings financed with TRB Engineering $74,250,000 BSE 22,950,000 Main 15,000,000 Downtown, Phase III 35,000,000

  26. Capital Improvement Funding • The Permanent University Fund (PUF) debt program funds various E&G capital needs. --PUF debt from tax-exempt bonds secured by distributions to the Available University Fund. “Free money” to UTSA. • STARS –Faculty Start-up funds UTSA has received $6.6M over the past 3 years • LERR – Library, Equipment, Repair and Rehabilitation UTSA received $2 million for FY07; $2.237M in FY08 Recent PUF Allocations to UTSA $20.25 M for Science Lab Renovations $ 8.25 M for Engineering Building $14.50 M for 1604 & Hausman Property (future site of Athletic facilities)

  27. Available Sources of Capital Funding • The Revenue Financing System (RFS) The UT System program provides low interest financing for capital needs: --available to campuses that meet bond rating agencies’ standards for The UT System to preserve its AAA rating. • Construction projects or capital equipment funded by Designated Tuition: must meet 2 of 3 financial ratios. • Projects funded by auxiliaries or fee revenue must demonstrate sustainable ability to service the debt. --100% of debt service paid by UTSA.

  28. Annual Financial Report (AFR) • UTSA has a healthy financial condition with a “Satisfactory” rating from UT System. • UTSA’s significant growth has ‘maxed out’ debt capacity to finance additional construction using designated tuition (and certain other fees) as the source for debt service.

More Related