Rebalancing State Appropriations April 16, 2008

1. Rebalancing State Appropriations April 16, 2008 Regular Board Meeting April 16, 2008

2. Appropriations per FTE excluding Ayers1995 to 2008 Regular Board Meeting April 16, 2008

3. How we got here? Mid 1990s Board of Trustees adopted an allocation methodology of constant percentage funding. • Allocations were distributed using a constant percentage for each university except for Legislatively-designated line items and Ayers funding. • Method assumed no changes in enrollments or productivity. • Funds were distributed to universities without regard to mission or productivity. Resulted in the need to rebalance funds among universities. Regular Board Meeting April 16, 2008

4. Past Equity Adjustments Actions by Board of Trustees to address the problem began in FY 2006. • FY 2006 - $ 457,440 (MVSU) • FY 2007 - $1,000,000 (MVSU & UM) • FY 2008 - $1,000,000 (UM) Regular Board Meeting April 16, 2008

5. Current Allocation FY 2008 Regular Board Meeting April 16, 2008

6. Current Allocation without Legislatively-Designated Line Items, Board Initiatives & Ayers FundingFY 2008 Regular Board Meeting April 16, 2008

7. Solution A formula was adopted November 2003 incorporating both university missions and productivity in the allocation of available funding. Formula is rational and objective. Regular Board Meeting April 16, 2008

8. Mississippi State Institutions of Higher Learning Funding Formula Adopted November, 2003 Regular Board Meeting April 16, 2008

9. Formula Components Facilities Operations (Infrastructure) Instruction & Administration (I&A) Based on weighted student credit hours + Small School Supplement $750,000 to institutions with 5,000 or fewer students and less than 110% of SREB Peer APP/FTE Capital Renewal Percent of Facilities Replacement Cost Regular Board Meeting April 16, 2008

10. Instruction and Administration Student Credit Hours are weighted by a grouping of 16 disciplines and by level of course Regular Board Meeting April 16, 2008

11. Student Credit Hour Weights Used in Formula Disciplines are separated based on Cost Regular Board Meeting April 16, 2008

12. Example of Student Credit Hour Weighting Regular Board Meeting April 16, 2008

13. 3-Year Average Student Credit Hours Conversion to Weighted Student Credit Hours CY 2005, 2006, & 2007 Student Credit Hours Regular Board Meeting April 16, 2008

14. Relative Cost of Programs at Institutions1 SCH on Average Equals WSCH (Average for the System is 2.44)FY 2009 The formula weights student credit hours based on various costs of disciplines. The chart reflects the value of one student credit hour after conversion to a weighted student credit hour based on the formula. The numbers, reflected in the chart below labeled SCH = WSCH, represents the average value of one student credit hour at the institution based on mission and productivity. APP/FTE should not be equal at all institutions. 87.0% of Highest Cost 86.7% of Highest Cost 88.6% of Highest Cost 100.0% of Highest Cost 91.6% of Highest Cost 79.5% of Highest Cost 90.5% of Highest Cost 96.2% of Highest Cost Regular Board Meeting April 16, 2008

15. The chart represents total formula (instruction & administration, facilities operations, capital renewal, and small school supplement) divided by FTE. The chart represents the relationships of APP/FTE among institutions. For example, MUW would be 79.7% of MSU. Relationship of Funding Needs Based on Formula FundingRelationship of Funding per FTE FY 2009 Funding Relationship at Current Level of $384 million of Funding shown in Light Blue 100.0% 101.0% 79.7% 87.2% 112.6% 91.4% 103.4% 80.4% $105 Per WSCH $100 Per WSCH $118 Per WSCH $122 Per WSCH $100 Per WSCH $105 Per WSCH $116 Per WSCH $113 Per WSCH Relationship of Institutions to Highest Funded Regular Board Meeting April 16, 2008

16. Equity is not just an issue for those institutions receiving more than the formula calculates; but there is also inequity among the institutions receiving less than the formula. The percentages reflect the current percentage of the formula each institution receives. Current Allocation at 78.6% of FormulaBased on Projected FY 2009 Current Need $104,817,547 Total Formula Need $490,223,792 Funding necessary to bring UM & MSU to JSU Funding necessary to bring UM up to MSU Regular Board Meeting April 16, 2008

17. Background • The recommendation is based on the FY 2009 Appropriation Conference Report. • Ayers funding and Legislatively-designated line items have been excluded from calculations. • The formula was used as the guide for rebalancing funds. • Projections limited to one year since formula is dynamic with numerous variables affecting outcomes. Variables include: • student credit hours produced, • enrollment, • number of faculty, • number of majors, • E&G expenditures, • research expenditures, • law library holdings, • current appropriation level, • costs of construction, • consumer price index, • SREB appropriation per FTE, • HECA and • future state appropriations Regular Board Meeting April 16, 2008

18. Summary of AppropriationConference Report FY 2009

19. FY 2009 State Appropriation Conference Report Allocated using the Formula Regular Board Meeting April 16, 2008

20. FY 2009 Appropriation Conference ReportAllocated using Formula as compared to FY 2008 Actual Funding Regular Board Meeting April 16, 2008

21. Recommendation Regular Board Meeting April 16, 2008

22. Premise • The FY 2009 Appropriation Conference Report was used to calculate the recommendation. • Formula was used to rebalance funds so that each institution’s allocation of appropriation is the same percentage of the formula. • Rebalancing would be phased over a five-year period in a way to lessen the initial impact to institutions to allow time for institutions to adjust variables. • Rebalancing should begin in FY 2009 and continue over the five-year period whether or not additional state appropriations are received. • Line items should be discouraged to prevent distortion of funding allocation. Regular Board Meeting April 16, 2008

23. Recommendation for Rebalancing Sum of the Years’ Digits in Reverse over 5 Years Scenarios Regular Board Meeting April 16, 2008

24. Recommendation for RebalancingSum of the Years’ Digit in Reverse – 5 Years EXAMPLE of first year of a 5-year phase out for institutions receiving more than formula pro-rated to the current funding level = Formula: Institution’s FY 2008 Actual Appropriations subtract Institution’s FY 2009 Formula Calculation equals Difference times 1/15th equals Reduction Amount Regular Board Meeting April 16, 2008

25. FY 2009 Appropriation Conference ReportAllocated using Formula as compared to FY 2008 Actual Funding Regular Board Meeting April 16, 2008

26. Sum of the Years’ Digits in ReverseFirst Year Adjustment Regular Board Meeting April 16, 2008

27. Examples of Reduction Methodology Hit of reduction in one year Regular Board Meeting April 16, 2008

28. Staff Recommendation • Staff recommends approval of rebalancing over 5 years using the Sum of the Years’ Digits in Reverse methodology. 2. Staff recommends rebalancing to occur whether or not new funding is received. Regular Board Meeting April 16, 2008

29. Sum of the Years’ Digits in ReverseFirst Year Adjustment Regular Board Meeting April 16, 2008

30. Sum of the Years’ Digits in Reverse with ½ Year Rolling Calculation Regular Board Meeting April 16, 2008

31. Questions? Regular Board Meeting April 16, 2008

33. Example of ½ Year Rolling Regular Board Meeting April 16, 2008

35. Percent of Formula After Recommendation Regular Board Meeting April 16, 2008