New Academic Administrators August 2019

1. New Academic AdministratorsAugust 2019 Brent Johnston University Budget Officer Office of Planning and Budgets Michigan State University

2. To begin: from the innovative university …the standard model has become unsustainable. To avoid disruptions, institutions of higher education must develop strategies that transcend imitation. Clayton M. Christensen, Henry J. Eyring, The Innovative University

3. Emerging Environment • Programmatic stability and prominence – 32 programs in the top-25 nationally, top-100 in the world, AAU membership -- Increasing prominence and cost of active learning and STEM disciplines • Growing accountability for student success, student safety, and Title IX objectives • Intensifying focus on competitive tuition rates, financial hardship and related student debt and completion • Threats to non-resident enrollment targets and composition – falling State and regional demographics, increasing institutional competition – offset by rising college-going rates • Opportunities to reach different student markets – online education, Kaplan, etc • Increased competition to recruit and retain top faculty including salary as well as start-up requirements • Need to prioritize programmatic and capital improvements • MSU increasingly competitive for federal support. However, federal R&D spending lags inflation, longer term Federal outlook unclear • Insurance and other operational cost pressures– focus on productivity and efficiency

4. MSU All Funds Financial Activity FY18 Expenditures: $3.1B** FY18 Revenue: $2.7B $ in thousands *Does not include additional pledges totaling $151.3M received in FY18 **Fund-specific expenditure totals do not include required GASB eliminations including asset capitalization, student aid, and internal billings

5. MSU General Fund Financial Summary FY19 Revenue: $1.4B FY19 Expenditures: $1.4B $ in thousands

6. Federal Budget Sources and Uses Total Federal Budget Sources: $3.8T Total Federal Budget Uses: $3.8T

7. 2017 Research and Development Expenses • MSU ranks 7th in the Big Ten and 32nd nationally for research and development expenditures • MSU three-year rate of change leads the Big Ten Source: NSF HERD survey

8. Big Ten Endowment Comparison 2016 2011 Includes $985M traditional endowment and $384M MSU Foundation endowment. Does not include Endowment Trust investments ($985M) SOURCE: Council for Aid to Education reports - 2014 Institutions with on campus hospitals, such as U of M, include patient donor support in the above calculations

9. Big Ten Endowment Performance

10. MSU Budget Process • Involves engagement of campus stakeholder groups • Board of Trustees • Academic governance • ASMSU • COGS • Refines multi-year planning focused on improving the value proposition for stakeholder • University administrators • Collective bargaining groups • RHA • State policy makers

11. Planning and Financial Process November-December 2019Executive Branch January 20202020-21 executive budget recommendation March, April, May, 2020 Legislative hearings: House and Senate July 2020* State appropriation passed

12. MSU Budget Process June-October 2019 Trustees act on 2019-20budgets and 2020-21 State budget request Fall 2019 Budget & Planning - Strategic Issues February - May 2020 Budget Planning Meetings April-May 2020 Admin/Board review of 2020-21 budgets June 2020 Preliminary 2021-22 operating and capital outlay request formulated June-July 2020 Board action on 2020-21 budgets August 2020 Administration consultation on 2021-22 budget request October 2020 Trustees act on 2021-22 budget request

13. Continuing discussion: Board of Trustees, President, Provost, Deans, Governance, Community Fall--Strategic Planning Major challenges/opportunities (e.g., intellectual, educational, research, outreach) facing the unit Goals, outcomes or benefits anticipated, and contribution to the Provost’s priorities (https://provost.msu.edu/priorities/index.html) Supports sustainable programmatic visions that are dynamic and responsive Identify requests that align with priorities, build unique advantage, and add value Build internal and external alliances Use metrics to demonstrate results and accountability with clear outcomes and impacts Investment from multiple sources; both internal and central Reward high performing units and address non-performing and lower-priority areas Values-Driven Data-Oriented Planning

14. Spring- -Internal Budget Issues Solidify programmatic plans including reductions Problem/opportunity addressed (current baseline metrics) What will be done Accountability: outcomes and milestones related to metrics Continue integration of college and university priorities Continue progress on strategic initiatives and links requests with strategic directions outlined in the fall State economic condition indicates a period of flat resource growth Most investments come from reallocated funds from elsewhere in the institution Seek multiple strategies for achieving goals Values-Driven Data-Oriented Planning

15. Key MetricsIllustrative Overview Departmental Overview Sample AAU Comparison (Academic Analytics) Sample Sample Persistence and Graduation Sample

16. Academic Analytics Metrics for Departmental Comparisons

17. Budget Planning Strategy • Financial planning isolates selected resources including investment income, indirect cost recoveries, the MSU Foundation, and utilities reserves • MSU’s conservative financial approach restricts operational investment from these sources Overall campus operations also include auxiliary units, research programs, and clinical activities • MSU recently completed a comprehensive bond offering that provides funding from non general fund sources for several capital projects and MSU’s legal settlement

18. Budget Planning Structure • Incremental budget framework for most units • Utilizes an ongoing budget that includes both recurring and non-recurring components • Recurring elements include: • Programmatic investments • Annual reallocations • Salary increments • Supplies and services increments • Activity-based allocations provided for revenue generating activity and include: • Off-campus/online credit instruction • Indirect cost recovery • Significant institutional activities separately planned for, including: • Financial aid • Fringe benefits • Utilities • Differential programmatic investments • Financial framework provides a planning mechanism for leadership to identify priorities and estimate funding over a multi-year horizon

19. Annual Budget and Planning Process

20. MSU Financial Framework (recurring)

21. MSU Financial Framework (non-recurring)

22. FY20 Budget and Planning – Significant Items • Appropriations: • House, Senate, Governor continue broader budget negotiations • Indian Tuition Waiver may have additional budgetary impact • Tuition and fees: • Enrollment targets and residency mix • Block tuition exceptions • Insurance costs experiencing significant increases • Self insured for traumatic brain injury (TBI) and sexual assault • Law college incorporation • Startup costs and timing for STEM fields • Investment income, other technical financial planning • Student health services • Reserves and capital project planning

23. FY20 Budget and Planning – Significant Items Salary proposals • Faculty and academic staff raise increment at 2.5% plus 0.5% Provost market • UNTF merit pool of 1.5%, ongoing changes to minima and other contractual provisions • Graduate assistants increase 2.0%, changes to minima • Student employee salary increase of 4% • All other increases in accordance with union contracts

24. Budget Planning - Revenues

25. Budget Planning - Expenditures * Includes 2.5% general merit and 0.5% market pool administered centrally ** Health care budget augmented by amounts previously committed to collective bargaining groups due to claims experience Note: Increments for revenue-based activities to be added to totals in subsequent once known

26. Budget Planning Rates of Change

27. Significant Recent Construction Projects STEM Teaching & Learning Grand Rapids Research College of Music Addition College of Business Pavilion Bioengineering Interdisciplinary Science

28. Consistency with MSU planning initiatives Reputation for administrative competence Ability to catalyze longer-term, wider impact initiatives Multi-disciplinary in nature History of programmatic success Willingness to commit internal matching funds Entrepreneurial talent Quantify objectives and results Development of long-term planning model that allows for identification of financial and operational issues Predictors of Long-Term Budgetary Success

29. The imagining university works continuously at doing its best within its circumstances, exploiting the spaces available to it, and so even changing its circumstances in the process Ronald Barnett Imagining the University

30. Questions & Follow Up David Byelich Vice President & Director Office of Planning and Budgets 517-355-9271 Byelich@msu.edu Brent Johnston University Budget Officer Office of Planning and Budgets 517-353-5519 john1096@msu.edu