UNIVERSITY OF MINNESOTAFinancial Overview

University of MinnesotaFinancial Management Organization

UNIVERSITY OF MINNESOTABOARD OF REGENTS

UNIVERSITY PRESIDENTRobert Bruininks

VICE PRESIDENT, CFO & TREASURERRichard Pfutzenreuter

Lincoln KallsenDirector of Financial Planning & Analysis

UNIVERSITY TAX DEPARTMENTKelly Farmer

Director

OFFICE OF ASSET MANAGEMENTStuart Mason

Assoc. VP & Chief Investment Officer

Carole FleckDirector of Debt Managment

OFFICE OF BUDGET & FINANCEJulie Tonneson

Director

OFFICE OF REAL ESTATESue Weinberg

Director

OFFICE OF THE CONTROLLERMike Volna

Assoc. VP & ControllerAccounting ServicesDisbursements/External SalesU of M Policy DevelopmentFinancial Systems Support

PurchasingSponsored Financial Reporting

Inventory ServicesRisk Management & Insurance

Inventory Services

Investment ManagementCash ManagementBursar Operations

Operating Budget DevelopmentCapital Budget DevelopmentBiennial Budget Development

Compact Process Support

OFFICE OF INSTITUTIONALRESEARCH & REPORTING

ASSOC. VP & DIRECTOR OF AUDITSGail Klatt

r. 2004-Sept-10

Fiscal Year 2007-08Total Operating Budget

What is the amount of the University’s annual budget?

Current Non-Sponsored Expenditures $2,515,519,819

& Mandatory Transfers

Current Sponsored Expenditures $ 534,000,000

Total Current Fund Operating Budget $3,049,519,819

All-Funds Budget Structure

Non-Sponsored Funds$2.5 Billion

Centrally Allocated & Attributed$1.462 Billion

Local Unit Generated Revenues$1.053 Billion

$795 MillionClinical Income

Restricted IncomeGrants & ContractsBusiness & Industry

Sales & ServicesFees

Endowment Income

State O & M/Other Misc.

State Specials

Indirect Cost Recovery

Central Reserves

Tuition

$258 MillionAuxiliary

Operations

University Fee

Sponsored Funds$534 Million

University of Minnesota Revenue Sources All Funds FY2007

Educational Sales/Contract Activity: 11%

Gifts: 4%

Federal/State/Other Grants and Contracts: 26%

Capital Grants/Gifts/Appropriations: 3%

State Appropriation: 26%

Auxiliary Enterprises: 11%

Tuition and Fees: 19%

Educational Sales/Contract Activity: 11%

Gifts: 4%

Federal/State/Other Grants and Contracts: 26%

Capital Grants/Gifts/Appropriations: 3%

State Appropriation: 26%

Auxiliary Enterprises: 11%

Tuition and Fees: 19%

University of Minnesota Revenue Sources All Funds FY 2007

FY 2007–08 Revenues: $1.2 billion

0

200

400

600

800

1000

1200

1400

Why Are These RevenuesSo Important?

Student Tuition

and Fees

StateAppro-

priations

• 70% of total spending on instruction

• 77% of total spending on student services

• 72% of total spending on faculty compensation

• 93% of the total budget of CLA

• 78% of the total budget of IT

• 75% of the total budget of CFANS

Two Budget Processes

• Biennial Budget Request to the State

- completed every two years

• Annual Budget Process

- conducted every year

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Where the Money GoesState of Minnesota General Fund Budget / $34.58 Billion2010-11 Biennium

Higher Education

9.1%

Public Safety5.4%Health &

Human Services

28.1%

K-12 Education

39.9%

All Other8.5%Property Tax

Aids9.0%

77% of State Budget • K-12 Education

• Property Tax Aids & Credits

• Health & Human Services

Legislative Outcome* 2007-08 2008-09

Request $58,900,000 $64,500,000

Actual $67,447,000 $14,310,000

Difference $ 8,547,000 ($50,190,000)

Biennial Math = Request $182,300,000Actual $149,204,000Difference ($ 33,096,000)

*Excludes $25,000,000 onetime U/Mayo Partnership

Current Non-Sponsored FundsFiscal Year 2006-07 Expenditures / $2.2 Billion

60%

4%

12%

11%

7%

2%4%

36%

2%

5%

18%

11%

12%

16%

By Object of Expenditure By Function

Consultants/Purchased Personnel

Equip. & Capital Assets

Utilities

Supplies &Services

All Other

Student Aid

Salaries &Fringe

InstructionAll Other

Op. &Maint.of Plant

InstitutionalSupport

Academic Support &Student Services

PublicService

Research

State of MinnesotaFinancial Context – FY2008/09 & FY2010/11

($3,000)($2,500)($2,000)($1,500)($1,000)

($500)$0

$500

2008/09 2010/11

Projected Balance Feb. 2008 ForecastActual Balance May 2008 End Session

Projected Balance 2010/2011 @ 2.0% InflationProject Balance 2010/2011 @ 3.3% Inflation

Historical Annual Incremental Investment Framework: $80.0 M

100%

0%

Safety and contractual obligations = $3.0M or 3%

Programmatic investments = $18.0M or 22%

Infrastructure investments and support = $7.0M or 9%

Student aid = $5.0M or 6%

Facility operations = $12.0M or 15%

Employee compensation = $35.0M or 45%

DRAFT FOR DISCUSSION ONLY2010-2011 Biennial BudgetConceptual Framework

Research Enhancement

Program

State Responsibility

Compensation75% State Share

Student Aid

University Responsibility

[Tuition and Internal Funds]

Educational & Instructional Programs

Core Academic Support(cost pools, etc.)

Compensation25% U of M Share

Biennial Budget Request:Increase over FY09 Increase over

FY102010-2011 Biennium

FY2010 FY2011 (Biennial Math)

State Request

Core Compensation

(State Share)

$36,500,000 $22,200,000 $95,200,000

Middle Income Scholarship

$8,000,000 $0 $16,000,000

Research Enhancement Fund

$10,000,000 $10,000,000 $30,000,000

New State Appropriation $54,500,000 $32,200,000 $141,200,000

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Biennial Budget Timeline

July August Sept. Oct. Nov.

EstablishConceptual Framework

FinishPrinciples,

Prel. Write Ups &Financial PlanFor SeptemberBOR Review

Present Biennial

Request toBoard of RegentsReview

Present Biennial

Request toBoard of RegentsApproval

CompleteEntry of Biennial Budget

Information into State System

DOF Budget

Instructions

BOR DocketDeadline 8-24-08

BOR DocketDeadline 9-28-08

UMD Meeting

Agency PlansDue to MNLegislature

Nov 30, 2008

PreliminaryCost

Estimates 17

Three critical economic issues

The University’s biennial request funds:1. Compensation for University faculty and staff.

2. Middle income scholarships for Minnesota students and their families.

3. Research enhancements to meet growing demand for capacity and evolving statewide needs.

Compensation for faculty and staff

Request

3% annual compensation pool increase = $95.2M for biennium

Rationale

Higher education is people-intensive and highly competitive.• Nearly two-thirds of the U’s annual operating budget is compensation.• Minnesotans have seen prices rise by 5.6% since July 2007.• Top faculty are highly sought-after — making them challenging to recruit

and retain.

Middle income scholarship program

Request

Middle-income scholarships to reduce tuition by 5% to 40% depending on income = $16M for biennium ($8M recurring)

Rationale

Many middle-income students receive little scholarship support.• Middle-class Minnesota families are struggling with rising costs.• Low-income students already attend the U with free tuition.• It’s time to provide ongoing scholarship support for middle-income

students.

Research enhancement program

Request

New investments to enhance research capacity = $30M for biennium

Rationale

The U creates new knowledge that fuels the economy.• Investment in research is critical to job creation and economic growth.• The U competes to win $600M+ in research funding each year.• Our research capacity is leveraged by the state, business and industry,

and other colleges and universities.

University-funded components

Funding sources

4.5% tuition increase per year

1% reallocation per year

University obligations

The U’s share of the compensation pool increase

Essential academic investment and support

Debt service, utilities, leases, new building operations, safety and contractual obligations

FY2010 – 2011 Biennial budget request

Increase over FY09

Increase over FY10

2010-2011 Biennium

FY2010 FY2011 (Biennial Math)

State Request

Core Compensation

(State Share)

$36,500,000 $22,200,000 $95,200,000

Middle Income Scholarship

$8,000,000 $0 $16,000,000

Research Enhancement Fund

$10,000,000 $10,000,000 $30,000,000

New State Appropriation

$54,500,000 $32,200,000 $141,200,000

Budget Development Activities

Pre IMG

“Infante” Phase Pre IMG

“Infante” Phase

IMG

“Install” Phase IMG

“Install” Phase

IMG“Shared

Responsibility”Or “Common Good”

Phase

IMG“Shared

Responsibility”Or “Common Good”

Phase

1992 ------1997 1998 ------1999 2000 ------ 2005

“Earned Income&

Full Cost Model”Phase

“Earned Income&

Full Cost Model”Phase

2006 ------ ????

Reforming Resource AllocationModels for Revenue Distribution

TuitionRevenue

Allocations toAcademic & Support Units

CentralFunds

Indirect CostRecovery

StateAppropriations

Previous Model Current Model

StateAppropriations

TuitionRevenue

Indirect CostRecovery

Allocations toAcademic Units

Allocations toSupport Units

50.5%

49.5% 100%

CentralFunds

Centrally Distributed Revenues

Local Unit Generated Revenues

The challenge of funding institutionalcommon goods andacademic priorities

Reforming Resource AllocationWhy Institutional Revenue Sharing?

IRS – recognition that all units should share in providing

resources for meeting institutionalneeds & budgetary responsibilities.

Institutional Revenue SharingFiscal Year 2004-05 Approved Budget

Academic Institutional Revenue Sharing = Total Revenues X 8.5%

Academic Institutional Revenue Sharing = Total Revenues X 8.5%

Part 1

Calculate revenue yield @ 3.75% of

“Sales & Services” Revenue*

* [Includes Central Support Units]

Part 1

Calculate revenue yield @ 3.75% of

“Sales & Services” Revenue*

* [Includes Central Support Units]

Part 2

Subtract “3.75% Sales & Services” Assessment from

8.5% IRS and collect remaining

assessment from collegiate/campus

units

Part 2

Subtract “3.75% Sales & Services” Assessment from

8.5% IRS and collect remaining

assessment from collegiate/campus

units

Estimated FY05 Yield = $11.9 m Estimated FY05 Yield = $87.3 m

Why Build Upon the IMG Model?IMG Largely A Success - However

NEED MORE

NEED LESS

TransparencySimplicity/Fewer LeversAll-Funds/All Costs AnalysisAccountability – Units & Leadership

Internal AssessmentBase + / - Methodology

Minnesota’s Budget Development Story

Earned Revenues

TuitionICRFeesGiftsSalesEtc.

Allocated StateAppropriation

AcademicUnits

Allocated Costs

UtilitiesFacilities OpsDebtLeasesLibrariesResearchTechnologyStudent Serv.ClassroomsAdministration

Earned Income-Full Cost

9 Cost Allocation Pools• Facilities – Operations & Maintenance

(ASF/Space Data Base/Twin Cities/Standard Service Levels)

• Utilities - (Consumption by Building/Buildings Metered/Monthly Bill)

• Debt & Leases - (Occupancy/General Purpose Classrooms)

• Office of Information Technology(Centrally Allocated/Unweighted Headcount/Tiered)

• Administrative Service Units - (Total Expenditures/Tiered)

• Research(Sponsored Services/3 Yr. Rolling Avg. Sponsored Expenditures)

• Libraries - (Weighted Student & Faculty Headcount/Law Library Nuance)

• Student Services(3 “buckets”/Primarily Student Headcounts/Aid Programs Included)

• General Purpose Classrooms(Student Course Registrations/Future Incentive Refinements)

Summary of Cost Allocation RecommendationsX = Primary “type” assignment

Utilities Facilities

O&M

Debt &

Leases

Tech Admn

Serv

Libraries Research Student

Serv

Gen.

Purpose

Class-rooms

Consumption

Based Cost

Allocation

X X

Cost-Driver

Based Cost

Allocation

X X X X X X

Common Good Based

Cost

Allocation

X

Utilities15%

Facilities15%

Debt/Leases9%

Libraries10%

Research Admin10%

Technology9%

Student Serv.3%

Admin. Serv.28%

Classrooms1%

Utilities18%

Facilities16%

Debt/Leases12%

Libraries10%

Research Admin3%

Technology10%

Student Serv.17%

Classrooms3%

Admin. Serv.11%

Medical School College of Biological Sciences

Utilities5%

Facilities10%

Debt/Leases4%

Libraries16%

Research Admin1%

Technology17%

Student Serv.32%

Classrooms5%

Admin. Serv.10%

College of Liberal ArtsUtilities

3%Facilities

9%

Debt/Leases0%

Libraries22%

Research Admin0%

Technology19%

Student Serv.23%

Classrooms6%

Admin. Serv.18%

Carlson School of Management

6-Year Capital Improvement Plan

Part One: May/JuneCapital Improvement Budget

Year 1

Part Two: Oct./Nov. Capital Improvement Plan

Years 2 - 6

Board of Regents Policy directs the administration to develop a capital budget with a “6 year time horizon, updated annually”

6-Year Capital Improvement Plan

Board of Regents

Review/Action/Discussion

Policy Background/context

Oversight Strategic positioning

Key ToolsState Biennial Request – even years

Annual Operating Budget – every yearState Capital Request – odd yearsSix Year Capital Plan – every yearAnnual Capital Budget – every year

Operating & Capital Budget DevelopmentC

omm

ittee

s

Wor

k se

ssio

ns

Board Meetings

Oversight & Approval

Contacts for Budget and Financial Information

Budget Office Web Site: www.budget.umn.edu

Budget Office Phone #: 612-626-4517

Controller’s Org Phone #:612-624-0874

Institutional Research & Reporting Web Site:www.irr.umn.edu

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