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PRESIDENTS RECOMMENDED OPERATING BUDGET PLAN

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PRESIDENTS RECOMMENDED OPERATING BUDGET PLAN

    PRESIDENT’S RECOMMENDED OPERATING BUDGET PLAN

    FISCAL YEAR 1999-2000

    Contents Page

I. Fiscal Year 1999-2000 Operating Budget Plan

    Centrally Distributed and Attributed Funds

     Introduction/Guiding Principles 4

     Fiscal Year 1999-2000 Operating Budget Overview 4

     Fiscal Year 1999-200 Operating Budget Context of 5

     Biennial Budget Appropriation

     Fiscal Year 1999-2000 Operating Budget Investment Plan 7

     Fiscal Year 1999-2000 Operating Budget Resource Plan 9

    -01 Operating Budget 10 Preparing for the Fiscal Year 2000

    II. All Funds Budget Context

    A. Current Funds 13

    B. Noncurrent Funds 15

    III. Budget Development 16

IV. President’s Recommended 1999-2000 Financial Plan by Fund Group

    Budget Plan Summary 17

    Centrally Distributed and Attributed Funds 17

     Operations and Maintenance Fund 17

    A. Projected Resources 18

    B. Proposed Distributions 18

     Tuition Fund 18

    A. Tuition Plan 18

    B. Tuition Estimates by Collegiate Unit 19

    C. Revenue Allocations 21

     State Specials 21

    A. Projected Resources 21

    B. Proposed Distributions 22

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    Contents Page

     Indirect Cost Recovery 22

    A. Projected Resources 23

    B. Revenue Distributions 23

     Central Reserves 25

    A. Projected Resources 25

    B. Proposed Distributions 25

    Self-Sustaining Funds 25

    ; Auxiliary Enterprises 25

    ; Internal Service Organizations 26

    ; Other Unrestricted and Other Restricted Nonsponsored Accounts 26

    Sponsored Research 26

    V. Special Budget Issues

    Compensation 26

    ; Compensation Plan 26

    ; Fringe Benefit Rates 27

    Enterprise Systems Project 27

    Rates and Fees 29

    VI. Noncurrent Funds Budget Summary 30

    VII. Budget Plan All Current Funds Estimate 30

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Contents Page

Attachments

    1) Resource and Expenditure Budget Plan (University Fiscal Page) 32 2) Policy Memorandum Salary Adjustments for Faculty Not 33

     Covered by Collective Bargaining Agreements, Academic Professional

     and Administrative Staff and Graduate Assistants and Other 95XX

     Student Employees

    3) Definitions of Current Sponsored and Nonsponsored Funds 40 4) Fund Forecast Allocated and Attributed Funds 42

    5) Approved Tuition Rate Schedule 46

    6) Fringe Benefit Rates by Component 49

     50 7) Student Professional Fringe Table 1999-2000

    8) Approved Academic Fees 51

    9) Approved Course Fees 52

    10) Student Services Fees Recommendations 60

    11) Budget Resolution on the 1998-99 Operating Budget Board of Regents 73

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I. Fiscal Year 1999-2000 Operating Budget Plan Centrally Distributed

    and Attributed Funds

Introduction

    For fiscal year 1999-2000, the University of Minnesota’s operating budget plan presented to the Board of Regents has been constructed based upon the following four principles:

; Maximizing the University’s ability to budget new state funds for fiscal year 1999–2000

    and fiscal year 200001 in a manner consistent with the priorities outlined in the biennial

    budget proposal;

    ; Providing resources to meet financial obligations not directly related to the biennial

    budget proposal including costs associated with: a) common goods; b) targeted academic

    investments; and, c) core administrative services;

    ; Adopting internal financing mechanisms that communicate and support the concept that

    each academic and administrative unit must share responsibility for the welfare of the

    institution as a whole; and

    ; Establishing a preliminary financial framework to guide the development of the fiscal year

    2000-01 operating budget plan.

Fiscal Year 1999-2000 Budget - Overview

The President’s Fiscal Year 1999-2000 Operating Budget has been prepared based upon

    projected revenues and expenditures from a wide variety of sources. Attachment 1 (Resource and Expenditure Budget Plan) displays the recommended budget plan for all current, non-sponsored funds (funds supporting annual operating expenses). In summary, the budget for total current, nonsponsored funds is proposed as follows:

    Table 1

    Proposed Fiscal Year 1999-2000 Budget Current Nonsponsored Funds

     Beginning Balance $328,435,000

     Revenues & Net Transfers $1,545,575,417

     Total Net Resources $1,874,010,417

     Expenditures $1,573,280,534

     Ending Balance $300,729,883

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    Within the framework of Attachment 1 the primary funds supporting teaching, research and outreach are Operations and Maintenance (O&M), Tuition, State Specials and Indirect Cost Recovery (ICR). These four funds total 65% of externally generated revenues of the University and represent the major focus of budget development and planning. Table 2 below summarizes the revenue and expenditure plans relative to these four funds.

    Table 2

    The President’s Fiscal Year 1999-2000 Operating Budget

    Beginning Balance ($1,003,988)

    Revenues and Net Transfers

    Operations & Maintenance $546,321,128

    Tuition $234,414,331

    State Specials $83,113,500

    Indirect Cost Recovery $54,632,773

    Total Net Resources $917,477,744

    Allocations to Academic & Support Units $916,818,412

    Ending Balance $659,332

Fiscal Year 1999-2000 Operating Budget - Context of Biennial Budget Appropriation

University of Minnesota

    The University of Minnesota's 2000-2001 Biennial Budget Proposal was designed to increase the strength of the University as it enters a new century by providing resources to:

; provide competitive compensation for all employee groups;

    ; enrich the undergraduate experience;

    ; address changes in the design, delivery and financing of health professional education; ; connect the University to the community at large; and

    ; promote a climate of quality University services.

    The proposal represented an increase of $198,774,000 over base level funding. The total biennial appropriation request totaled $1,289,068,000. The House and Senate approved, and Governor Ventura signed, bills that provide an increase of $120,551,000 over base level funding for fiscal years 2000 and 2001. The 2000-2001 biennial state appropriation for the University of Minnesota totals $1,207,682,000.

    The biennial funding increase is represented by two distinct appropriations from the state. The first is a general appropriation of $1,191,687,000, an increase of $103,956,000 from the state’s general fund and an increase of $600,000 from the state’s Health Care Access Fund. The second is an appropriation of $15,995,000 for health professional education resulting

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    from the establishment of a medical education endowment. One-time tobacco settlement payments of $277,000,000 were used to establish this endowment.

These appropriations, like the Governor’s original recommendation for the University,

    recognize each of the University’s five major biennial budget initiatives.

State Grant Program

    In addition to direct funding for the University, the state appropriations for higher education include significant additional funding for students with financial need through the Minnesota state grant program. The major changes include the following:

    ; The living and miscellaneous expense allowance for all students in all institutions is

    increased.

    ; Tuition increases in public institutions are recognized and funded and the tuition

    maximums for students in private institutions are increased by approximately 3 percent. ; The family/government share of a student's state grant budget is increased from 53 percent

    in 1998-99 and 1999-2000 to 54 percent in 2000-01.

    In addition to these changes in the State Grant Program, the maximum federal Pell grant will increase from $3,000 in 1998-99 to $3,125 in 1999-2000 and 2000-01.

    As a consequence of these changes, the maximum, combined grant support from the federal Pell grant program and the Minnesota state grant program for students on the Twin Cities campus with the greatest financial need (i.e., $0 expected family contribution) will increase as shown in the table below. The combined grant total already exceeds the cost of tuition and required fees by $343, and that variance is expected to grow to $589 over the next two years.

     Twin Cities Undergraduate Students (full-time, $0 EFC)

     Actual Projected Projected

     1998-99 1999-00 2000-01

    Tuition and Required Fees $4,746 $4,667 $4,807

    Maximum Pell and State Grant $5,088 $5,163 $5,395

    Total Grants minus Tuition and Required Fees $343 $496 $589

    Increases will be similar on the Crookston, Duluth, and Morris campuses.

MINITEX

    The higher education appropriation from the state includes a significant increase in funding for MINITEX Library Information Network, a program of the Minnesota Higher Education Services Office located at the University of Minnesota. This appropriation provides new funding of $3.8 million for the biennium, a 73% increase over the previous biennium.

These funds provide for:

    - enhanced document delivery, including electronic delivery of articles to the

    desktop (MINITEX provides loans and photocopies from the University Libraries

    collections to other libraries in Minnesota, North Dakota, and South Dakota);

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    - one-time resources for moving the MINITEX Office from Wilson Library to

    MnLAC in January 2000 and purchasing furnishings and hiring staff to provide

    services from the storage cavern that will house infrequently used but important

    materials from the University Libraries and libraries of all types throughout

    Minnesota;

    - adding the table of contents of book titles to LUMINA, MnSCU/PALS, CLICNET,

    and other academic libraries in Minnesota;

    - licensing of scholarly and research databases for academic and state government

    libraries in Minnesota; and

    - licensing general reference databases for statewide access in Minnesota in

    cooperation with funding provided to MN Department of Children, Families and

    Learning.

MNSCU

    The biennial state appropriation for the Minnesota State Colleges and Universities (MnSCU) totals $1,115,791,000, an increase of $103,956,000. This appropriation recognizes the MnSCU initiatives of institutional competitiveness (including increases for compensation), student success, technology, and economic development.

Fiscal Year 1999-2000 Operating Budget Investment Plan

    The President’s Fiscal Year 1999 – 2000 Operating Budget represents the first year of a two-year investment plan. The allocation of new resources in fiscal year 1999 2000 is

    predicated upon a two-year financial strategy directly linked to the University’s original biennial budget proposal. The priorities of that proposal were:

    ; Competitive Compensation

    ; Enriching the Undergraduate Experience

    ; Financing Health Professional Education

    ; Connecting the University to the Community

    ; Promoting a Climate of Quality Service

As introduced at the Board of Regents May 1999 meeting, the President’s Fiscal Year 1999-

    2000 Operating Budget organizes investments in to four major categories: 1) compensation; 2) targeted academic investments; 3) core administrative services; and 4) common goods. The following table provides a summary of these investments for fiscal year 1999-2000.

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    Table 3

    Fiscal Year 1999-2000 Operating Budget Investments

    Centrally Distributed Funds

     Total New

    Investment Percent of Total

Compensation $ 18,374,764 32.9%

Targeted Academic Investments $ 12,741,843 22.8%

Core Administrative Services $ 5,232,334 9.3%

Common Goods Facilities $ 5,807,237 10.4%

    Common Goods Technology $ 12,650,836 22.6%

    Common Goods - Miscellaneous $ 1,131,821 2.0%

    Grand Total $ 55,938,835 100%

Note: The above table does not include investments funded through new state special dollars such as the tobacco

    endowment, Animal Health and Food Safety, Rapid Response Fund, Regional Partnerships, Commercialization

    of Technology and general inflation.

    Examples of the investments made under the three major categories are:

Targeted Academic Investments

    ; Compact Investments

    ; 30 New Faculty / Freshmen Seminars (8 first year and 22 second year)

    ; Undergraduate Academic Investments (study abroad, research opportunities)

    ; Clinical Outcomes Research Center

    ; Rochester

    ; Faculty Service Awards / Regents Professors / Morse & Graduate Teaching

    Awards

    ; CLA Best Departments

Core Administrative Services

    ; EEO Community Education Program

    ; External Sales

    ; ICR Rate Development

    ; Financial Management

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Common Goods

    ; New Building Operations

    ; Repairs and Betterments

    ; U of M Issued Debt

    ; Gateway Leases

    ; Technology Enhanced Learning

    ; Libraries / Digital and Undergraduate

    ; MnVU / ISEEK

    ; Enterprise Project / Grants Management

    ; Web Development

    ; Classrooms

    ; Financial Aid

    ; State Fair Building

Compensation

Of the 3% compensation increase dollars, $231,781 are allocated to Crookston, $1,534,218

    are allocated to Duluth, $436,199 are allocated to Morris, and $16,172,566 are allocated for

    all other units of the University. Attachment 2 is a copy of the policy memorandum

    impacting salary adjustments for fiscal year 1999-2000.

Fiscal Year 1999-2000 Operating Budget Resource Plan

Resources identified to fund the investments categorized above are from five major sources as

    outlined in Table 4 below:

    Table 4

    Fiscal Year 1999-2000 Operating Budget Resource Plan

    Centrally Distributed Funds

     New Resources Percent of Total

New State Appropriations $ 39,588,014 70.8%

Enterprise Assessment $ 6,094,494 10.9%

Institutional Revenue Sharing $ 5,898,585 10.5%

One-Time Central Balance Recapture $ 2,807,742 5.0%

Central Reserves $ 1,550,000 2.8%

    Grand Total $ 55,938,835 100%

Note: The above table does not include resources appropriated as new state special dollars such as the tobacco

    endowment, and funds for Animal Health and Food Safety, Rapid Response Fund, Regional Partnerships, Commercialization of Technology and general inflation.

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New State Appropriations The increase in state appropriations for O&M for fiscal year

    1999-2000 is $40,228,000. As shown above, $39,588,014 of those new funds are being allocated for a variety of new investments. The remaining amount will carry forward into fiscal year 2000-01 to help address increased future investment needs. The state specials appropriations increased by $11,093,500 over the base, (a net increase of $9,801,527 over the previous year) and the details regarding those investments are listed on page 22 of this document.

Enterprise Assessment The enterprise assessment was approved as part of the overall

    financing plan for the Enterprise Project and was implemented in fiscal year 1997-98. Due to the availability of one-time funds during the current fiscal year, 1998-99, the assessment was suspended for one year. The President’s recommended operating budget plan for fiscal year 1999-2000 includes reinstating this assessment. The charge will be 1% of total salary expenditures in a set of defined fund groups.

Institutional Revenue Sharing (IRS) The IRS plan included in this budget recommendation

    has two parts. The first involves a consistent 2% assessment on actual “sales and services” revenues realized in each unit of the University. The goal here is to implement a system in which external purchasers of University goods and services realize a small amount of overhead costs in their charges. The second part of the IRS involves an additional obligation for campus and collegiate units such that their total IRS payment (the 2% assessment plus the remaining charge) equals 1% of their total current nonsponsored revenues for the year. The additional obligation for central administrative units involves targeted reallocations or cost burdens, rather than a formulaic calculation of total payment.

One-Time Balance Recapture As part of the annual budget review of each unit of the

    University, year-end balances are analyzed and explained. To meet some of the nonrecurring investment needs for the next year, some central administrative balances determined to be uncommitted are being reinvested.

    Central Reserves This budget plan includes one-time allocations from central reserves for research projects associated with the NIH settlement requirements, funds for Y2K modifications and improvements to Eastcliff.

Preparing for the Fiscal Year 2000-01 Operating Budget

    It is important to note that the University’s budget is balanced for both years of the biennium. Sufficient resources are available in the second year of the biennium to meet all fixed obligations and prior commitments established by the President’s Fiscal Year 1999-2000

    Operating Budget Plan.

    Consistent with the four principles outlined in the introduction to this document, the University is committed to developing a preliminary financial framework for fiscal year 200001 including potential new items of investment. Table 5 below represents a planning

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