Transcription
The Financial Status of KULawrence / Edwards and theFive-Year Financial PlanJeff DeWitt, CFO & Executive Vice ChancellorMarch 2022
Financial Status of KULawrence/Edwards and theFive-Year Financial Plan Big Picture of KU Finances Lawrence/Edwards Campus Historical View ofState General Fund and Tuition Financial Status Update & 5 Year Financial Plan(Structural Deficit) How do We Address the Structural Deficit? Revised Five-Year Financial Plan withStrategic Initiatives What are Our Risks? Challenges of Implementation Other Initiatives We are Working On
Page 3 6% Fiscal Year 2022Base BudgetReductions 4% Tuition GrowthBig Picture of KU Financesin Academic Years2023 & 2024 No Merit in FiscalYears 2023 & 2024 No Other OperatingExpense (OOE)Increase in FiscalYears 2023 & 2024
Page 4Big Picture - KU Generated Revenues of 1.4 Billion in FY 2021Where Does the Money Come From?Where Does the Money Go?
Page 5What Makes Up KU's Combined Financial Report?University of Kansas – Lawrence/Edwards Supported by State Funding and Tuition Supported by Other RevenuesKansas University Medical Center and AffiliatesUniversity of Kansas - Affiliates: (501-C3s)1.2.3.4.5.6.Kansas University Endowment Association (KUEA)Kansas AthleticsKU Center for Research (KUCR)Kansas Memorial Union Corporation (Union)KU Campus Development Corp. (Central District)Jayhawk Community Partners (JCP)1.2.3.4.Student HousingWatkins Health ServicesKU Recreation ServicesParking & TransitUniversity of Kansas - Auxiliaries:Mostly Restricted(Self Supporting)
Page 6Picture of KU's Combined Financial RevenuesKU Revenues by EntityKU Medical Center Affiliates11%KU Lawrence / Edwards Campus- General Funds(State Funding & Tuition)26% 389MKU Medical Center26%KU Central District1%Kansas Memorial Unions2%Kansas Athletics6%KU Center for Research12%FY 2021 Total Consolidated Revenues 1.4 BillionKU Lawrence / Edwards Campus Non-General Funds(Course Fees, KUEA Gifts, Auxiliaries,JCERT, EBF, Federal Covid Funds,Dept Restricted Fees)16% 247M
Page 7Historical View of StateGeneral Fund and TuitionLawrence/Edwards Campus
Page 8KU Lawrence/Edwards State General Fund (SGF) SupportInflation*: 1.00 in FY 2008 is equal to 1.36 in FY 2022 151.27 Million in FY 2008 is equal to 198.26 Million in FY 2022 198,257,561 200,000,000 52.53 Million Lessthan InflationSGF FUNDING (DOLLARS) 151,271,069 150,000,000 145,728,207 100,000,000 50,000,000 0FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022Actual SGF Dollars*Based on CPI RatesIncludes All Lawrence & Edwards Campus State General Funds, Including the Kansas Geological Survey2008 Funding Adjusted Each Year for Inflation
Page 9KU Lawrence/Edwards Student Headcount Student Headcount hasRemained Relatively Flat From2012 Through 2019 Headcount Declined 4.96%From Fall 2019 to Fall 2021 Resident Undergraduate TuitionRates Held Flat Since Fall2018; Other Cohorts Held FlatSince Fall 2019
Page 10KU Lawrence/Edwards Net Tuition Revenue 350,000,000 300,000,000 250,000,000 200,000,000 150,000,000 100,000,000 50,000,000 020082009201020112012201320142015Fiscal YearNet Tuition2016201720182019202020212022Estimate
Page 11KU Lawrence/Edwards Historical Expenses & Budget CutsPermanent BaseBudget CutCash Budget CutPermanent BaseBudget Cut &State ImposedSpending LimitFY2021: Hiring freeze, employee pay cuts, carry forward sweeps, restricted travel,voluntary retirement payoutFY2022: 24.8M permanent reduction: approximately half of estimated structural deficit
Page 12Financial Status Update &Five-Year Financial PlanLawrence/Edwards Campus
Page 13Governor’s Proposed Budget – KU Forecasted ResultIn January 2022, the Governor released her recommended budget report. The Governor’sbudget restores higher education funding to FY 2021 levels, increases state portion ofpayroll by 5%, increases financial aid, and includes one-time investments in IT, deferredmaintenance and economic development. In exchange, Kansas Board of Regents(KBOR) universities agree to freeze tuition.Governor's Recommended BudgetFY2022 KU-Lawrence SGF BudgetKU-Lawrence Share of 45.7MKU-Lawrence Share of 24.1M (Employee Pay)Estimated FY2023 KU-Lawrence SGF BudgetOther Recommended Budget Additions:Financial AidInvestment in IT (one-time)Deferred Maintenance (one-time)Econ Dev Grants (one-time) 135,531,729 9,945,2595,487,144 150,964,132For Distributionto all Six KBORUniversities 25,000,000 20,000,000 25,000,000 10,000,000
Page 14KBOR Facility Maintenance AssessmentIn June 2021, KBOR approved a required maintenance assessment to address annual anddeferred maintenance. The assessment is phased in over the next six years and universitiesare allowed a credit for current in-house expenditures. Additionally, any spend over theassessment can be carried forward to the following fiscal year.Fiscal YearFY 2023 (1/4%)FY 2024 (1/2%)FY 2025 (3/4%)FY 2026 (1%)FY 2027 (1 1/2%)FY 2028 (2%)MaintenanceAssessment 4,203,258 8,406,516 12,609,774 16,813,032 25,219,547 33,626,063In-HouseExpenditure Credit 1,898,983 3,855,511 5,754,494 5,754,494 5,754,494 5,754,494Assessment Netof Credit 2,304,275 4,551,005 6,855,280 11,058,537 19,465,053 27,871,569
Page 15Financial Forecast Key Assumptions – FY2023Key Assumptions - FY 2023 State Funding Level - FY2022 Level Plus KU’s Portion of Additional Governor’s Recommended 45.7M and State General Fund Payroll Portion of a 5% Increase Enrollment Stays Flat Relative to FY 2022 and No Increase in Tuition Rates Salary Costs - 5% Pool Increase Operating Costs - 5% Increase Reflects KBOR Deferred Maintenance Policy Use of 46 Million General Fund Carryforward from FY2021 to Help Sustain FY2022 and FY2023Without Additional Cuts Creation of a University Contingency Reserve Fund to Minimize Mid-Year Budget Cuts and AddressUnexpected Expenses KUEA Funding Provides Start-up for Key Strategic Growth Initiatives Auxiliaries and Affiliates Carry Themselves
Page 16Financial Forecast Key Assumptions: FY2024 - FY2026AssumptionState General FundingTuition Rate GrowthSalary CostsOperating CostsDeferred MaintenanceAuxiliary & Affiliate Financial SupportFY2024 - FY20261.5% Increase Over Prior Year3% Rate Increase2.5% Pool Increase2.5% IncreaseKBOR PolicyNone needed
Page 17The Five-Year Forecast – Structural DeficitKU - Lawrence & Edwards Campuses General Fundin millionsSourcesState AppropriationsTuition & ed 137.2263.912.1 413.2 140.9263.611.6 416.1 151.0263.611.8 426.4 153.2271.512.4 437.1 155.5279.612.6 447.7 157.928812.6 458.5 309.658.313.78.918.4 408.9 295.381.616.311.619.7 424.5 313.788.517.011.719.0 449.9 321.99017.512.119.1 460.6 330.691.618.012.419.1 471.7 339.497.918.612.719.1 487.7 4.3( 8.4)( 23.5)( 23.5)( 24.0)( 29.2)Carryforward 41.8 46.1 37.7 14.2( 9.3)( 33.3)Available Year-End Resources 46.1 37.7 14.2( 9.3)( 33.3)( 62.5)UsesSalary & FringesOOEUtilitiesScholarshipsDebt ServiceTotalOperating Margin
Page 18The Five-Year Forecast – Structural Deficit 50.0Current Financial Plan 46.1Available Year-End Resources (in millions) 37.7 Increase to State Funding Based onGovernor’s Proposed Budget inFiscal Year 2023 and 1.5% OngoingIncreases 30.0 14.2 Freeze Tuition Rates in Fiscal Year 10.0202120222023( 10.0)202420252026 5% Increase in Salary Pool in Fiscal( 9.3)Year 2023 and 2.5% Ongoing 5% Increase in Operating Costs in( 30.0)Fiscal Year 2023 and 2.5% Ongoingto Reflect Inflation( 33.3)( 50.0)( 70.0)2023 and 3% Rate IncreaseOngoing( 62.5)Fiscal Year
Page 19 6% Fiscal Year 2022Base BudgetReductions 4% Tuition GrowthHow Do We Address the Structural Deficit? in Academic Years2023 & 2024No Merit in FiscalYears 2023 & 2024No Other OperatingExpense (OOE)Increase in FiscalYears 2023 & 2024Lawrence/Edwards Campus
Page 20How Do We Address the Structural Deficit? 6% Fiscal Year 2022Base BudgetReductionsBy Implementing Strategic Initiatives that Align with4% Tuition Growthin AcademicorYearsJayhawks Rising Strategic Plan and Increase Revenue2023 & 2024Decrease Expenditures: No Merit in Fiscal Strategic Enrollment ManagementContinuous ImprovementConventions & EventsAll Funds BudgetingYears 2023 & 2024 No Other OperatingExpense (OOE)Increase in FiscalYears 2023 & 2024
Page 21How Do We Address the Structural Deficit?Strategic Enrollment Management(Areas Targeted for Enhancement) Growth in Programs Demanded by the MarketIncreased and Focused Marketing to Prospective StudentsExpansion of Online ProgramsPricing and Student Aid OptimizationIncreased Support Toward Retention and GraduationFinancial Plan ImpactNet ImpactFY2023Projected 0FY2024Projected 0FY2025Projected 7,200,000FY2026Projected 12,300,000
Page 22How Do We Address the Structural Deficit?Conventions & Events Implement a Central Conventions & Events OfficeDevelop Marketing Strategies and Social Media Prospects to Attract the MarketImplement Centralized Schedules of University SpacesDevelop 3 to 5 Year Use of Space ScheduleDevelop a Collaborative Process Allowing All Essential Areas to Work TogetherExpand Opportunities for Corporate Partnerships and SponsorshipsFinancial Plan Impact (General Fund Share)Net ImpactFY2023Projected 0FY2024Projected 1,250,000FY2025Projected 2,000,000FY2026Projected 5,000,000
Page 23How Do We Address the Structural Deficit?Continuous Improvement Create a Culture of Collaboration Where Ideas for Improvement are WelcomeExamine Opportunities for Improvements to Lower Purchasing CostsReview Business Processes and Policies for Efficiencies and RedundanciesReview Opportunities to Consolidate Systems University-WideFinancial Plan ImpactNet ImpactFY2023Projected 2,500,000FY2024Projected 5,000,000FY2025Projected 7,500,000FY2026Projected 7,500,000
Page 24How Do We Address the Structural Deficit?All Funds Budgeting Develop Process to Plan & Budget All Funding Sources Efficient Use of All Funds (KUEA Funds, Course Fees, etc.) Prior to Use of LimitedGeneral Funds Provide Guidance and Reporting for Units to Examine and Leverage All Sourcesof Funding Supplement a Portion of the General Fund Gap from Available SourcesFinancial Plan ImpactNet ImpactFY2023Projected 10,000,000FY2024Projected 10,000,000FY2025Projected 10,000,000FY2026Projected 10,000,000
Page 25 6% Fiscal Year 2022Base BudgetReductions 4% Tuition Growthin Academic Years2023 & 2024Revised Five-Year Financial Plan No Merit in FiscalYears 2023 & 2024with Strategic Initiatives No Other OperatingLawrence/Edwards CampusExpense (OOE)Increase in FiscalYears 2023 & 2024
Page 26Revised Five-Year Forecast with Strategic InitiativesKU - Lawrence & Edwards Campuses General Fundin millionsSourcesState AppropriationsTuition & FeesOtherTotalUsesSalary & FringesOOEUtilitiesScholarshipsDebt ServiceTotalFY2021ActualsOperating Margin With 026Projected 137.2263.912.1 413.2 140.9263.611.6 416.1 151.0263.611.8 426.4 153.2271.512.4 437.1 155.5279.612.6 447.7 157.928812.6 458.5 309.658.313.78.918.4 408.9 295.381.616.311.619.7 424.5 313.788.517.011.719.0 449.9 321.99017.512.119.1 460.6 330.691.618.012.419.1 471.7 339.497.918.612.719.1 487.7 4.3( 8.4)( 23.5)( 23.5)( 24.0)( 29.2) 12.5 16.3 26.7 34.8Operating MarginNet Impact of Strategic Initiatives (SI)FY2022Projected- 4.3( 8.4)( 11.0)( 7.2) 2.7 5.6Carryforward 41.8 46.1 37.7 26.7 19.5 22.2Available Year-End Resources 46.1 37.7 26.7 19.5 22.2 27.8
Revised Five-Year Forecast with Strategic Initiatives 50.0 46.1Page 27Revised Financial Planwith Strategic Initiatives Increase to State Funding Based onAvailable Year-End Resources (in millions) 40.0Governor’s Proposed Budget inFiscal Year 2023 and 1.5% OngoingIncreases 37.7 30.0 27.8 26.72023 and 3% Rate IncreaseOngoing 22.2 19.5 20.0 Freeze Tuition Rates in Fiscal Year 5% Increase in Salary Pool in FiscalYear 2023 and 2.5% Ongoing 5% Increase in Operating Costs in 10.0 0.0Fiscal Year 2023 and 2.5% Ongoingto Reflect Inflation202120222023Fiscal Year202420252026
Page 28What Are Our Risks Governor’s Budget is not Approved by the Legislature Inflation Increases Beyond Current Levels & Persists for Multiple Years Future State Support Diminished Below the Forecast Future Mandates Placed on the University Affiliates and Auxiliaries Cannot Remain Self-Supporting Strategic Initiatives Underperform, are Delayed, or not Embraced
Page 29Challenges of Implementing Strategic Initiatives 6% Fiscal Year 2022What Do We Need From Everyone:Base BudgetReductions 4% Tuition Growthin AcademicYears “Silos” Increased Collaboration Across All Academic and Administrative Areas- Remove2023 & 2024 Collaboration to Address Market Challenges of Declining Prospective No StudentsMerit in FiscalYears 2023 & 2024 Efficiently Deploying All Sources of Funds – Not Only State and Tuition Dollars Strategic Collaboration of Purchases University-Wide Eliminate Redundancies and Review Current Processes Shared Use and 3-Year Planning of University SpaceEver-Curious Stewards of KU No Other OperatingExpense (OOE)Increase in FiscalYears 2023 & 2024
Page 30Other Initiatives We Are Working On Competitive Pay Study and Plan for Implementation System to Reward High Performing Employees Long Range Financial Plan for Infrastructure, Facilities and Technology Reaccreditation and Our Obligation to the Higher Learning Commission (HLC) Development of KUMC Strategic Plan and Financial Plan
Page 31Current Path Versus a Future with Strategic InitiativesCurrent Path 50.0Embracing Strategic Initiatives 46.1 50.0 46.1 37.7 30.0 14.2 10.0( 10.0)202120222023202420252026( 9.3)( 30.0)( 33.3)( 50.0)( 70.0)Available Year-End Resources (in millions)Available Year-End Resources (in millions) 37.7 19.5( 62.5) 22.2 10.0( 10.0)202120222023( 30.0)( 50.0)Fiscal Year 27.8 26.7 30.0( 70.0)Presentation Available at: https://finance.ku.edu/reportsFiscal Year202420252026
QuestionsAndAnswersPresentation Available at:https://finance.ku.edu/reports
Page 27Appendix
Page A-1Getting to the State Funding and Tuition Supported Part of KUStatement of Revenues, Expenses, and Changes in Net Assets for the Year Ended June 30, 2021(Natural Classification)OPERATING REVENUESTuition and fees, netState appropriationsFederal grants and contractsState and local grants and contractsNongovernmental grants and contractsSales and services of educational departmentsSales and services of medical and administrative activitiesAuxiliary enterprises:HousingAthleticsParkingStudent unionsUniversity health servicesOther auxiliary enterprisesOther operating revenuesLocal appropriationsGiftsInvestment income (loss)Nonoperating Federal grants and contractsOther nonoperating revenuesTotal RevenuesEXPENSESCompensation and benefitsScholarships and fellowshipsUtilitiesSupplies and other servicesDepreciationInterest expenseOther nonoperating expenseTotal expensesIncome (loss)CONSOLIDATED KU CTR 82,426,55913,761,96579,094,783-KANSASATHLETICS-KU MEMORIALUNIONS-KU CAMPUSJAYHAWKKU MEDICALKU MED CTRKU MEDDEV COPR COMM PRTNRSCENTERRESEARCH INST 0960,923,81255,035,35679,094,783-KS ,292)48,874,345CAPITAL TRANSACTIONSCapital appropriationsCapital grants and gifts (expense)Transfers (to)from UniversityAdditions to permanent endowmentsTotal Capital l increase (decrease) in net 6(82,182)(4,902)8,258,856(2,504,078)
Page A-2Getting to the State Funding and Tuition Supported Part of KUStatement of Revenues, Expenses, and Changes in Net Assets for the Year Ended June 30, 2021(Natural Classification)GENERALUSE 1,920,02830,932,277NON-GENERALUSE 660,168)(15,531,966)(21,097,811)CAPITAL TRANSACTIONSCapital appropriationsCapital grants and gifts (expense)Additions to permanent endowmentsTotal Capital 50,5941,975,7901,50413,027,888Total increase (decrease) in net assets(2,504,078)(8,069,923)OPERATING REVENUESTuition and fees, netState appropriationsFederal grants and contractsState and local grants and contractsNongovernmental grants and contractsSales and services of educational departmentsAuxiliary enterprises:HousingParkingStudent unionsUniversity health servicesOther auxiliary enterprisesOther operating revenuesLocal appropriationsGiftsInvestment income (loss)Nonoperating Federal grants and contractsOther nonoperating revenuesTotal RevenuesEXPENSESCompensation and benefitsScholarships and fellowshipsUtilitiesSupplies and other servicesDepreciationInterest expenseOther nonoperating expenseTotal expensesIncome (loss)5,565,8455,565,845
Page A-3Getting to the State Funding and Tuition Supported Part of KUStatement of Revenues, Expenses, and Changes in Net Assets for the Year Ended June 30, 2021(Natural Classification)OPERATING REVENUESTuition and fees, netState appropriationsState and local grants and contractsSales and services of educational departmentsOther operating revenuesInvestment income (loss)Nonoperating Federal grants and contractsOther nonoperating revenuesRevenue Interfund TransfersTotal RevenuesEXPENSESCompensation and benefitsScholarships and fellowshipsUtilitiesSupplies and other servicesDepreciationInterest expenseOther nonoperating expenseExpense interfund transferDebt principal paymentsBuilding and equipment purchasesTotal expensesIncome (loss)FINANCIAL STMTGENERALTO BUDGETUSE 86,736)(25,273,685)(1,281,169)BUDGETGENERALUSE )(13,861,277)(2,786,736)(408,933,853)4,284,676
FY2022 KU-Lawrence SGF Budget 135,531,729 KU-Lawrence Share of 45.7M 9,945,259 KU-Lawrence Share of 24.1M (Employee Pay) 5,487,144 Estimated FY2023 KU-Lawrence SGF Budget 150,964,132 For Distribution to all Six KBOR Other Recommended Budget Additions: Universities Financial Aid 25,000,000 Investment in IT (one-time) 20,000,000
