Reallocations bolster new budget

Iowa State leaders will rely on just over $14 million in new revenue and approximately $4.5 million in internal reallocations to fund the university's top priorities this year, including $5 million for employee salary increases.

Meeting Aug. 1 in Urbandale, the state Board of Regents approved Iowa State's $731.9 million operating budget for the fiscal year that began July 1. Tuition and fees ($466.8 million) and state appropriations ($225.5 million) make up 64 percent and 31 percent of the revenue, respectively. State support includes a $170.6 million general university appropriation and $54.9 million in directed appropriations for units such as the Agriculture Experiment Station, Cooperative Extension Service, Veterinary Diagnostic Lab and the ISU Research Park.

State funding to Iowa State nearly mirrors what it was in FY 2011, when fall enrollment stood at 28,682 -- or about 7,300 fewer students than last fall.

Net state funding for Iowa State is about $2.15 million less than it was on July 1, 2017. That reflects a $5.4 million reduction in May made permanent for FY19, tempered by Iowa State's share ($3.15 million) of a new appropriation the regents designated for resident undergraduate financial aid. The 2018 Legislature also approved $100,000 in additional operating funds to the VDL, for total VDL support of $4.1 million.

"It's been a challenging year, both because of the late spring cut and the early June decision on tuition for this fall," said interim senior vice president for finance Pam Cain. "We had lots of input and discussion and, ultimately, cooperation in a short amount of time to finalize this budget."

In her remarks to the regents, President Wendy Wintersteen said the priorities for the additional revenue this year were salary increases, student financial aid, additional programming for international students and strategic hires to enhance diversity, equity and inclusion on campus.

"Following last year's salary freeze, we saw our largest number of faculty resignations in a decade: 44 faculty left and 44 percent of faculty who responded to an exit interview said their next institution would pay 'significantly more' than Iowa State," Wintersteen said. "For these reasons, we made salary increases a top priority for FY19."

She said competitive salaries would "continue to be a high priority moving forward."

New revenue: FY19

Priority expenditures and cost increases: FY19

*Scholarships, international student programming, financial literacy, student retention/success

As they are able financially, Cain said colleges will hire faculty to fill positions vacated by resignations and retirements or in response to enrollment shifts and discipline-specific needs in teaching and research. Two new half-time faculty appointments are the director for the Student Innovation Center and faculty fellow the to vice president for diversity and inclusion. Staff hires will fill vacancies or expand capacity in graduate student recruitment, academic advising, international student services, IT support and library acquisitions and digital scholarship.

Building projects at the library and College of Veterinary Medicine will:

• Renovate the first-floor service area and all restrooms in Parks Library
• Expand women's locker room and restroom facilities at Vet Med to reflect the gender makeup of faculty, staff and students
• Renovate the main entrances to the Lloyd Teaching Hospital and the Vet Med college, for visitors' benefit

Making permanent the FY18 reduction

In April, university leaders relied mostly on one-time cuts to meet a $5.4 million reversion in state funding. By the end of the legislative session, it was clear the funding wouldn't be restored in the new fiscal year. Permanent reductions absorbed by the major divisions this year are:

• Academic affairs, $2.44 million
• Student affairs, $0.19 million
• Finance/University services, $1.40 million
• President, $1.37 million ($1 million held centrally while planning continues)

Big picture

The board approved the university's overall budget, which surpassed $1.5 billion and is about $1 million smaller than last year's budget. Restricted budgets, totaling $773.2 million, include sponsored research, endowment income, building projects, and auxiliary units such as athletics, residence, printing, parking, utilities, recreation services, bookstore, Reiman Gardens, Iowa State Center and the Memorial Union.

Capital appropriations

Iowa State will receive these state funds in FY19 for specific building projects:

• Biosciences facilities (Bessey addition, Advanced Teaching and Research Building), $4 million in the final of four years
• Student Innovation Center, $6 million in the third of six years
• Veterinary Diagnostic Lab, $1 million in the first of six years

Modifications to the budget model

As part of its charge to assess the functionality of Iowa State's 10-year-old budget model, the institutional budget management (IBM) team changed how some administrative costs will be paid for, starting this fiscal year. With declining state support for higher education, Cain said the intent is to lessen the burden on the general fund operating budget by allocating administration costs more broadly -- including more units in the "restricted" part of the budget.

Approximately $9 million to operate offices in the president's unit (such as offices of university counsel, marketing and relations; internal audit, ombuds) will be allocated across the university, including self-funded auxiliary units that receive no state dollars. Cain said the general fund units (for example, colleges, extension) received reallocated state funds to cover their allocations, which covers about 88 percent of the $9 million. Non-general fund units need to cover a total of about $1 million of these administrative costs from their own sources.

"Our general fund units historically have shouldered 100 percent of the burden of state funding cuts," Cain said, "but all units benefited from the growth in student enrollment and that additional revenue."

A second change to relieve a strained general fund budget will have a significant impact on service rates charged by facilities planning and management units, which in turn will be shared widely across campus. New rates took effect July 1. More information about this change will be provided in an upcoming edition of Inside Iowa State.

Cain said planning and analysis on the FY20 budget will begin earlier and expand further into the total budget, rather than focus just on the general fund budget. She said the IBM team also will begin to use a three-year planning structure for a stronger long-term vision.