OPEN – FIN – INFO 1-1

January 31 – February 1, 2013

OPEN – FIN – INFO 1-1

January 31 – February 1, 2013

Strategic Financial Planning Assumptions and Three-year Budget Projections

UMOPEN – GB – INFO 2

University of Missouri SystemBoard of CuratorsJanuary 31, 2013

FINANCE COMMITTEE

OPEN – FIN – INFO 1-2

January 31 – February 1, 2013

FY2014 – 2016 Strategic Financial Planning Assumptions – Three Questions

What are the strategic financial planning assumptions?

Why does the University prepare the assumptions?

What are they used for?

OPEN – FIN – INFO 1-3

January 31 – February 1, 2013

Revenue Drivers that Impact Strategic Financial Planning

Revenue Drivers State Appropriations for

Operations Tuition and Fee Rates Enrollment Other Miscellaneous

Revenue

OPEN – GB – INFO 2

OPEN – FIN – INFO 1-4

January 31 – February 1, 2013

Expense Drivers that Impact Strategic Financial Planning

Expenditure Drivers Salary and Wage Changes Cost of Employee Benefits Maintenance and Repair Other Costs of Doing

Business

OPEN – GB – INFO 2

Salary & Wage 61%

Benefits 17%

FY13 Budget

Other Expenditures

22%

OPEN – FIN – INFO 1-5

January 31 – February 1, 2013

Financial Objectives

Strategic Reallocation – 1%-2% per year growing to 3%-4%

Operating Results – Range 4.5%-5.9%Net Assets – 8.0%-12.1%Expenditure Reductions to Achieve Budget

EquilibriumRevenue Generation to Achieve Budget

Equilibrium

OPEN – FIN – INFO 1-6

January 31 – February 1, 2013

Drivers & Results : Base Case

OPEN – FIN – INFO 2

FY14 FY15 FY16Revenue Assumptions:State Appropriations 0.0% 2.0% 3.0%Missouri UG Rate Increase 1.7% 2.0% 2.0%Other Fee Rate Increase 3.3% 2.0% 2.0%Enrollment & Student Mix Incr. FTE 1.8% 1.3% 1.0%Enrollment & Student Mix Incr. $ $4.9 $4.2 $3.8Other Revenue 2.0% 2.0% 2.0%

Expenditure Assumptions:Salary & Wages 3.0% 3.0% 3.0%Benefit Change % of S&W 1.5% 1.5% 1.5%Benefit Rate 35.37% 36.87% 38.37%Other Expense 3.0% 2.0% 2.0%M&R at Inflation $1.4 M $1.5 M $1.6 M

Other Planning FactorsStrategic Reallocation 1-2% 2-3% 3-4%MO UG Resident Net Tuition @ 1% $2.2Other Tuition Rate Increase @ 1% $2.6

OPEN – FIN – INFO 1-7

January 31 – February 1, 2013

Results : Base CaseBase Year

No ChangeMarginal Change

Marginal Change

Marginal Change

FY13 FY14 FY15 FY16Revenues

State Approp $384.0 $0.0 $7.7 $11.8Net Tuition 552.9

UG Tuition Rate Increase 3.7 4.4 4.4Other Tuition Rate Increase 8.6 7.5 7.5Enrollment Increase 4.9 4.2 3.8

Other Revenues 168.4 3.9 3.4 3.5Total Revenues $1,105.3 $21.1 $27.3 $30.9

ExpendituresSalary & Wage $673.9 $19.9 $20.8 $21.4Benefits 194.5 15.5 16.6 17.4M&R at inflation 1.4 1.5 1.6Enrollment & Strategic Inv 5.3 3.2 2.8Other Expenditures 236.8 9.1 4.9 5.0

Total Expenditures $1,105.3 $51.2 $47.0 $48.3

Change $0.0 ($30.1) ($19.8) ($17.4)

Strategic Reallocation 1-2% 2-3% 3-5%Dollars in Mill ions

OPEN – FIN – INFO 1-8

January 31 – February 1, 2013

Scenario Summary

Base Year No

ChangeMarginal Change

Marginal Change

Marginal Change

FY13 FY14 FY15 FY16Optimistic Total Revenues $1,105.3 $36.9 $33.8 $33.5Total Expenditures $1,105.3 $53.1 $50.0 $51.2Change $0.0 ($16.2) ($16.2) ($17.7)

Base CaseTotal Revenues $1,105.3 $21.1 $27.3 $30.9Total Expenditures $1,105.3 $51.2 $47.0 $48.3Change $0.0 ($30.1) ($19.8) ($17.4)

PessimisticTotal Revenues $1,105.3 $11.0 $7.3 $7.3Total Expenditures $1,105.3 $38.4 $37.2 $38.2Change $0.0 ($27.4) ($29.9) ($30.9)

OPEN – FIN – INFO 1-9

January 31 – February 1, 2013

Section 3: Preliminary FY2014 Budget

Section 1: Setting the Financial Stage

OPEN – FIN – INFO 1-10

January 31 – February 1, 2013

FY 2014 UM Preliminary Budget Issues

RevenuesFlat state supportConstraints on tuition increases

ExpensesIncrease in salaries and wages: merit & marketIncrease in medical costs and the required contribution to

Retirement FundIncrease in M & R

Control rate of increase in expenses relative to revenues

10

OPEN – FIN – INFO 1-11

January 31 – February 1, 2013

Other Issues on the Horizon

State support based on performance fundingLimited capacity to increase tuition & feesPressure to reduce costs and increase productivityFunding for strategic investmentPressure to increase output

Retention ratesGraduation rates# of Degrees Granted

A new financial model for the future

OPEN – FIN – INFO 1-12

January 31 – February 1, 2013

Projected Marginal Costs for FY2014 Budget - $51.2 million

Dec Jan

1. Salary & Wages Increase $19.2 $19.92. Benefits on Salary & Wages Increase 5.4 6.43. Flat Rate Benefit Increase (1.5% of Salary

& Wages) 7.8 9.1

4. Total Compensation $32.4 $35.45. Increase in M&R (inflation) 1.4 1.46. Other Marginal Cost Increases 7.6 9.17. Costs Due to Enrollment &Priorities 4.9 5.38. Total Marginal Cost Increases $46.3 $51.2

$ in Millions

OPEN – FIN – INFO 1-13

January 31 – February 1, 2013

Projected Marginal Revenues for FY2014 Budget - $21.1 million

Dec Jan1. Increase in Net Tuition from Inflation

(2% Dec; 1.7% Jan)$9.5 $8.1

2. Increase in Net Supplemental from rate changes

2.4 2.3

3. Increase in Net Tuition Above Inflation 1.6 1.94. Increase in Net Tuition & Fees from

Enrollment6.6 4.9

5. State Appropriations 0.0 0.06. Increase in Other Revenues (incl.

dedicated) 1.2 3.9

7. Total Marginal Revenue Increases $21.3 $21.1$ in Millions

OPEN – FIN – INFO 1-14

January 31 – February 1, 2013

Preliminary Funding Gap of $30.1 million

Dec Jan1. Marginal Cost Increases $46.3 $ 51.22. Marginal Revenue Increases $21.3 $21.1

3. Net Funding Gap $25.0 $30.14. Gap as a % of Operating Expenses 2.3% 2.7%5. Impact of 1% inc/dec State Approps (net) $3.8 $3.86. Impact of 1% Rate inc in Net Tuition &

Fees $4.8 $4.8

7. Add’l Cost to reach M&R policy (FCNI of 0.30) $49.3 $49.38. Strategic Reallocation 1-2%

$ in Millions

OPEN – FIN – INFO 1-15

January 31 – February 1, 2013

Questions?