At the Oct. 23 Financial Transparency Town Hall, Vice Chancellor for Planning & Budget and Chief Financial Officer Kurt Schnier, Associate Vice Chancellor for Financial Planning and Analysis Bianca Khanona and Associate Vice Chancellor for Auxiliary Enterprises and Fiscal Innovation Adriana Rojas presented the latest data on 2023-2024 campus revenues and expenditures, along with anticipated changes to state funding and revenue streams. They also provided insights into how our campus can achieve fiscal sustainability while maintaining our mission as a student-centered research university.
Below are five key points from the presentation. Links to the full presentation and slides presented are listed below.
1) Fiscal pressures will increase in coming years and now is the time to plan for the future.
Over the past year, we received about $524M in revenue (excluding gifts and endowments). As shown in the above representation, the largest proportion came from state funding, followed by tuition and revenue from Auxiliaries. Funding forecasts predict a 7.95% reduction in state funding for the University of California system in the Governor's Budget. While our Memorandum of Understanding (MOU) with the UC Office of the President will help offset that reduction in the next year, our preliminary expectations are a reduction of approximately $5M in state funding for our campus. The one-time funding provided under our MOU is set to expire in fiscal year 2027 (FY27), for a further reduction of $13M in FY27. In addition to these shortfalls, there is financial uncertainty around slow enrollment growth and represented staff negotiations.
2) Expenses, the greatest of which are personnel-related costs, continue to rise.
Revenue for FY 2023-24 totaled around $524M, with expenses of approximately $537M. Of that amount, around 58% went to personnel expenses. There were three significant areas of cost growth for FY24, relative to FY23, that impacted the campus: 1) personnel expenses, 2) technology costs, and 3) equipment expenditures.
3) To counteract these forecasted pressures, salary savings for all divisions will increase from 4% to 5% over FY25
Given the recent increases in our personnel expenses, and to provide transactional funding to support our Temporary Academic Support budget, the salary savings requirements for each division will increase from 4% to 5% this fiscal year. It is important to note that historical vacancy rates have exceeded 5%, which implies that savings can be readily achieved. The campus will begin working on an exercise to investigate budget reduction scenarios should the Governor's projected funding allocation reductions materialize. Additional information regarding scenario planning will be forthcoming from campus leadership.
4) Our ability to continue growing at our current pace, given the funding shortfalls from decreasing state appropriations, is dependent on enrollment growth.
Between 2014 and 2019, our tuition revenue grew at a compounded annual growth rate of 6.7%, whereas our tuition revenue slowed to a compounded annual growth rate of 1.9% between 2019 and 2024. Every undergraduate student that we enroll brings approximately $17,600 in tuition, net of return to aid, and state support. The following chart breaks down how those tuition dollars are allocated across divisions:
The degree to which we as an institution can focus on bringing students to UC Merced, improving student retention and enhancing social mobility indexes will further generate needed revenue streams for the campus. An increased focus on undergraduate enrollment and retention ultimately supports all of our respective missions, fuels student success, makes us a leader in inclusive excellence and supports our research mission.
5) Remember the Three Es to promote fiscal sustainability: Evaluation, Efficiency and Enrollment.
To build a stronger university for the future, all of us share in the responsibility of promoting fiscal sustainability in our respective areas. The Three Es help us remember three simple ways we as a campus community can contribute to long-term sustainability. First, we can evaluate whether the money we are requesting and/or the programs we're supporting are aligned with the campus mission. Second, we can look at how efficiently we are using campus resources. We can make data-driven decisions via the development of metrics on how to improve our efficiencies and determine where changes in allocations can be made. Third, we can look at how our individual efforts can contribute to enrollment.
Together, with the framework of the Three Es and a continued focus on improving the academic and campus experience for our students, we can navigate through the fiscal challenges we face in the coming years and build a stronger UC Merced for future generations. Click the buttons below to watch the full presentation or view the slide deck.
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