Board of Regents Special Meeting
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Board of Regents Special Meeting June 2021 June 29, 2021 11:30 a.m. Boardroom, McNamara Alumni Center BOR - JUN 29, 2021 - Special Meeting 1. President's Recommended FY 2022 Annual Operating Budget - Action Docket Item Summary - 3 Resolution Related to Fiscal Year 2022 Annual Operating Budget Resolution - 6 Budget Document - 7 Attachment 1: Recommended Investments - 44 Attachment 2: University Fiscal Page - 46 Attachment 3: Fringe Benefit Rates by Component - 47 Attachment 4: Graduate and Professional Student Fringe Benefit Rate Table - 48 Attachment 5: Tuition Rate Plan - 49 Attachment 6: Definitions of Current Sponsored and Nonsponsored Funds - 59 Attachment 7: Course and Class Fees - 61 Attachment 8: Miscellaneous Fees - 70 Attachment 9: Academic Fees - 76 Attachment 10: Student Service Fees - 78 Attachment 11: Fund Forecast - 89 Public Input on the Budget - 93 Presentation Materials - 121 Resolution Related to Amendment of Terms of Commercial Paper Facility and Issuance of Debt for Operating Purposes Resolution - 128 2. Resolution Related to Naming Agreement Assignment and Stadium Name Change - Review/Action Docket Item Summary - 131 Resolution - 133 Presentation Materials - 135 Page 2 of 146 BOARD OF REGENTS DOCKET ITEM SUMMARY Board of Regents June 29, 2021 AGENDA ITEM: President’s Recommended FY 2022 Annual Operating Budget Review Review + Action X Action Discussion This is a report required by Board policy. PRESENTERS: President Joan T.A. Gabel Myron Frans, Senior Vice President for Finance & Operations Julie Tonneson, Associate Vice President and Budget Director PURPOSE & KEY POINTS The purpose of this item is to: A. act on the resolution related to the Fiscal Year 2022 Annual Operating Budget; and B. review and act on the resolution related to Amendment of Terms of Commercial Paper Facility and Issuance of Debt for Operating Purposes. Resolution Related to the Fiscal Year 2022 Annual Operating Budget The President’s Recommended FY 2022 Annual Operating Budget (operating budget) was reviewed by the Finance & Operations Committee at the regular June meeting and no changes have been made since review. At the time these materials were developed, the State of Minnesota had not yet acted on the 2022-2023 biennial appropriations, so the operating budget continues to incorporate the University’s full request of an incremental $15.5 million. If the actual appropriation is less than what is included in this recommendation, the investments designated for the MPact 2025 Systemwide Strategic Plan (MPact 2025) as part of the recommended budget will be adjusted accordingly. The overarching goal in any budget is to advance the mission and vision of the institution, and to do so in a fiscally responsible manner. The President’s recommended operating budget reflects a commitment to providing an affordable, high-quality education; excellence in instruction, research and public engagement; and continuous improvement and efficiency gains in University operations. These commitments are evident in the operating budget through a proposed general tuition rate increase well below the current rate of inflation; a significant investment in MPact 2025; a modest increase in compensation; and reprioritization of existing resources through an internal reallocation process of a magnitude not implemented since the early 2000s, when the University faced large appropriation reductions. Through this internal reallocation process, units across all campuses are planning spending reductions related to efficiencies or changes in programming and services. Although there are no financial implications built into the operating budget related to the Page 3 of 146 PEAK Initiative, work is underway to enhance what is planned in this operating budget with future structural and process changes designed to deliver more efficient and effective services. This budget also addresses the projected continuing impact COVID-19 has had on University operations. Specifically, tuition revenue is estimated to come in below budget during FY 2021, and that is fully addressed through the resource and spending plans in the proposed FY 2022 operating budget. In addition, for auxiliary and other sales activities across the campuses, revenue estimates for next fiscal year incorporate a move toward “normal” levels (up from FY 2021) but still below pre-pandemic experience. Spending reductions and the use of balances and reserves will continue to be necessary to support that transition. Finally, there remains uncertainty around the level of state appropriation the University will receive for the next biennium. The President’s recommended operating budget incorporates the full requested increase to the O&M appropriation: $15,500,000. Should that request not be funded, the proposal includes a contingency plan of reducing the level of recurring resources dedicated to advancing MPact 2025. Efforts would be made, in that scenario, to dedicate nonrecurring funds where possible to jump-start initiatives that could secure recurring funding in the future. To summarize and highlight the proposed incremental changes for balancing the primary discretionary funds of the institution recommended by the President, the FY 2022 Operating Budget Framework is as follows: University of Minnesota FY22 Recurring Framework Incremental Resources: Proposed Increased State Appropriations $15,500,000 Tuition Revenue 13,600,000 Unit Reallocations $49,600,000 One-Time Unit Balances to Bridge $200,000 Unit Revenue Increases $9,600,000 Total Incremental Resources $88,500,000 Incremental Expenditures: Compensation and Benefits $18,700,000 Institutionally Managed Student Financial Aid $100,000 Core Operations and Services $29,400,000 Student Serv. Instructional and Financial Support $100,000 Program Enhancement and Compliance $32,200,000 Facilities and Technology Infrastructure $7,200,000 Total Incremental Expenditures $87,700,000 Balance $800,000 The resource and investment plans outlined above are included in the all-funds budget for FY 2022. The all-funds budget plan for FY 2022, which includes state appropriations, tuition, and all other revenue sources (such as gifts, indirect cost recovery, sales and fees, sponsored grants, and so forth), proposes total estimated revenues of $4,230,837,638 and expenditures/net transfer out of $4,232,998,265. Total balances are projected to decrease roughly $2 million between FY 2021 and FY 2022. Page 4 of 146 Resolution Related to Amendment of Terms of Commercial Paper Facility and Issuance of Debt for Operating Purposes The resolution authorizes the issuance and sale of debt for operating purposes in the form of commercial paper and amends the terms of the Commercial Paper Facility to provide funding for operating purposes. As noted above and during review of the operating budget at the June meeting, the University faced significant financial shortfalls over the last sixteen months because of changed operations due to the COVID-19 pandemic, leaving certain departments with significant operating deficits during FY 2021. Some negative impacts are expected to continue into FY 2022, and as a result the President’s recommended FY 22 annual operating budget includes the use of commercial paper as a source of funds for a loan to certain units. The resolution grants authority to issue up to $50 million in debt. The debt must be issued no later than December 31, 2022. The results of any issuance will be reported to the Finance & Operations Committee at the meeting following the completion of the transaction. BACKGROUND INFORMATION The Finance & Operations Committee previously discussed information specifically related to the FY 2022 operating budget at the following meetings: June 2021: President’s Recommended FY 2022 Annual Operating Budget February 2021: FY 2022 Annual Operating Budget Framework December 2020: FY 2021 Operating Budget Update & FY 2022 Budget Variables and Levers October 2020: President’s Recommended FY 2022-23 Biennial Budget Request - Action September 2020: President’s Recommended FY 2022-23 Biennial Budget Request - Review PRESIDENT’S RECOMMENDATION The President recommends approval of the following: A. the resolution related to the Fiscal Year 2022 Annual Operating Budget; and B. the resolution related to Amendment of Terms of Commercial Paper Facility and Issuance of Debt for Operating Purposes. Page 5 of 146 REGENTS OF THE UNIVERSITY OF MINNESOTA RESOLUTION RELATED TO The Fiscal Year 2022 Annual Operating Budget WHEREAS, the University of Minnesota (University) as the state’s public, land grant university is charged with the responsibility to pursue knowledge and help apply that knowledge through research and discovery, teaching and learning, and outreach and public service; and WHEREAS, the State of Minnesota, through its legislative and executive branches, has not acted on appropriations for the 2022-2023 biennium, but the University has requested an increase for FY 2022 of $15,500,000 over the fiscal year 2021 base appropriation; and WHEREAS, the University faced significant financial shortfalls over the last sixteen months as a result of changed operations due to the COVID-19 pandemic, leaving certain University departments with significant operating deficits during FY 2021, and some negative impacts continuing into FY 2022; and WHEREAS, the future of the University is premised on partnerships within the University community of faculty, staff, and students, with the State of Minnesota, other educational institutions, business and industry, University