Budget UpdateOpen Forums

February 27, 2018

March 1, 2018

OUTLINE

• Current year budget cut

• Assumptions for FY19 (2018-19) budget

• FY 2018-19 budget scenarios

• FY 2018-19 budget planning

• Advocacy efforts

• Status of ideas from past years

Current Year

Budget Cut

Impact of Budget Cut

• 1% State Appropriation cut or $516,200

• Cuts by division as follows:

• Academic affairs - $331k

• Admin & Finance - $123k

• Student Affairs - $25k

• Advancement - $19k

• Athletics - $19k

• Divisions addressing primarily through salary savings

FY 2018-19 Budget

Assumptions

Enrollment and retention

challenges remain ...

14,80715,109

15,405

15,748 15,738 15,660

15,28315,114

14,72014,566 14,488

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

KERS Contribution Rates Current and

Proposed FY 2018-19

9% 10%12%

17%20%

24%27%

39% 39%

49% 49%

84%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

84% based upon 2018-2020 Office of State Budget Director Salary and Benefit Defined Calculation report

KERS Contribution Amounts Current

and Proposed FY 2018-19

$2.6$3.3 $3.9

$5.9$7.4

$9.3$10.4

$14.1$15.3

$17.7 $18.3

$31.0

$0

$5

$10

$15

$20

$25

$30

$35

$’s in millions

Assumptions for FY 2018-19 Budget

• Enrollment declines of 0.5% to 2.5%

• Tuition increase of 2% to 5%

• Scholarship increases

• State appropriation cut of 6.25%

• KERS increase $12.8 million

• Other fixed cost increases

• Health Innovation Center operating costs

FY 2018-19 Budget

Scenarios

Tuition Percent Increase

Enrollment Change

4%

.5% Decline

4%

1.5% Decline

No Equity No KERS

Funding

No Equity No KERS

Funding

$ $

Source of Funds

Tuition rate increase 4,900,000 4,900,000

FY18 Net tuition shortfall (650,000) (650,000)

FY19 Tuition shortfall (575,000) (1,725,000)

FY19 Scholarship incr (1,500,000) (1,500,000)

Net Tuition Incr(Decr) 2,175,000 1,025,000

State cut of 6.25% (3,200,000) (3,200,000)

½ KERS Increase funded 0 0

Equity Funding for FY19 0 0

Net State Appropriation (3,200,000) (3,200,000)

TOTAL FUNDS (1,025,000) (2,175,000)

Scenario 1 Scenario 2

Tuition Percent Increase

Enrollment Change

4%

.5% Decline

4%

1.5% Decline

No Equity No KERS

Funding

No Equity No KERS

Funding

$ $

TOTAL FUNDS (1,025,000) (2,175,000)

Use of Funds

KERS Rate Increase

(to 84%)

(12,810,000) (12,810,000)

Fixed Cost Estimate (1,800,000) (1,800,000)

HIC Operating Cost Estimate (2,000,000) (2,000,000)

Net Use of Funds (16,610,000) (16,610,000)

SURPLUS (DEFICIT) (17,635,000) (18,785,000)

Scenario 1 Scenario 2

Tuition Percent Increase

Enrollment Change

4%

.5% Decline

4%

1.5% Decline

$ $

SURPLUS (DEFICIT) (17,635,000) (18,785,000)

Equity funding 5,100,000 5,100,000

SURPLUS (DEFICIT) (12,535,000) (13,685,000)

SURPLUS (DEFICIT) (17,635,000) (18,785,000)

½ KERS Increase Funded 6,405,000 6,405,000

SURPLUS (DEFICIT) (11,230,000) (12,380,000)

Scenario 1 Scenario 2

Budget Variables

Across-the-board pay increase of 1% = $1.1 million

Tuition rate increase of 1% (net) = $1.2 million

Enrollment increase of 1% = $1.15 million

Average compensation/benefits for FT Faculty = $93 K

Average compensation/benefits for FT Staff = $91 K *

* Assumes KERS at 84%

FY 2018-19 Budget

Planning

FY 2018-19 Budget

Planning/Timeline

• Budget update presentations to campus constituencies

(Deans, Staff Congress, Chairs, Faculty Senate, SGA)

• Open Forums in late February/early March

• Parking/Dining/Housing fee recommendations to Board in

March

• Division budget planning – ongoing

• Tuition recommendation to Board in May

• Budget recommendation to Board - TBD

• Possible special board meeting in May or June

Advocacy Efforts

• Equity funding

• Pension reform

• Pension relief

NKU - Pension Reform Requests

1.

Place all new hires into

a defined contribution

system

2.

Create a one-time

window to give

employees opportunity

to transfer out of KERS

and into a defined

contribution system

Council on Post Secondary Education

2018-20 Biennial Budget Recommendation

KERS Cost Relief

InstitutionFY 2018 Total General Fund

KERS Cost Increases

Budgetary Impact

University of Kentucky $267,089,200 $0 0.0%

University of Louisville 132,758,000 0 0.0%

Eastern Kentucky University 65,045,200 9,714,400 14.9%

Kentucky State University 26,729,600 1,358,600 5.1%

Morehead State University 41,642,600 3,283,800 7.9%

Murray State University 45,802,100 4,777,300 10.4%

Northern Kentucky University 51,621,100 12,810,700 24.8%

Western Kentucky University 74,653,800 7,263,300 9.7%

KCTCS 181,605,000 8,039,400 4.4%

TOTAL $886,946,600 $47,247,500 5.3%

Status of Ideas

Past Years: Suggestions Acted Upon or in Progress

REVENUE GENERATION

• Entered into partnership with Academic Partnerships to increase enrollment in online programs and enhance online course offerings

• Have involved the entire campus in improving student recruitment and retention efforts

• Entered into U.S. 27 development project that will help bring in people and revenues to campus

• Increased parking fee structure for visitors

• Continuing advocacy for state equity funding

• Have realigned student aid programs to improve recruitment and retention

• Continuing to develop strategies for recruiting non-traditional, part-time students, and out-of-tristate students

Past Years: Suggestions Acted Upon or in Progress (Cont)

COST SAVINGS

• Continue to re-evaluate contracts with external vendors and seek competitive bids

• Converting more users' computers to cloud-based desktops

• Continually explore options to reduce KERS costs, e.g., moving more employees to TIAA when possible and transition staff jobs to faculty when appropriate

• Close university over holidays to save on electricity and other resources

• Carefully considering “outsourcing” possibilities

• Targeting facilities investment into asset preservation rather than new buildings

• Promoting and expanding participation in online W-2s

• Continually analyze health and wellness-related costs, including costs of health insurance

• Continue to review job vacancies and make sure these duties are still needed

• Evaluated the need for using search firms and did not use them for some positions, e.g., Arts & Sciences Dean, CFO, General Counsel

• Offered shortened work week to eligible staff

Current Year: Revenue Generation Suggestions

• Utilize BB&T for major conferences or events outside of athletic cycles

• Create a Norse Alumni membership group with an annual fee and some perks (e.g., free drink/snack at basketball games)

• Charge students fees for missing advising appointments

• Charge a fee to faculty/staff for using the Recreation Center – reduce for frequent users

• Develop and offer more events and courses to the community and advertise these strategically through social media

• Increase local advertising presence, e.g., billboards on I-275 near campus

• Sell naming rights to areas, places, or items on campus, e.g., rooms, green areas

• Begin a grassroots & social media campaign to highlight existing revenue generation, e.g., Planetarium birthday parties, NKU Theatre

• Sell assets that are not being used - such as the old Covington campus in Park Hills

• Evaluate organizational structure - look for ways to increase efficiency and create synergies

• Have fewer phones on campus; many office phones are rarely or never used

• Create stricter guidelines on office furniture purchasing and encourage the "swapping" of furniture between departments

• Make dental and vision employee-paid benefits only

• Offer early retirement incentives

• Reduce the number of days/week that trash is collected and/or have employees empty own trash in a central location

• Institute a 4-day work week/class schedule and reduced summer operating hours

• Use solar panels; replace current lights with LED lighting; install reflective sheets above halogen light bulbs; install more motion lights

• Eliminate color postcards; make double-sided printing the default; let students opt-in to electronic rather than paper communications

Current Year: Cost Saving Suggestions

We want your input

• Link to Website for Revenue Generation and Cost

Saving Ideas

https://inside.nku.edu/cfo/ideas.html

APPENDIX

2016-17 Progress

1. 2016 Session: General Assembly

addresses historic funding disparities

impacting NKU and WKU, and

appropriate $5.1 million to NKU to fix half

of disparity.

2. 2017 Session: development of a rational,

strategic performance based funding

model

KERS Contribution Rates

8% 9% 10% 12%

17%20%

24%27%

39% 39%

49% 49%

0%

10%

20%

30%

40%

50%

60%

KERS Contribution Amounts

$2.6M$3.3M

$3.9M

$5.9M

$7.4M

$9.3M$10.4M

$14.1M$15.3M

$17.7M$18.3M

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Mill

ions

KERS as % of State Appropriation

4.9%6.4%

7.7%

11.6%

15.9%

20.4%

24.3%

32.2% 32.0%

38.2%

35.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

What If…KERS Contribution Rates

9% 10% 12%17%

20%24%

27%

39% 39%

49% 49%

84%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

84% based upon 2018-2020 Office of State Budget Director Salary and Benefit Defined Calculation report

KERS Contribution Amounts

$2.6M $3.3M $3.9M

$5.9M$7.4M

$9.3M$10.4M

$14.1M$15.3M

$17.7M $18.3M

$31.0M

$0

$5

$10

$15

$20

$25

$30

$35

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Mill

ions

KERS as % of State Appropriation

4.9% 6.4% 7.7%

11.6%

15.9%

20.4%

24.3%

32.2% 32.0%

38.2%35.4%

60.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Postsecondary Pension Reform Requests

1.

Place all new hires into

a defined contribution

system

2.

Create a one-time window to

give employees opportunity

to transfer out of KERS and

into a defined contribution

system

Positive for NKU:

• All new hires enter DC

plan

• Existing KERS employees

may opt out of DB plan

and opt in to DC plan

• Tier 3 employees (hired after

1/1/14) roll over to DC plan

• Voluntary opt-out of KERS if

full actuarial cost paid in full

More Information Needed:

• How will the actuarial cost

be determined?

• Ability to use NKU’s DC plan

(TIAA) v. PERS

Pension Reform Assessment (Gov. Bevin’s Proposal)

HB200 Budget Proposal

Budget Reduction: 6.25% ($3.2M)

Eliminate Mandated Programs (Kentucky Center for

Mathematics)

($1.3M)

No Pension Relief/Reform ($13M)

Total Impact ($17.5M)

% Cut to State Appropriation 34%

Invest in Success

Campaign• Launched November 19, 2015 at NKUF Semi-Annual Meeting