Transcript Faculty Leadership Conference Revenue Forecast Report and Budget Update Bernard M. Hannon Senior Assoc Commissioner & CFO April 23, 2010

Faculty Leadership Conference
Revenue Forecast Report and Budget
Update
Bernard M. Hannon
Senior Assoc Commissioner & CFO
April 23, 2010
INDIANA’S HIGHER EDUCATION
SYSTEM AND STATE FUNDING
Total FY 10 estimated expenditures by all
Indiana public postsecondary institutions
$5,090,667,914
Total FY 10 General Fund estimated expenditures by all
Indiana public postsecondary institutions
$3,487,676,807
Indiana’s Public
Higher Education System
• 5 four-year Public Postsecondary
Institutions
• 2 two-year Public Institutions
• 31 Public Campuses and 12 Instructional
Sites
• 407,000 Students in 2008-09
• 1,500 buildings worth $12B
• $2.3B in salary and compensation
4
State Operating Appropriations as % of Institutional
Expenditures
70.0%
% of total exp from state operating appropriations
60.0%
% of Operating exp from state operating appropriations
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Indiana
Univ.
Purdue
Univ.
statewide
avg.
Ball St.
Univ.
Univ. Indiana St.
Southern
Univ.
Indiana
ITCCI
Vincennes
Univ.
State Income—By Source
10%
5%
6%
Sales Tax
47%
Individual Income Tax
Corporate Income Tax
Gaming
Other
33%
Approximately $13 billion per year
State Expense—By Source
14%
3%
K-12
Higher education
5%
48%
5%
Medicaid
Teacher Pensions
Corrections
Child Welfare
13%
Other
13%
Approximately $13 billion per year
Percentage of state General Fund
appropriated to IHEs
25.0%
20.0%
15.0%
10.0%
5.0%
2009-10
2008-09
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985-86
1984-85
1983-84
1982-83
1981-82
1980-81
1979-80
1978-79
1977-78
1976-77
1975-76
2010-11
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985-86
1984-85
1983-84
1982-83
1981-82
1980-81
1979-80
1978-79
1977-78
1976-77
1975-76
State Appropriations to Public IHEs
state appropriations 1976 - 2011
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
Compound Annual Growth Rate: 4.7%
$400,000,000
$200,000,000
$-
State General Fund Appropriations to
Higher Education
$2,000,000,000
Total HE Appropriations
Campus Operating Appropriations
$1,800,000,000
$1,600,000,000
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
FY 2011
FY 2010
FY 2009
FY 2008
FY 2007
FY 2006
FY 2005
FY 2004
FY 2003
FY 2002
FY 2001
FY 2000
Total appropriations include: SSACI, capital and line item appropriations
HIGHER EDUCATION STATE FUNDING
NATIONAL CONTEXT
FY 2009 State Appropriations per FTE
$16,000
$14,000
$12,000
Indiana
$4,752
$8,000
U.S. Avg.
$6,934
$10,000
$6,000
$4,000
$2,000
$-
Vermont
New Hampshire
South Dakota
Colorado
Montana
Indiana
Rhode Island
Ohio
Oregon
Michigan
North Dakota
Pennsylvania
Massachusetts
Kansas
Delaware
South Carolina
Virginia
Iowa
Missouri
Minnesota
Utah
West Virginia
Washington
Wisconsin
Florida
Maine
California
US
Nebraska
Arizona
Mississippi
New Jersey
Illinois
Tennessee
Arkansas
Kentucky
Louisiana
Maryland
Alabama
Texas
New York
Connecticut
New Mexico
Georgia
Nevada
Oklahoma
North Carolina
Idaho
Hawaii
Alaska
Wyoming
FY 2009 Net Tuition Revenue per FTE
$14,000
$12,000
$10,000
U.S. Avg.
$4,095
$6,000
Indiana
$5,379
$8,000
$4,000
$2,000
$-
California
New Mexico
Wyoming
Georgia
Washington
Florida
North Carolina
Nevada
Louisiana
Idaho
Hawaii
Utah
Illinois
New York
Nebraska
Wisconsin
Texas
Tennessee
Mississippi
Kansas
US
Missouri
Alaska
Oregon
Massachusetts
Montana
Arkansas
Oklahoma
Arizona
Minnesota
Colorado
Kentucky
Ohio
South Dakota
Indiana
Alabama
Iowa
Connecticut
Virginia
South Carolina
North Dakota
West Virginia
Maryland
New Jersey
Maine
New Hampshire
Michigan
Pennsylvania
Rhode Island
Delaware
Vermont
FY 2009 Total Educ. Revenue per FTE
$20,000
$18,000
$16,000
$12,000
Indiana
$10,102
U.S. Avg.
$10,991
$14,000
$10,000
$8,000
$6,000
$4,000
$2,000
$-
California
South Dakota
Washington
Florida
Montana
Colorado
Utah
Oregon
Kansas
Indiana
Massachusetts
Ohio
New Mexico
Missouri
Wisconsin
Louisiana
New Hampshire
South Carolina
Georgia
Nebraska
US
North Carolina
Minnesota
Nevada
Illinois
Virginia
Mississippi
Iowa
Tennessee
Arizona
New York
North Dakota
Idaho
West Virginia
Arkansas
Texas
Hawaii
Michigan
Kentucky
Alabama
Oklahoma
Rhode Island
Pennsylvania
Connecticut
Maine
Vermont
Maryland
New Jersey
Delaware
Alaska
Wyoming
2009 Tax Revenue per Capita
$8,000
$7,000
$6,000
Indiana
$3,332
U.S. Avg.
$4,242
$5,000
$4,000
$3,000
$2,000
$1,000
$-
Alabama
Tennessee
Mississippi
South Dakota
South Carolina
Idaho
Kentucky
Arkansas
Missouri
Oklahoma
Indiana
Utah
West Virginia
Oregon
Montana
Texas
Georgia
North Carolina
New Hampshire
Iowa
Arizona
Michigan
New Mexico
Colorado
Florida
Ohio
Louisiana
Nebraska
North Dakota
Kansas
Nevada
Wisconsin
Virginia
Pennsylvania
U.S.
Delaware
Washington
Maine
Illinois
Rhode Island
Minnesota
Vermont
California
Maryland
Massachusetts
Hawaii
New Jersey
Connecticut
Wyoming
New York
Alaska
2009 Total Taxable Resources per Capita*
$90,000
$80,000
Indiana
$45,213
$60,000
U.S. Avg.
$52,754
$70,000
$50,000
$40,000
$30,000
$20,000
$10,000
$-
Mississippi
West Virginia
Arkansas
South Carolina
Kentucky
Alabama
Idaho
Michigan
Maine
Montana
New Mexico
Utah
Oklahoma
Tennessee
Arizona
Missouri
Indiana
Ohio
Georgia
North Carolina
Wisconsin
Vermont
Iowa
Oregon
Kansas
Pennsylvania
North Dakota
Louisiana
Nebraska
Florida
Texas
South Dakota
U.S.
Hawaii
Rhode Island
Minnesota
Illinois
Colorado
New Hampshire
Washington
California
Virginia
Nevada
Maryland
Massachusetts
New York
New Jersey
Alaska
Wyoming
Connecticut
Delaware
*Total Taxable Resources per capita from U.S. Treasury Department: www.treas.gov/offices/economicpolicy/resources/estimates.html
84.0%
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Indiana per Capita Income as Percentage of
U.S. Average
100.0%
98.0%
96.0%
94.0%
92.0%
90.0%
88.0%
86.0%
Higher Education Appropriations per $1,000 of
Personal Income
$20.00
$18.00
$16.00
$14.00
$12.00
U.S. Avg.
$6.80
$8.00
Indiana
$6.95
$10.00
$6.00
$4.00
$2.00
$0.00
New Hampshire
Colorado
Vermont
Massachusetts
Rhode Island
Pennsylvania
New Jersey
Missouri
New York
Connecticut
Oregon
Virginia
Illinois
Ohio
Nevada
Montana
Michigan
Maine
Maryland
Wisconsin
Florida
Arizona
Washington
South Dakota
United States
Indiana
Delaware
Texas
Minnesota
Tennessee
California
Kansas
Iowa
Idaho
Oklahoma
South Carolina
Georgia
Utah
Nebraska
Kentucky
Arkansas
West Virginia
North Dakota
Alaska
Louisiana
Hawaii
Wyoming
North Carolina
Mississippi
Alabama
New Mexico
State Revenue
Performance
State General Fund Revenue Growth
15.0%
13.1%
10.0%
7.4% 7.5%
6.9%
5.7%
5.4%
5.0%
2.9%
6.3%
4.5%
2.4%
0.0%
-0.8%
-5.0%
-3.6%
-7.4%
-6.4%
-10.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Note: FY 10 and FY 11 per December 2009 Revenue Forecast
Revenue Growth and Higher Education
Appropriations 2000-2011
15.0%
GF growth
HE approps
10.0%
5.0%
0.0%
-5.0%
-10.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
State Expenditure Growth
9.7%
10%
9%
8.0%
7.6%
8%
7%
7.1%
6.5%
5.6% CAGR 1996-2005
6%
2.3% CAGR 2006-2009
5.1%
4.9%
5%
4.1%
3.9%
4%
2.8%
2.7%
3%
1.9%
2%
0.8%
1%
0.5%
----F1996
F1998
F2000
F2002
F2004
F2006
F2008
Real Per Capita Expenditures*
$2,400
$2,350
$2,300
CAGR = -1.3%
$2,250
$2,200
$2,150
$2,100
FY 2004
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
* Includes Major Moves Investments
Revenue Collections FY 2006 – FY 2011
$14,500
$14,005
$14,000
$13,701
$13,500
$13,135
$12,906
$13,000
$12,836*
$12,500
$12,076*
$12,000
$11,500
$11,000
FY06
FY07
FY08
FY09
FY10
FY11
*projected
15%
Comparison of Forecasted to Actual Revenue
10%
5%
Percent
Change
(FY2010 vs.
FY2009)
0%
-5%
Targets from
May Forecast
-10%
Targets from
December
Forecast
-15%
-20%
-25%
June
May
April
March
February
January
December
November
October
September
August
July
Year-to-date = -10.5%
Last year = -7.4%
25
The Good News is:
We Entered the Recession in a Strong
Financial Position
Budget Surplus/Deficit
1,000.0
500.0
-----
1998
(500.0)
(1,000.0)
(1,500.0)
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
State Reserves (Cash – Liabilities)
1600
1329
1400
1200
1000
800
600
400
200
0
2001
-200
-400
2002
2003
2004
-179.2
2005
2006
2007
2008
2009
The Bad News is:
The Challenges are Unprecedented
Much Worse Than Prior Recessions
6.0%
4%
4.0%
2.0%
1.3%
0.0%
-2.0%
-4.0%
FY 1991 FY 1992
FY 2001 FY 2002
FY 2009 FY 2010
-0.8%
-3.6%
-6.0%
-8.0%
-7.4%
-10.0%
-12.0%
-10.5%
Sales Tax: CY 2009 vs. CY 2008
0%
-4%
-5%
-10%
-4%
-4%
-9%
-9%
-9%
-10%
-15%
-20%
-25%
-25%
-30%
-11%
Budgeted Revenue: FY 2010-11
29,000
Dec-08
Apr-09
May-09
Dec-09
28,143
28,000
27,452
Current Spend
26,748
27,000
26,000
25,000
24,913
24,000
23,000
Forecast reduced over $3 billion in one year. Missed forecast 17 straight months
Without Budget Management, State Reserves would
be Depleted by End of Biennium
Total State Reserves
in millions
$1,500
$1,329
$1,000
$500
$379
$211
$0
6/30/09
3/1/10
6/30/10
6/30/11
($500)
($1,000)
($1,500)
($909)
Summary– Progress, But More Action Needed
-$1.8 billion (=December 2009 revenue projection vs. May 2009 budget)
+$770 million (= agency and education reductions)
+$1 billion (= all remaining reserves and rainy day funds)
-$112 million (=revenue loss since December 2009 forecast)
= -$142 million deficit if no further actions are taken
Goal– continue to take necessary actions to spend
within our means, align operating expenses with
operating revenues and avoid tax increases
State Fiscal Outlook
• Even if current forecast is met, state
reserves balances will be fully expended
• Next legislative session – portends most
difficult biennial budget in memory:
– Loss of federal stimulus funds ($867M SFSF)
– Revenue and expenditure imbalance
– No state reserves to draw down
Distributing Scarce Resources
Commission Budget Responsibilities and
Priorities
• Debt Service
• College Completion Incentives:
– Number of Degrees
– On-Time Degrees
– Low Income Degrees
• Enrollment/Student Course Success Incentive
• Research Funding Incentive
• R&R
• Economic Development
• Two-Year Transfer Incentive
• Student access and success (SSACI)
37
Evolution of CHE Funding Recommendations
2001
2003
2005
2007
2009
Enrollment Change
Enrollment Change (credit Enrollment Change (credit Enrollment Change (credit Enrollment Change (credit (successfully completed
hours enrolled)
hours enrolled)
hours enrolled)
hours enrolled)
credit hours)
Inflation Adjustments
Inflation Adjustments
Inflation Adjustments
Inflation Adjustments
Equity Adjustment
Equity Adjustment
Equity Adjustment
Equity Adjustment
Plant Expansion/leases
Plant Expansion/leases
Research Support
Incentive
Research Support
Incentive
Change in number of
degrees
Change in On-Time
graduation Rate
Two Year Transfer
Incentive
Program Adjustment
Research Support
Incentive
Research Support
Incentive
Change in number of
degrees
Change in On-Time
graduation Rate
Two Year Transfer
Incentive
Low Income Degree
Completion Incentive
Workforce Development
Incentive (funding noncredit coursework)