From Provost and Senior Vice President April Mason and Vice President Cindy Bontrager: FY17 budget update

Submitted by April Mason and Cindy Bontrager

Dear Faculty and Staff,

Summer is nearly upon us, although you would not know it last week as the weather seemed more like March than May. May is a time when we celebrate the end of a successful academic year and the achievement of our students and graduates. It is also a time when the budget picture for the coming fiscal year comes more fully into focus as the Kansas Legislature completes its annual legislative session and we submit our tuition and fees proposal to the Kansas Board of Regents. In today's letter, we want to provide you with an overview of the status of the university budget for FY17, particularly as it relates to planned operating and salary enhancements.

Budget overview

At the conclusion of this year's legislative session, the Kansas Legislature passed to the governor an appropriation bill that repealed the tuition cap for the 2016-2017 school year for regent institutions including K-State. The repeal of the tuition cap will provide us with much needed flexibility to generate additional revenue to assist in addressing our budget priorities. Some more positive budget news out of the legislative session is the retention of the special grants funding for enhancements to the College of Veterinary Medicine and the funding for the University Engineering Initiative Act.

The Legislature passed a proviso that required allotments to higher education be calculated based on the total university budget instead of the state general fund amount. This action results in higher percentage reductions to Kansas State University and the University of Kansas. Unfortunately, the governor did not veto the proviso and in order to balance the state budget, the governor initiated allotments that reduce our state general funds appropriations by approximately $7.1 million. This action is in addition to the reduction of our Global Food Systems appropriation of $4 million introduced by the governor earlier in the legislative session and passed by the Legislature.

Following the conclusion of the 2016 legislative session, we presented our annual tuition and fees proposal to the Kansas Board of Regents during its meeting on May 18. A 5 percent increase in tuition and fees was requested for the 2016-2017 academic year for the Manhattan, Polytechnic, and Olathe campuses and a 3 percent increase for the College of Veterinary Medicine. In addition, the College of Arts & Sciences requested an increase of $8.70/credit hour (to $16.70), and the College of Business Administration and the College of Engineering requested surcharge increases of $15 and $30 per student credit hour, respectively. The new college fees, if approved by the Regents, will be used by the colleges to support key strategic initiatives in their K-State 2025 plans.

The Manhattan, Polytechnic and Olathe campuses will be revising the tuition rate increase to 5.81 percent to offset the higher than expected state general fund reduction recently announced by the governor. If approved, the estimated revenue from the proposed tuition increases would generate approximately $11.7 million to fund key priorities. The Board of Regents is scheduled to approve the tuition increases at its June 15 meeting.

Budget development and planned operating and salary enhancements

Last fall, the University Budget Advisory Committee implemented the university's first open budget enhancement request process. This was an opportunity for all units to request general use funds in a transparent and uniform manner for their most important needs over a three-year budget planning window. Twenty-two requests were submitted from 14 units, totaling more than $23.7 million in funding needs.

In addition, the Faculty Compensation Task Force submitted recommendations for a new three-year compensation improvement plan focused on tenured, tenure-track and non-tenure track faculty salaries. The report, "Structuring Faculty Salaries Towards K-State 2025 and Beyond," as well as the feedback received from the university community during the open comment period, are available online.

The Total Rewards Initiative, focused on compensation for university support and unclassified professional staff, also moved forward under the leadership of Vice President Cheryl Johnson and her Human Capital Services team. This spring, Johnson briefed the university community on the initial findings and recommendations, including the need to address salaries not currently at a living wage and 25 percent below market. More work on this initiative will continue over the summer.

As we look ahead, we are facing state general fund budget cuts, energy costs, and enrollment challenges. Recent investments in expanding our academic infrastructure have resulted in increased costs to support expansion of the chill plant, utility and operation costs of the new facilities. Considering the budget realities faced by the university, the University Budget Advisory Committee submitted its recommendations to the president following the close of the legislative session. The following final budget allocations for FY17 were then approved by President Schulz.

1. Faculty Promotions, Professorial Performance Awards for tenured faculty, and Targeted Faculty Salary Enhancements, or TFSE, Awards, will continue to be funded as they have been for the past three years. A total of 175 Targeted Faculty Salary Enhancements Awards of $3,000 are funded for FY17. As recommended by the Faculty Compensation Task Force, each college will be allowed to designate up to 10 percent of their TFSE awards for regular, nontenure-track faculty positions.

2. The building of new facilities across the Manhattan campus has revitalized and injected much needed academic and research space for our university. Therefore, new funding will be provided for custodial staffing, the increased utility cost from additional square footage and the debt service for the chill plant. Additionally, funding will be provided for institutional scholarships, increased costs for graduate teaching assistant tuition waivers, and fringe benefit rate adjustments.

3. Merit raises were recommended in both the Faculty Compensation Task Force Report and the Total Rewards initiative. Unfortunately, due to budget constraints, we are unable to provide across-the-board salary increases this year. In addition, the university is unable to commit to additional Faculty Compensation Task Force recommendations or a new multiyear plan for faculty compensation. We are asking the Faculty Compensation Task Force to review its report next spring and submit updated recommendations for consideration for FY18. Finally, we are unable to begin funding implementation of the Total Rewards compensation strategy until FY18 and beyond.

4. In order to balance the FY17 university budget, we have asked the vice presidents and deans to implement a 3.85 percent internal reallocation. If there are any changes to the university's state allocation or tuition proposal, this reduction to units will be revised. A July letter to campus will include all the financial details for FY17 as we have done in previous years.

Moving forward

There is no doubt that our current constrained budget environment is not a short-term situation, but a new normal we must recognize and address. We must look for sources of funding other than increasing tuition for our students and across-the-board cuts to our units to annually balance our budget.

We must plan strategically for a future that might not allow us to do the things we have historically been able to do. This means identifying and implementing alternative strategies to reduce costs and increase revenues. It means making it a priority to develop a sustainable compensation pool of funds to allocate to faculty and staff salary enhancements in the future. It means developing and implementing definitive strategic enrollment and retention initiatives as soon as possible.

Thanks to tireless efforts of our faculty, staff, students, donors and friends, we have made great strides in advancing K-State in spite of a constrained budget environment these last years. We know that working together as a K-State community with General Myers first and then our new president, we can meet our challenges and continue to provide the extraordinary educational experience that is K-State.

Thanks for all you do!

April Mason

Provost and Senior Vice President

Cindy Bontrager

Vice President for Administration and Finance