OPEN – FIN – INFO 1-16 January 31 – February 1, 2013 OPEN – FIN – INFO 1-16 January 31 – February 1, 2013 Strategic Financial Planning Assumptions and Three-year Budget Projections UM OPEN – GB – INFO 2 University of Missouri System Board of Curators January 31, 2013 FINANCE COMMITTEE

OPEN – FIN – INFO 1-17 January 31 – February 1, 2013 FY2014 – 2016 Strategic Financial Planning Assumptions – Three Questions  What are the strategic financial planning assumptions?  Why does the University prepare the assumptions?  What are they used for?

OPEN – FIN – INFO 1-18 January 31 – February 1, 2013 Revenue Drivers that Impact Strategic Financial Planning  Revenue Drivers  State Appropriations for Operations  Tuition and Fee Rates  Enrollment  Other Miscellaneous Revenue OPEN – GB – INFO 2

OPEN – FIN – INFO 1-19 January 31 – February 1, 2013 Expense Drivers that Impact Strategic Financial Planning  Expenditure Drivers  Salary and Wage Changes  Cost of Employee Benefits  Maintenance and Repair  Other Costs of Doing Business OPEN – GB – INFO 2

OPEN – FIN – INFO 1-20 January 31 – February 1, 2013 Financial Objectives  Strategic Reallocation – 1%-2% per year growing to 3%-4%  Operating Results – Range 4.5%-5.9%  Net Assets – 8.0%-12.1%  Expenditure Reductions to Achieve Budget Equilibrium  Revenue Generation to Achieve Budget Equilibrium

OPEN – FIN – INFO 1-21 January 31 – February 1, 2013 Drivers & Results : Base Case OPEN – FIN – INFO 2

OPEN – FIN – INFO 1-22 January 31 – February 1, 2013 Results : Base Case

OPEN – FIN – INFO 1-23 January 31 – February 1, 2013 Scenario Summary

OPEN – FIN – INFO 1-24 January 31 – February 1, 2013 Section 3: Preliminary FY2014 Budget Section 1: Setting the Financial Stage

OPEN – FIN – INFO 1-25 January 31 – February 1, 2013 FY 2014 UM Preliminary Budget Issues  Revenues  Flat state support  Constraints on tuition increases  Expenses  Increase in salaries and wages: merit & market  Increase in medical costs and the required contribution to Retirement Fund  Increase in M & R  Control rate of increase in expenses relative to revenues 25

OPEN – FIN – INFO 1-26 January 31 – February 1, 2013 Other Issues on the Horizon  State support based on performance funding  Limited capacity to increase tuition & fees  Pressure to reduce costs and increase productivity  Funding for strategic investment  Pressure to increase output  Retention rates  Graduation rates  # of Degrees Granted  A new financial model for the future

OPEN – FIN – INFO 1-27 January 31 – February 1, 2013 Projected Marginal Costs for FY2014 Budget - $51.2 million DecJan 1.Salary & Wages Increase$19.2$ Benefits on Salary & Wages Increase Flat Rate Benefit Increase (1.5% of Salary & Wages) Total Compensation$32.4$ Increase in M&R (inflation) Other Marginal Cost Increases Costs Due to Enrollment &Priorities Total Marginal Cost Increases$46.3$51.2 $ in Millions

OPEN – FIN – INFO 1-28 January 31 – February 1, 2013 Projected Marginal Revenues for FY2014 Budget - $21.1 million DecJan 1.Increase in Net Tuition from Inflation (2% Dec; 1.7% Jan) $9.5$8.1 2.Increase in Net Supplemental from rate changes Increase in Net Tuition Above Inflation Increase in Net Tuition & Fees from Enrollment State Appropriations0.0 6.Increase in Other Revenues (incl. dedicated) Total Marginal Revenue Increases$21.3$21.1 $ in Millions

OPEN – FIN – INFO 1-29 January 31 – February 1, 2013 Preliminary Funding Gap of $30.1 million DecJan 1. Marginal Cost Increases$46.3$ Marginal Revenue Increases$21.3$ Net Funding Gap$25.0$ Gap as a % of Operating Expenses2.3%2.7% 5. Impact of 1% inc/dec State Approps (net)$ Impact of 1% Rate inc in Net Tuition & Fees$ Add’l Cost to reach M&R policy (FCNI of 0.30) $ Strategic Reallocation 1-2% $ in Millions

OPEN – FIN – INFO 1-30 January 31 – February 1, 2013 Questions?