Overview of the University Budget Structure 2009

UTSA Operating Budget Fund Sources  State Funds:  State Appropriations: Formula Funding, Special Items, Benefits  THECB Transfers: TX Pub Ed Grant (TPEG), Work-study  Statutory Tuition, Certain Lab Fees  Designated Funds:  Designated Tuition, Mandatory, Course & Incidental Fees  Indirect Cost Recovery: Facilities & Admin Overhead  Auxiliary Funds (29-accts)  Restricted Funds: Gifts (30-accts) Sponsored Programs - Grants/Contracts (26-accts) Federal Financial Aid (26-accts) Designated Funds 19-accounts E&G Budget = 14-Accts State Funds + $33M of Designated Funds (Tuition, Fees & F&A) Xfrd to fund E&G Bdgt

UTSA FY 2009 Operating Budget All Revenue Sources - $421,560,213

State Legislative Budget Cycle   Legislature convenes every 2 years   for 140 days during an odd numbered calendar year beginning January 2 nd 2007 = 80 th Legislative Session for FY08 and 09 Budgets 2009 = 81 st Legislative Session for FY10 and 11 Budgets   State budget is allocated for 2 years at a time   HE appropriations are generally flat in the 2nd year   Fiscal Year begins September 1   Numerical reference is by the trailing year:   = FY09   = FY10   Legislature convenes every 2 years   for 140 days during an odd numbered calendar year beginning January 2 nd 2007 = 80 th Legislative Session for FY08 and 09 Budgets 2009 = 81 st Legislative Session for FY10 and 11 Budgets   State budget is allocated for 2 years at a time   HE appropriations are generally flat in the 2nd year   Fiscal Year begins September 1   Numerical reference is by the trailing year:   = FY09   = FY10

Legislative Appropriations Request (LAR)   Each agency details funding sought from the state budget - tied to goals, objectives & strategies   Each UT campus prepares their own LAR   Format dictated (ABEST system input)   Instructions in early April of even calendar years   Due to UT System ~ May 15, 2008   Basis for Joint Budget Hearing in Fall 2008 before session begins   UTSA’s Hearing was held September 8, 2008   Each agency details funding sought from the state budget - tied to goals, objectives & strategies   Each UT campus prepares their own LAR   Format dictated (ABEST system input)   Instructions in early April of even calendar years   Due to UT System ~ May 15, 2008   Basis for Joint Budget Hearing in Fall 2008 before session begins   UTSA’s Hearing was held September 8, 2008

General Appropriations Act (GAA)   General Appropriations Act details each agency’s biennial budget allocation   State revenues only - does not include designated funds   Academic institutions   Direct appropriations via funding formula are lump sum   Strategies are for information only   Non-formula appropriations are ‘restricted’: – Special Items & Higher Education Group Insurance   Revenue sources referred to as ‘method of finance’   General Revenue (“sum certain” appropriations)   General Revenue-Dedicated (estimated –Stat Tuition/Lab Fees) – collected by UTSA – considered a funding source for the formula   General Appropriations Act details each agency’s biennial budget allocation   State revenues only - does not include designated funds   Academic institutions   Direct appropriations via funding formula are lump sum   Strategies are for information only   Non-formula appropriations are ‘restricted’: – Special Items & Higher Education Group Insurance   Revenue sources referred to as ‘method of finance’   General Revenue (“sum certain” appropriations)   General Revenue-Dedicated (estimated –Stat Tuition/Lab Fees) – collected by UTSA – considered a funding source for the formula

General Appropriations Act (GAA)   GAA specifies how state funds are allocated, not how they must be spent.   Institutions are not bound to spend appropriations within a specified strategy (E&G Space Support)   Exceptions   Special Items   Higher Education Group Insurance   TRB Debt service   Research Development funds must be used per Ed Code §   General Revenue can not be used to fund   Construction   Auxiliary purposes – e.g. Athletics, Parking, etc.   GAA specifies how state funds are allocated, not how they must be spent.   Institutions are not bound to spend appropriations within a specified strategy (E&G Space Support)   Exceptions   Special Items   Higher Education Group Insurance   TRB Debt service   Research Development funds must be used per Ed Code §   General Revenue can not be used to fund   Construction   Auxiliary purposes – e.g. Athletics, Parking, etc.

State Funding Variance by UT Campus

State Appropriation % of Total Revenue Declined After Tuition Deregulation

Formula Funding in Texas   Tool used by the Legislature since 1950’s to allocate most of the funds for public universities.   Over time, the formula became more and more complex   Simplified in 1997, engineered by Senator Ratliff   The result of a ‘negotiation’ among institutions & the Legislature re: how available dollars should be allocated   Not intended as restricted budget line item   Universities may allocate to a college or department more or less than the amount ‘earned’ through the formula.   Intended to be fair & equitable, provide incentives, stable & predictable   Tool used by the Legislature since 1950’s to allocate most of the funds for public universities.   Over time, the formula became more and more complex   Simplified in 1997, engineered by Senator Ratliff   The result of a ‘negotiation’ among institutions & the Legislature re: how available dollars should be allocated   Not intended as restricted budget line item   Universities may allocate to a college or department more or less than the amount ‘earned’ through the formula.   Intended to be fair & equitable, provide incentives, stable & predictable Source: THECB Presentation: Introduction to the Texas Public University Funding Formula (November 2001)

Formula Funding in Texas   Intended to fund Educational & General budget items   62% of all state appropriations for general academic institutions are allocated via 2 funding formulas and 2 supplements.   An “all funds” formula   General Revenue – from sales taxes, franchise tax, lottery & numerous other source   All Funds – GR + Statutory Tuition   Intended to fund Educational & General budget items   62% of all state appropriations for general academic institutions are allocated via 2 funding formulas and 2 supplements.   An “all funds” formula   General Revenue – from sales taxes, franchise tax, lottery & numerous other source   All Funds – GR + Statutory Tuition Source: THECB Presentation: Introduction to the Texas Public University Funding Formula (November 2001)

State Appropriations: Formula Funding Instructional and Operations (I/O) Formula   Uses Weighted Semester Credit Hours (SCH) generated during the ‘Base Year’ Infrastructure Support Formula   Funding associated with oper & mtnc of plant Driven by sft needed to support E&G activities Adjusted Utility Rate (66.1%) All Other Infrastructure Costs (33.9%) To support Oper & Mtnc of E&G space Rate per predicted square foot = $6.19 Instructional and Operations (I/O) Formula   Uses Weighted Semester Credit Hours (SCH) generated during the ‘Base Year’ Infrastructure Support Formula   Funding associated with oper & mtnc of plant Driven by sft needed to support E&G activities Adjusted Utility Rate (66.1%) All Other Infrastructure Costs (33.9%) To support Oper & Mtnc of E&G space Rate per predicted square foot = $ %* 17.1% * *of total made available to fund the formula

Instructional and Operations (I/O) Formula Formula Strengths: consistent methodology - same for all 35 academic institutions; emphasizes instruction. Formula Weaknesses: hurts growing institutions adjustments every 2 years; motivates creation of graduate programs; doesn’t reward quality or student success; validity of weighting not demonstrated. Costs by discipline are aggregated and self reported. Actual costs are not fully funded (rate based on funding made available by the legislature). Formula Strengths: consistent methodology - same for all 35 academic institutions; emphasizes instruction. Formula Weaknesses: hurts growing institutions adjustments every 2 years; motivates creation of graduate programs; doesn’t reward quality or student success; validity of weighting not demonstrated. Costs by discipline are aggregated and self reported. Actual costs are not fully funded (rate based on funding made available by the legislature). The formula is never funded at the levels recommended by THECB to cover cost increases.

Instructional and Operations (I/O) Formula 1.Each institution reports cost data by discipline and level 2. Each institution reports enrollment data for the base period – 12 months immediately preceding & including the legislative session.   UTSA’s reported SCH for Summer 2008, Fall 2008 and Spring 2009 will determine relative amount of formula funding for FY2010 and 2011   SCH’s are adjusted by funding caps 1.Each institution reports cost data by discipline and level 2. Each institution reports enrollment data for the base period – 12 months immediately preceding & including the legislative session.   UTSA’s reported SCH for Summer 2008, Fall 2008 and Spring 2009 will determine relative amount of formula funding for FY2010 and 2011   SCH’s are adjusted by funding caps

Cap Adjustments to the Base SCH The following SCHs are deducted from our base SCH and not funded:   Doctoral Cap –doctoral hours accumulated by a single student in excess of 99 hours.   Undergraduate Hour Cap – SCH earned by a resident undergraduate student that exceeds by at least 45 hours the number of SCH required for completion of the student’s degree program.   Developmental Education Cap – developmental hours accumulated by a single student in excess of 18 SCH.   Third Time Enrollment Cap – credit hours attempted by a single student for the third time. The following SCHs are deducted from our base SCH and not funded:   Doctoral Cap –doctoral hours accumulated by a single student in excess of 99 hours.   Undergraduate Hour Cap – SCH earned by a resident undergraduate student that exceeds by at least 45 hours the number of SCH required for completion of the student’s degree program.   Developmental Education Cap – developmental hours accumulated by a single student in excess of 18 SCH.   Third Time Enrollment Cap – credit hours attempted by a single student for the third time.

Cost Study Inputs

Formula Funding Weights Reflect Variable Costs by Discipline & Level

Instructional and Operations (I/O) Formula 3. Per SCH funding rate for all 35 Academic Institutions is the same: State General Rev + GR-Dedicated (Statutory tuition + lab fees) = Funding Rate Statewide Weighted Semester Credit Hrs (WSCH) Per WSCH Funding for Individual Institutions: (Institution’s WSCH x Funding Rate per WSCH) = All Funds Appropriated Funding Rates FY06-07= $55.72FY08-09= $59.02 (+5.9%) FY10-11 TBD - THECB Recommended at $63.87 for Attempted SCH $72.05 for Completed, HB1 is $60.51 (+2.5%) 3. Per SCH funding rate for all 35 Academic Institutions is the same: State General Rev + GR-Dedicated (Statutory tuition + lab fees) = Funding Rate Statewide Weighted Semester Credit Hrs (WSCH) Per WSCH Funding for Individual Institutions: (Institution’s WSCH x Funding Rate per WSCH) = All Funds Appropriated Funding Rates FY06-07= $55.72FY08-09= $59.02 (+5.9%) FY10-11 TBD - THECB Recommended at $63.87 for Attempted SCH $72.05 for Completed, HB1 is $60.51 (+2.5%)

Teaching Experience Supplement   10% additional weighting to Undergraduate SCH (both Lower and Upper Division) taught by tenure/tenure track faculty   Was 5% in and   Increased to 10% in 02-03, 04-05, biennia   In the GAA included this language:   It was the intent of the Legislature to increase the weight by 10% per biennium, up to 50%. (Did not increase in 08-09)   For 10-11, THECB has recommended removal of this supplement!   10% additional weighting to Undergraduate SCH (both Lower and Upper Division) taught by tenure/tenure track faculty   Was 5% in and   Increased to 10% in 02-03, 04-05, biennia   In the GAA included this language:   It was the intent of the Legislature to increase the weight by 10% per biennium, up to 50%. (Did not increase in 08-09)   For 10-11, THECB has recommended removal of this supplement!

Statutory Tuition   Rates established by Ed Code ($50/SCH since Fall 2005 for resident undergraduate students)   Same rate for all UT institutions.   Graduate students pay 2 times undergraduate rate, referred to as Graduate Incremental Tuition. ($100/SCH since Fall 2005)   Non-resident students pay rates equal to the average non-resident tuition at the 5 most populous U.S. states. Rates are determined by THECB per §54.051(d) of the Texas Ed Code (currently at $331/SCH for UG and $772/SCH for GR)   Statutory Tuition is a revenue source for the I/O formula (in an amount estimated in the General Appropriations Act.)  Institution bears impact of any over or under collection of budgeted revenue – worse for campuses who lose enrollment.   Rates established by Ed Code ($50/SCH since Fall 2005 for resident undergraduate students)   Same rate for all UT institutions.   Graduate students pay 2 times undergraduate rate, referred to as Graduate Incremental Tuition. ($100/SCH since Fall 2005)   Non-resident students pay rates equal to the average non-resident tuition at the 5 most populous U.S. states. Rates are determined by THECB per §54.051(d) of the Texas Ed Code (currently at $331/SCH for UG and $772/SCH for GR)   Statutory Tuition is a revenue source for the I/O formula (in an amount estimated in the General Appropriations Act.)  Institution bears impact of any over or under collection of budgeted revenue – worse for campuses who lose enrollment.

Designated Tuition In 2003, the legislature ‘deregulated’ designated tuition rates to counteract declining state revenue.   Considered a local source of revenue; rates are set by by the Board of Regents (fingers crossed) & vary by institution   FY 08 = $101/SCH FY09 = $110 /SCH FY10 = $ (fingers crossed)   20% of the amount collected from paid resident UG and 15% from resident GR over $46/SCH is set aside for student financial aid.   Very important revenue stream   Only discretionary source of new revenue in the 2 nd year of the biennium to fund merit, mandatory cost increases, new faculty, strategic initiatives, etc. In 2003, the legislature ‘deregulated’ designated tuition rates to counteract declining state revenue.   Considered a local source of revenue; rates are set by by the Board of Regents (fingers crossed) & vary by institution   FY 08 = $101/SCH FY09 = $110 /SCH FY10 = $ (fingers crossed)   20% of the amount collected from paid resident UG and 15% from resident GR over $46/SCH is set aside for student financial aid.   Very important revenue stream   Only discretionary source of new revenue in the 2 nd year of the biennium to fund merit, mandatory cost increases, new faculty, strategic initiatives, etc.

Mandatory & Incidental Fees New fees and or changes to the fee amounts are set for two years upon approval by the Board of Regents.   Proposals are considered prior to the Fall Semester of the 2 nd year of the biennium.   Fee revenue must be spent in accordance with the approved purpose (justification) and or per Texas Education Code stipulations. Mandatory Fees (Designated & Auxiliary Funds):   Required to be paid by all students unless exempted by statute or waived by the President.   New fees and/or fee rate changes must be approved by the Board of Regents (BoR) Incidental or Course Fees (Designated Funds):   College/course fees are included in the Total Academic Cost formula.   President has authority after review of The UT System Executive VC. New fees and or changes to the fee amounts are set for two years upon approval by the Board of Regents.   Proposals are considered prior to the Fall Semester of the 2 nd year of the biennium.   Fee revenue must be spent in accordance with the approved purpose (justification) and or per Texas Education Code stipulations. Mandatory Fees (Designated & Auxiliary Funds):   Required to be paid by all students unless exempted by statute or waived by the President.   New fees and/or fee rate changes must be approved by the Board of Regents (BoR) Incidental or Course Fees (Designated Funds):   College/course fees are included in the Total Academic Cost formula.   President has authority after review of The UT System Executive VC.

Facilities and Administrative (F&A) Indirect Cost Recovery   Facilities and Administrative overhead from sponsored grants and contracts provides reimbursement for institutional expenses in support of extramural activities that cannot be directly charged to a specific grant or contract.   Facilities component includes plant operation and maintenance, depreciation, library expenses.   Administrative component includes general administration and general expenses, sponsored projects administration.   Facilities and Administrative overhead from sponsored grants and contracts provides reimbursement for institutional expenses in support of extramural activities that cannot be directly charged to a specific grant or contract.   Facilities component includes plant operation and maintenance, depreciation, library expenses.   Administrative component includes general administration and general expenses, sponsored projects administration.

Facilities and Administrative (F&A) Indirect Cost Recovery   UTSA’s F&A rate is negotiated with the federal government (DHHS)  On-campus rate: 44.5%  Eff. 9/1/2007 through 8/31/11  Was 41.5%, gain of 3%  Off-campus rate: 26%   Modified Total Direct Costs (MTDC) is the base to which F&A (indirect cost) rates are applied when submitting a grant or contract, per OMB Circular A-21.   UTSA’s F&A rate is negotiated with the federal government (DHHS)  On-campus rate: 44.5%  Eff. 9/1/2007 through 8/31/11  Was 41.5%, gain of 3%  Off-campus rate: 26%   Modified Total Direct Costs (MTDC) is the base to which F&A (indirect cost) rates are applied when submitting a grant or contract, per OMB Circular A-21.

Auxiliary Enterprises   Self-supporting activity providing goods or services to students, faculty, staff, departments, or incidentally to the general public.   Charges are directly related to, although not necessarily equal to, the cost of the goods or services.   Important aspect of campus life   UTSA’s Auxiliaries include   Bookstore – outsourced management contract (Follett)   Food Services - outsourced management contract (Aramark)   Parking   Housing   University Center   Recreation Center (we moved this year from designated)   Athletics   UTSA Card   Self-supporting activity providing goods or services to students, faculty, staff, departments, or incidentally to the general public.   Charges are directly related to, although not necessarily equal to, the cost of the goods or services.   Important aspect of campus life   UTSA’s Auxiliaries include   Bookstore – outsourced management contract (Follett)   Food Services - outsourced management contract (Aramark)   Parking   Housing   University Center   Recreation Center (we moved this year from designated)   Athletics   UTSA Card

Capital Improvement Funding 3 Debt Financing programs available to UTSA: 1. 1.Tuition Revenue Bonds (TRB) approved by the Legislature to debt finance new construction. “Free money” to UTSA. General revenue appropriation covers debt service. Recent UTSA Buildings financed with TRB Engineering $74,250,000 BSE 22,950,000 Main 15,000,000 Downtown, Phase III 35,000,000 3 Debt Financing programs available to UTSA: 1. 1.Tuition Revenue Bonds (TRB) approved by the Legislature to debt finance new construction. “Free money” to UTSA. General revenue appropriation covers debt service. Recent UTSA Buildings financed with TRB Engineering $74,250,000 BSE 22,950,000 Main 15,000,000 Downtown, Phase III 35,000,000

Capital Improvement Funding 2.The Permanent University Fund (PUF) net asset value = $11.74B --PUF debt from tax-exempt bonds secured by distributions to the Available University Fund. “Free money” to UTSA.   STARS –Faculty Start-up Funds UTSA has received $6.6M over the past 3 years   LERR – Library, Equipment, Repair and Rehabilitation UTSA received $2 million for FY07; $2.237M in FY08 Recent PUF Allocations to UTSA $20.25 M for Science Lab Renovations $ 8.25 M for Engineering Building $14.50 M for 1604 & Hausman Property (future site of Athletic facilities) Board of Regents just increased the PUF annual distribution from 4.75 to 5.0%; additional proceeds of ~$30M to be used for recruitment and retention of faculty. 2.The Permanent University Fund (PUF) net asset value = $11.74B --PUF debt from tax-exempt bonds secured by distributions to the Available University Fund. “Free money” to UTSA.   STARS –Faculty Start-up Funds UTSA has received $6.6M over the past 3 years   LERR – Library, Equipment, Repair and Rehabilitation UTSA received $2 million for FY07; $2.237M in FY08 Recent PUF Allocations to UTSA $20.25 M for Science Lab Renovations $ 8.25 M for Engineering Building $14.50 M for 1604 & Hausman Property (future site of Athletic facilities) Board of Regents just increased the PUF annual distribution from 4.75 to 5.0%; additional proceeds of ~$30M to be used for recruitment and retention of faculty.

Capital Improvement Funding 3. 3.The Revenue Financing System (RFS) The UT System program provides low interest financing for capital needs: -- available to campuses that meet bond rating agencies’ standards for The UT System to preserve its AAA rating.   Construction projects or capital equipment funded by Designated funds:   Policy requires a campus to meet 2 of 3 financial ratios: Debt Service Coverage, Debt Burden and Expendable Resources to Debt   Projects funded by auxiliaries or fee revenue must demonstrate sustainable ability to service the debt % of debt service paid from UTSA revenues The Revenue Financing System (RFS) The UT System program provides low interest financing for capital needs: -- available to campuses that meet bond rating agencies’ standards for The UT System to preserve its AAA rating.   Construction projects or capital equipment funded by Designated funds:   Policy requires a campus to meet 2 of 3 financial ratios: Debt Service Coverage, Debt Burden and Expendable Resources to Debt   Projects funded by auxiliaries or fee revenue must demonstrate sustainable ability to service the debt % of debt service paid from UTSA revenues.