1. 1 Financial Topics Cost of Education Committee 9/04/2009

2. 2 Outline Formula Funding Financial Ratios Debt Capacity Academic Cost Limits

3. 3 Formula Funding Conference Committee Report on SB1 (May 2009) Available at http://www.lbb.state.tx.us/http://www.lbb.state.tx.us/ Article III, Page 74 – UTPA Appropriations Article III, Page 233 – Funding Matrix Instruction & Operations Support Calculated according to matrix weights and base period semester credit hours. Liberal arts = 1.00 Teaching Experience Supplement Additional 10% weight added to undergraduate hours taught by tenure and tenure-track faculty. Infrastructure Support Based on predicted Educational & General (E&G) space.

4. 4 Instruction & Operations Support – Example The funding for each class is calculated as follows: SCH (semester credit hour) count * matrix weight (per discipline and level)* funding rate. For example, if 20 upper-division undergraduates each take a 3-hour course funded under the Business Administration discipline, the formula funding calculation would yield: 60 SCH * 1.73 * $62.19 = $6,455.32. (If taught by a tenured or tenure-track professor, an extra 10% would be generated from the teaching experience supplement.) Note: The lower of the student level or class level is used.

5. 5 Key Financial Ratios Source: FY 2008 Analysis of Financial Condition (AFC) submitted with Annual Financial Report.

6. 6 Debt Capacity Must equal or exceed two of three benchmarks: Debt Service Coverage ( ≥ 1.8x) - UTPA 1.4x Debt Service to Operations ( ≤ 5%) – UTPA 6.4% Expendable Resources to Debt ( ≥ 80%) – UTPA 92.7% As of 8/31/08, UTPA is unsatisfactory on 2 of the 3 ratios used to substantiate ability to issue additional debt. (Source: FY 2008 AFC)

7. 7 Types of Debt Tuition Revenue Bonds (TRB) Revenue Financing System (RFS)  General Institutional Debt  Self-Supporting Activities Debt  Commercial Paper HEAF Debt

8. 8 FY 2010 Budgeted Debt Service PropertyAmountRepayment Source Academic Service Bldg$235,200HEAF Existing Science Renovation616,875HEAF Equipment Financing357,551HEAF Land199,000HEAF Student Health Clinic89,600Medical Service Fee Student Housing1,356,437Housing Revenue Student Union478,725Student Union Fee Wellness-Rec Sports Center1,514,763Recreation Fee Tuition Revenue Bonds7,583,956State Appropriation Other (commercial paper)4,228Interest Income Total ► ( Principal-$8,356,703; Interest - 4,079,632) $12,436,335

9. 9 Academic Cost for FY11 and FY12 House passed non-binding resolution (HCR 288, 81 st Legis.) urging public universities to limit annual increases in academic costs to the greater of 3.95% or $280. (Limit applies to the total average academic cost for 15 resident undergraduate hours for Fall and Spring terms combined. Limit for one long term would be the greater of 3.95% or $140.) Pending UT System guidelines for Tuition & Fee Proposals are expected to address concerns raised by HCR 288.

10. Academic Cost if House Resolution Limit Used 10 Fall 2009Fall 2010Fall 2011 UTPA – Average Academic Cost of 15 Resident Undergrad Hrs $2,761 $ 2,901 $ 3,041 $ Increase-$140 % Increase-5.07%4.83% If this proposed limit were to be applied to Designated Tuition, the rates would increase by $10 per semester credit hour. For undergraduates the rate would increase from $97/hr to $107/hr (Fall 2010) and $117/hr (Fall 2011). Because DT is capped at 14 hours, the maximum designated tuition increase would be $140 per term. Assuming enrollment growth remains constant, this would result in annual revenue increases of approximately $4.3M of which approximately $800k would be set aside for need-based student financial assistance. Goal is the smallest possible increase required to meet institutional needs.

11. 11 Contact Information UTPA Budget Office website: www.utpa.edu/budget/ Email: Gonzalez@utpa.edu Budgetoffice@utpa.edu