1. Budget Development Discussion

2. overview Public Funds Fixed Costs Employee Compensation
Revenue Enhancements
Cost Reductions
Student Impact

3. KCTCS Public Funds Revenue background & Comparison

5. Public Two-Year Colleges College Funding Indicators
43%
43%
24%
49%
61%
25%
63%
59%
This slide shows that Kentucky’s public two-year colleges are getting 41% in appropriations (or having to make up 59% in tuition) per FTE relative to surrounding SREB states receiving much larger percentages in appropriations, i.e., Mississippi 63%, Georgia 51% and Arkansas 57%.
*SREB State Data Exchange - March 2016

6. Public Funds Revenue 2008-2016 Institution
Dollar Change
Percent Change
University of Kentucky
$573,919,000
$737,504,100
$163,585,100
28.5%
University of Louisville
355,198,200
439,769,978
84,571,778
23.8%
Eastern Kentucky University
178,916,900
224,991,197
46,074,297
25.8%
Kentucky State University
43,945,600
37,934,297
(6,011,303)
-13.7%
Morehead State University
95,518,800
115,960,900
20,442,100
21.4%
Murray State University
130,344,200
164,576,800
34,232,600
26.3%
Northern Kentucky University
152,189,500
189,442,300
37,252,800
24.5%
Western Kentucky University
209,052,000
274,397,500
65,345,500
31.3%
KCTCS
397,175,000
418,170,600
20,995,600
5.3%
$2,136,259,200
$2,602,747,672
$466,488,472
21.8%

8. Tuition cost comparison
$2,370
$3,520
$4,498
86.9%
144.1%
Research
Comprehensive
KCTCS
48.5%
89.8%
$4,620
$8,636
$11,276
Annual Tuition
Kentucky’s comprehensive institutions’ tuition is 86.9% and the research institutions are 144.1% higher than KCTCS with the gap widening annually. Average student financial aid residual for a KCTCS student is approximately $2,000 per semester.
Based on full-time comparison of resident undergraduates students taking
15 credit hours per semester for two semesters, or 30 credit hours per year.

9. KCTCS Fixed cost Increases background & examples

10. Kentucky Employee Retirement System (KERS) Employer Rate
Fiscal Years
To illustrate the growth in cost of KERS, this chart shows the astronomical rise in percent of KERS since We have approximately 1,143 participate in KERS and KTRS (557 KERS, 586 KTRS). The total projected cost for is $16 million ($10.9 million for KERS, $5.1 million for KTRS)

11. Changes to KRS contributions 2012-2017
Fiscal
Fiscal
Contributions
$ Change
% Change
KCTCS
4,870,055
13,242,140
8,372,085
172%
Sources: Kentucky Retirement System, Fiscal Year ; Participating Postsecondary Institutions, Chief Budget Officer Estimates, Fiscal Year

12. Impact of state funding Cuts & KERS Increases 2012-2017
(C + D)
(F ÷ A) A B C D F G
Fiscal Net General Fund
Fiscal Net General Fund(1)
NGF Change
KERS Change
Combined Budget Impact
Percent
Appropriations
FY12 to FY17
Impact
200,744,200
181,605,000
-19,139,200
-8,372,085
-27,511,585
-13.7%
(1) Includes additional appropriations of $1,602,500 for the partially funded KERS increases in fiscal
KERS = Kentucky Employees Retirement System
Sources: Kentucky Retirement System, Fiscal Years through ; Participating Postsecondary Institutions, Chief Budget Officer Estimates, Fiscal Year

13. FY18 Projected EXPENDITURES (1)
Unavoidable Fixed Costs:
Employee Benefits (KERS, Unemployment, Workers Comp, etc.) $2,900,000
Other Fixed Costs (Property & Liability Insurance, Utilities, etc.) ,000
$3,700,000
Reduction in Expenditures:
Potential Contracts Reduction and Efficiency Effort ($1,000,000)
Balance $2,700,000
We have approximately 1,143 participate in KERS and KTRS (557 KERS, 586 KTRS). The total projected cost for is $16 million ($10.9 million for KERS, $5.1 million for KTRS)

14. KCTCS Salary Increases background & examples

15. Employee compensation and turnover
KCTCS continues to experience the loss of key faculty and staff and the inability to hire new employees due to the lack of competitive compensation
2016 Compensation and Classification Study (Study) by an external consultant (Hanna Resources Group) reviewed KCTCS’s faculty and staff salaries and found that KCTCS was roughly 85% of the market for comparable positions
Implementation of the Study will help KCTCS: 1) move closer to the market,
2) be more competitive in hiring, and 3) promote faculty and staff retention
For the three most recent years (FY 2015, 2016, and 2017), Kentucky’s other public postsecondary education institutions have on average awarded salary and wage increases roughly twice what KCTCS has been able to provide, with KCTCS providing no increase in FY 2017
In 2016 KCTCS had an external consultant perform a compensation and classification study, the study found that KCTCS was paying on average 85% of current market rates. Business and industry hiring our faculty away in high wage, high demand positions of healthcare and manufacturing

16. Postsecondary institutions annual Salary increases
Average Salary Increases (FY2015, FY 2016, and FY2017)
Eastern Kentucky University 0.83%
Kentucky State University 0%
Morehead State University 2.2%
Murray State University 1.2%
Northern Kentucky University 0%
Western Kentucky University 1.0%
University of Kentucky 2.5%
University of Louisville 2.3%
Average for State Universities 1.3%
KCTCS %

17. SREB State Data Exchange 2014-2015 Indicators Report
This shows that in Kentucky our salaries for full-time faculty are $46,106, 3rd lowest if the SREB states in Likelihood, given that KCTCS has not been able to consistently give a meaningful salary increase over the past several years, this ranking, at best has not improved, but worsened. The data presented is for community colleges only based on the average salary per full time faculty.
SREB State Data Exchange Indicators Report

18. FY18 Projected EXPENDITURES (2)
Potential Additional Expenditures:
Compensation and Classification Study (Phase I) $1,100,000
Salary Increases with benefits ($2.7 million per 1% increase)
At 1% increase $2,700,000
At 2% increase $5,400,000
At 3% increase $8,100,000
Range of Additional Expenditures for Employee Compensation:
Comp & Class and 1% salary/benefits $3,800,000
Comp & Class and 2% $6,500,000
Comp & Class and 3% $9,200,000

19. FY18 total Projected EXPENDITURES
Fixed Costs:
Benefits and other Fixed Costs minus Reductions $2,700,000
Range of Additional Expenditures for Employee Compensation:
Comp & Class and 1% salary/benefits $3,800,000
Comp & Class and 2% $6,500,000
Comp & Class and 3% $9,200,000
Total Fixed Costs and Employee Compensation Increases:
Fixed Costs, Comp & Class, 1% $6,500,000
Fixed Costs, Comp & Class, 2% $9,200,000
Fixed Costs, Comp & Class, 3% $11,900,000

20. revenue enhancement to cover expenditures increases

21. Overview and items to consider…
Tuition, fees, and other charges are the largest recurring fund source for KCTCS colleges.
CPE approved tuition rate takes into consideration the affordability to Kentucky residents.
In , CPE data shows the lowest 3 quartiles of full-time, in-state KCTCS students who received grants/aid had enough to cover almost all annual costs for tuition, fees, and books.

23. Student Affordability overview
The Council for Postsecondary Education (CPE) sets tuition parameters in an effort to maintain affordability for Kentucky residents. The previous slide displays affordability as it relates to students claimed on their parents’ family income and adult students living independently.
For example, KCTCS students claimed on their parents’ income with an average household income of $60,000 or less, have relatively no out-of-pocket expenses for unmet tuition, fees, or book costs.
KCTCS adult students with an average household income of $50,000 or less have no out-of-pocket expenses for unmet tuition, fees, or book costs and actually receive a residual student aid check.
Only students claimed on their parents’ income making on average more than $123,712 annually, have any significant out of pocket expenses.

24. Potential tuition Revenue
$1.3 million in additional tuition revenue for each $1 per semester credit hour increase
@$6 (Approved CPE maximum) $7,800,000
Note: Online Course charge amounts calculated assuming a 13% decrease from prior year online enrollment

25. Budget Scenarios overview
Scenario I
Tuition – $6
Salary – 2%
Charges--LOW
Scenario II
Salary– 2%
Charges--HIGH
Scenario III
Salary – 3%
Scenario IV
Revenue
Tuition Increase
$7,800,000
Fees & Other Charges
$7,200,000
$9,600,000
$15,000,000
$17,400,000
Expenses
Fixed Costs
$2,700,000
Comp/Class Study
$1,100,000
Salary Increase
$5,400,000
$8,100,000
$9,200,000
$11,900,000
Net Balance
$5,800,000
$8,200,000
$3,100,000
$5,500,000

26. Reduction in Cost of Books

27. Efforts of barnes and noble to decrease average cost of books to students since fy15
Barnes & Noble promotes book RENTALS and ELECTRONIC books
AVERAGE ANNUAL SAVINGS per student for books since FY14 is $91.96
B&N estimates additional $17.16 SAVINGS per student for FY18 if faculty expand adoption of Open Educational Resources (OER)

28. Summary of impact to students

29. Tuition Increase $6 per credit 18 credit hours per year (average of KCTCS students) = $108 annual increase
Books cost over last 4 years = -$109 annual decrease

30. Questions?