1. Welcome to the Two-Year Budgeting Workshop
John Sejdinaj
Sam Adams

2. Two-Year Budgeting Workshop Agenda
Welcome and Introductions
Two-Year Timeline
Retirement RFP
Compensation Overview and Other Changes
Credit Hour Projection Model 2.0
University Fiscal Analysis
Budget Construction Tools and Phase 1 Edit Reporting
Incidental Income
Fee Redesign
Wrap-Up and Close

3. Moody’s - Public University Median FY2017 Results
(193 Rated Public Universities)
1. Revenue growth declined for second straight year and trailed expense growth
-Median revenue growth of 2.9% in 2017, down from 3.9% in 2015
-Median expense growth surpassed median revenue growth by almost 2%
Median “Aaa” Revenue Growth of 4.0% vs. Expense Growth of 6.3%
-Containing expense growth will prove difficult with wage and capital spending pressure
2. Revenue growth varies with notable widespread weakness
-Revenue growth varies across higher education sector from -7% to +14%
-Majority of universities (65%) had revenue growth below higher education inflation
-Large segment (25%) witnessed revenue declines
Source: Moody’s Investors Service “Sector In-Depth, Medians - Public university median revenue growth falls for second year,” June 28, 2018

4. Moody’s FY2017 - Revenue Growth Declined for a Second Straight Year, Falling Below Expense Growth

5. Moody’s FY2017 – Revenue Growth Varies Across the Sector
(Bars represent revenue growth at individual universities)
Indiana University Revenue Growth in 2017 = 3.3%

6. Moody’s Higher education
2018 outlook changed to negative as revenue growth moderates
NEGATIVE
STABLE
POSITIVE
» Annual change in aggregate operating revenue will soften to about 3.5%; a growing portion of the sector will have revenue growth under 3%
» Constrained growth in multiple key revenue streams, including tuition, research and state appropriations
» Expense growth of almost 4%
» Uncertainty at the federal level over potential policy changes
What could change outlook to stable
What could change outlook
to positive
» An annual change in aggregate operating revenue in our rated sample of at least 3%, representing real growth in a low inflation environment, and outpacing expense growth
» Ongoing solid student demand
» Financial reserve strength
» Revenue growth well in excess of inflation expectations and expense growth
Note: A negative sector outlook indicates our view that fundamental credit conditions will worsen. A positive outlook indicates that we expect fundamental credit conditions to improve. A stable sector outlook indicates that conditions are not expected to change significantly. Since sector outlooks represent our forward looking view on conditions that factor into ratings, a negative (positive) outlook indicates that negative (positive) rating actions are more likely on average.

7. Net tuition revenue will decline for a rising number of public universities
% change in net tuition revenue by type of public university
% with declining NTR
Moderate Sized Public University
Small Public University Comprehensive Public University
25% 6% 5%
20% 4%
15% 3%
10% 2% 5% 1% 0% 0%
Est.
2018 For.
“Est.” indicates our estimated data based on preliminary information. “For.” indicates our forecasted data.
Source: Moody's Investors Service

8. Slowdown & Decline of High School Graduates
Public & Nonpublic Graduates (Millions)
812K
Midwest*
775K
717K
* 5% of graduates included for College Board Midwest are in another region in most WICHE materials (ND & SD = West, WV = South)

9. Midwest Declines Driven by Top 3 States
MI, 124K
OH, 137K
Declines Driven by Top 3 States
Other States Steady or Brief New High Before ‘Birth Dearth’
IL 152K
NE, 25K
MN, 63K
WI, 62K IN, 68K
OH, 110K
IL, 125K MI, 88K
Total number of graduates plotted relative to high point during projected period ( )
Is there a new high after 2012?  No  Yes

11. IU Revenues: 2.9% CAGR Over 10 Years
Auxiliary Enterprises and State Appropriations have experienced flat revenues over the past 10 years with a CAGR of 0.5% for Auxiliary Enterprises and 0.6% for State Appropriations
These categories make up the revenue growth:
Grants and Contracts with 1.7% 10- year CAGR and relatively flat over the past 5 years
Other Revenues and Gifts with 10-year CAGR of 4.5%
Tuition & Fees (net) with 10-year CAGR of 5.6% and a CAGR of 3.1% over the past 5 years
Investment income revenues have varied over the past 10 years subject to market forces
$ in Thousands 5

12. IU Expenses: 3.3% CAGR Over 10 Years
Depreciation and Amortization Expense has had a CAGR of 3.4% over the past 10 years while the CAGR of Supplies and General Expenses was 2.8% over the same period
Compensation and Benefits is the largest single expense category making up 66% of total expenses in The increases in this expense category have been relatively modest with CAGR of 3.3% over the past 10 years and 2.9% over the past 5 years
Student Financial Aid Expense and Energy and Utilities expense categories experienced 10-year CAGR’s of 3.9% and 3.8%, respectively. The following slide contains additional detail for the combined Student Financial Aid Expense and Scholarship Discount & Allowance
Student Financial Aid
Energy and Utilities
$ in Thousands
Compensation and Benefits
Depreciation and Amortization
Supplies and General Expense
Travel and Interest Expense

14. Observations “Aaa/AAA” Rating – Well run organization
RCM Model – Promotes innovation and change
President – Visionary leader
Future – Balance aspirations with financial realities
New paradigm – low tuition/rate increases, low revenue overall revenue growth
Enrollment Cliff – Need for long term (5-10) year planning and new strategies
Two Year Budgeting – Goal is shifting focus from constructing and managing budgets to long-term planning and innovation.  Numerous budget planning process improvements will free time and streamline the budget calendar.

15. 2-Year Budgeting Proposal
FY20 - FY21
Credit Hour and Other Income Projections
Non-Instructional Fees
Compensation Policy
Budget Guidelines and Expense Allocations
Current State
Tuition
State Appropriations
Shift the focus from budget construction to budget planning
Align financial planning with tuition and state revenue cycles

16. 2-Year Budgeting – Block vs. Rolling
FY20
FY21
FY22
FY23
Spring 2021
Spring 2019

17. Biennial Budget Presentations
Long Session (Assumptions)
Short Session (Adjustments)

18. What’s in, what’s out?   * Task Moving to 2-year Unchanged
Discontinued
Fall Analysis 
Non-Instructional Fees
Credit Hour Projections
UA Budget Conferences
Incidental Income
UA Tax Calculation
 *
Salary Policy
Benefit Rates
Spring/University Analysis
Budget Construction Load
Presentation to BOT
Provision for UA benefit increases will be estimated
Spring Analysis will continue to be completed annually, but will require projections beyond current fiscal year

19. Computing Systems & Data Analysis
Samuel Adams
Associate Vice President
Budget & Planning
Laura Hudson
Administrative Coordinator
Gary Palmer
Database Manager & Team Lead
Alicia Robertson
Associate Director
University Budget Operations
Brian Moellers
Associate Director
Financial Analysis & Planning
T. Michael Ford
Project Manager
John Burgoon
Budget Systems Manager
Greg Alter
Sr. Budget Analyst
Melissa Johnson
Payroll Manager
Dan Nichols
Sr. Financial Analyst
Nathan Schroder
Institutional Reporting Manager
Theo Wu
Business Analyst
Carol Ball
Business Analyst
Computing Systems & Data Analysis
University Budget Operations
Mary Lou Kessler
Business Analyst
Vicky Myers
Business Analyst
Financial Analysis & Planning
Project Management

20. Computing Systems & Data Analysis University Budget Operations
Budget Application Development & Support
UBO Desktop Support
UBO Database Management
Data Analysis
Institutional Reporting
University Budget Operations
Budget Construction, Calendar, and Guidelines
Incidental Income
Regional Campus Liaison
Endowment and Match Program Support
Batch Processing & Allocations
Fiscal Year-End
Expense Allocations & Batch Processing
Budget & Administrative Support
Executive VP for Academic Affairs
President’ Office
Board of Trustees
Bicentennial Campaign
Conferences & Events
Government Relations
Financial Analysis & Planning
Financial Projections & Modelling
State Appropriations
Credit Hour Projections
Ad hoc financial analysis
University Administration Tax
Budget Conferences
Project Management
Strategic Planning
UBO Website Content Manager
Training & Events Planning
UBO Special Projects

21. Questions?