FY05 Budget Update

Chart II and Chart III show All Funds revenue by source for FY2003 and FY2005. These pie charts show that by FY05 the increase in central student fees, primarily the curriculum fee, partially offset the prior years’ loss in state appropriation. The current revenue base does not provide sufficient funding for the campus to fully address its deferred maintenance backlog or substantially increase the size of the faculty. Since state appropriations will likely remain stable and student fee revenue will rise only to offset inflation, further campus growth will depend on increasing earned income in four primary areas.

1. Student Enrollment Growth: The campus now retains out-of-state tuition revenue. Revenue growth, however, will only come from increasing the out-of-state student body. Over the next five years, we anticipate adding 1,500 students to the campus with most of the growth coming from the out-of-state population.
2. Capital Campaign: The UMass Amherst capital campaign will raise funds for capital construction and renovation, professorship and scholarship endowments, program endowments, and current program activities. This will create, over time, a constant and increasing revenue stream for the campus.
3. Grants and Contracts: We project that research revenue from external organizations will grow by approximately 5% annually. This growth will provide not only increased support for the campus’ core mission of research but also an increase in overhead income that partially reimburses the campus for the indirect cost of conducting that research.
4. Continuing Education: The campus has had considerable success over the last several years in broadening its continuing education offerings. Continued growth in these programs is an essential element in the campus revenue plan, with an increasing share of CE revenue supporting campus-wide needs.

Table II shows the General Funds budget allocated to major budgetary units and for central campus costs since FY2002. The footnotes explain variances caused by organizational changes among units. Although the campus received only half the contractual salary increases last fiscal year, the FY04 base budget includes the full amount. Budget growth between FY04 and FY05 reflects increases in the following areas:

• Mandatory Costs: Utility prices will escalate, the UMass System Assessment has increased sharply, and the new Engineering Building requires incremental maintenance funding.
• Costs Related to the Fee Increases: The cost to the campus of waiving the curriculum fee for various categories of students has risen in proportion to the fee increases. Scholarship budgets in Financial Aid and Athletics also increased because of the fee increases.
• Campus Priorities: Additional funding implements the capital plan and includes new construction as well as critical renovation and repair projects. As shown in the table, academic buildings receive much of this spending. Allocations also increased to Academic Affairs for new faculty and the library acquisitions budget.

Table III shows actual All Funds spending by major budgetary units and for central campus costs in FY04. This table provides the most comprehensive view of each unit’s fiscal resources.

The campus anticipates spending $576 million over the next four years on capital projects. Table IV identifies the funding sources for this plan and shows how the money will be used. Table V highlights the impact of implementing the capital plan on the general funds budget.

These tables and charts provide a full picture of the campus’ finances. The data highlight our primary challenge of increasing earned income. This additional revenue will allow us to maintain and enhance our position among top American research universities by attracting and supporting nationally competitive faculty and students.

Sincerely yours,

John V. Lombardi
Chancellor

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