Financial report for the first quarter of 2007
Dear Colleagues,
I'm pleased to present our budget report for the first quarter of the 2007 fiscal year, which covers July 1, 2006 to Sept. 30, 2006. Here are some of the highlights:
As was previously reported, the University experienced higher-than-budgeted enrollments this summer and fall of 4.4 percent, which equates to additional revenue of about $5 million. While this gain has lessened the pressure on our budget and will help to offset the increased benefit and energy costs, we must be mindful that the increased enrollment will generate related incremental expenditures.
In the area of cost reduction, we have also been working to implement the cost-saving initiatives in the budget plan. This includes savings through vacant positions ($8.2 million) and utility savings ($0.9 million). Progress to date is good, and we will continue to look into other areas, such as our use of operating funds, overtime, consultants and service contracts.
Areas of concern are utility pricing, which is always volatile, and medical benefits, the contracts for which expire in December 2007. Bid specifications need to be prepared soon, with the goal of submitting a recommendation to the Board in June.
The State Teachers Retirement System unanimously approved a recommendation to increase contributions assessed to employees and their employers by 2.5 percent over the next five years. The recommendation requires legislative approval, with the earliest implementation date being July 1, 2007. Should this increase be enacted, the change has the potential of costing the University in excess of $1.5 million per year once fully implemented and would have to be added to next year's budget. The reasons cited for the proposed rate increase are:
- rising health benefit costs; and
- the poor investment performance in fiscal years 2001-02.
The State Employees Retirement System has systematically raised its minimum salary base for contributions. The minimum salary is now $36,000 per annum. The increase in the minimum creates a liability to the University of approximately $1.0 million. This item was anticipated, and it appears in this year's budget.
Overall, the current outlook at the completion of the first quarter is positive, although much work remains to be done on the budget implementation.
As always, I welcome your questions and input. Please use the e-mail address or the box below for your messages.
Thank you.
To our continued success,
F. John Case
Vice President for Finance and Administration/CFO
