Faculty Leadership ConferenceRevenue Forecast Report and Budget

Update

Bernard M. HannonSenior Assoc Commissioner & CFO April 23, 2010

INDIANA’S HIGHER EDUCATION SYSTEM AND STATE FUNDING

Total FY 10 estimated expenditures by all Indiana public postsecondary institutions

$5,090,667,914 Total FY 10 General Fund estimated expenditures by all

Indiana public postsecondary institutions

$3,487,676,807

Indiana’s Public Higher Education System

4

• 5 four-year Public Postsecondary Institutions

• 2 two-year Public Institutions• 31 Public Campuses and 12 Instructional

Sites• 407,000 Students in 2008-09• 1,500 buildings worth $12B• $2.3B in salary and compensation

State Operating Appropriations as % of Institutional Expenditures

Indiana Univ.

Purdue Univ.

statewide avg.

Ball St. Univ.

Univ. Southern Indiana

Indiana St. Univ.

ITCCI Vincennes Univ.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

% of total exp from state operating appropriations

% of Operating exp from state operating appropriations

State Income—By Source

47%

33%

6%

5%

10%

Sales TaxIndividual Income TaxCorporate Income TaxGamingOther

Approximately $13 billion per year

State Expense—By Source

48%

13%

13%

5%

5%

3%

14%

K-12 Higher educationMedicaidTeacher PensionsCorrectionsChild WelfareOther

Approximately $13 billion per year

Percentage of state General Fund appropriated to IHEs

5.0%

10.0%

15.0%

20.0%

25.0%

1975-761976-771977-781978-791979-801980-811981-821982-831983-841984-851985-861986-871987-881988-891989-901990-911991-921992-931993-941994-951995-961996-971997-981998-991999-002000-012001-022002-032003-042004-052005-062006-072008-092009-10

State Appropriations to Public IHEs

1975-76

1976-77

1977-78

1978-79

1979-80

1980-81

1981-82

1982-83

1983-84

1984-85

1985-86

1986-87

1987-88

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11 $-

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

state appropriations 1976 - 2011

Compound Annual Growth Rate: 4.7%

State General Fund Appropriations to Higher Education

FY 2000

FY 2001

FY 2002

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

$1,600,000,000

$1,800,000,000

$2,000,000,000

Total HE Appropriations Campus Operating Appropriations

Total appropriations include: SSACI, capital and line item appropriations

HIGHER EDUCATION STATE FUNDING NATIONAL CONTEXT

FY 2009 State Appropriations per FTE

Wyom

ingAlaskaHaw

aiiIdahoN

orth CarolinaO

klahoma

Nevada

Georgia

New

Mexico

ConnecticutN

ew York

TexasAlabam

aM

arylandLouisianaKentuckyArkansasTennesseeIllinoisN

ew Jersey

Mississippi

ArizonaN

ebraskaU

SCaliforniaM

aineFloridaW

isconsinW

ashingtonW

est VirginiaU

tahM

innesotaM

issouriIow

aVirginiaSouth CarolinaDelaw

areKansasM

assachusetts

PennsylvaniaN

orth DakotaM

ichiganO

regonO

hioRhode IslandIndianaM

ontanaColoradoSouth DakotaN

ew Ham

pshireVerm

ont

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Indiana$4,752

U.S. Avg.$6,934

FY 2009 Net Tuition Revenue per FTE

Vermont

Delaware

Rhode IslandPennsylvaniaM

ichiganN

ew Ham

pshireM

aineN

ew Jersey

Maryland

West Virginia

North Dakota

South CarolinaVirginiaConnecticutIow

aAlabam

aIndianaSouth DakotaO

hioKentuckyColoradoM

innesotaArizonaO

klahoma

ArkansasM

ontanaM

assachusetts

Oregon

AlaskaM

issouriU

SKansasM

ississippiTennesseeTexasW

isconsinN

ebraskaN

ew York

IllinoisU

tahHaw

aiiIdahoLouisianaN

evadaN

orth CarolinaFloridaW

ashingtonG

eorgiaW

yoming

New

Mexico

California

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

U.S. Avg.$4,095

Indiana$5,379

FY 2009 Total Educ. Revenue per FTE

Wyom

ingAlaskaDelaw

areN

ew Jersey

Maryland

Vermont

Maine

ConnecticutPennsylvaniaRhode IslandO

klahoma

Alabama

KentuckyM

ichiganHaw

aiiTexasArkansasW

est VirginiaIdahoN

orth DakotaN

ew York

ArizonaTennesseeIow

aM

ississippiVirginiaIllinoisN

evadaM

innesotaN

orth CarolinaU

SN

ebraskaG

eorgiaSouth CarolinaN

ew Ham

pshireLouisianaW

isconsinM

issouriN

ew M

exicoO

hioM

assachusetts

IndianaKansasO

regonU

tahColoradoM

ontanaFloridaW

ashingtonSouth DakotaCalifornia

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

U.S. Avg.$10,991

Indiana$10,102

2009 Tax Revenue per Capita

AlaskaN

ew York

Wyom

ingConnecticutN

ew Jersey

Hawaii

Massachusett

sM

arylandCaliforniaVerm

ontM

innesotaRhode IslandIllinoisM

aineW

ashingtonDelaw

areU

.S.PennsylvaniaVirginiaW

isconsinN

evadaKansasN

orth DakotaN

ebraskaLouisianaO

hioFloridaColoradoN

ew M

exicoM

ichiganArizonaIow

aN

ew Ham

pshireN

orth CarolinaG

eorgiaTexasM

ontanaO

regonW

est VirginiaU

tahIndianaO

klahoma

Missouri

ArkansasKentuckyIdahoSouth CarolinaSouth DakotaM

ississippiTennesseeAlabam

a

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

U.S. Avg.$4,242 Indiana

$3,332

2009 Total Taxable Resources per Capita*

Delaware

ConnecticutW

yoming

AlaskaN

ew Jersey

New

YorkM

assachusetts

Maryland

Nevada

VirginiaCaliforniaW

ashingtonN

ew Ham

pshireColoradoIllinoisM

innesotaRhode IslandHaw

aiiU

.S.South DakotaTexasFloridaN

ebraskaLouisianaN

orth DakotaPennsylvaniaKansasO

regonIow

aVerm

ontW

isconsinN

orth CarolinaG

eorgiaO

hioIndianaM

issouriArizonaTennesseeO

klahoma

Utah

New

Mexico

Montana

Maine

Michigan

IdahoAlabam

aKentuckySouth CarolinaArkansasW

est VirginiaM

ississippi

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

U.S. Avg.$52,754 Indiana

$45,213

*Total Taxable Resources per capita from U.S. Treasury Department: www.treas.gov/offices/economic-policy/resources/estimates.html

Indiana per Capita Income as Percentage of U.S. Average

19691970

19711972

19731974

19751976

19771978

19791980

19811982

19831984

19851986

19871988

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

200784.0%

86.0%

88.0%

90.0%

92.0%

94.0%

96.0%

98.0%

100.0%

Higher Education Appropriations per $1,000 of Personal Income

New

Mexico

Alabama

Mississippi

North Carolina

Wyom

ingHaw

aiiLouisianaAlaskaN

orth DakotaW

est VirginiaArkansasKentuckyN

ebraskaU

tahG

eorgiaSouth CarolinaO

klahoma

IdahoIow

aKansasCaliforniaTennesseeM

innesotaTexasDelaw

areIndianaU

nited StatesSouth DakotaW

ashingtonArizonaFloridaW

isconsinM

arylandM

aineM

ichiganM

ontanaN

evadaO

hioIllinoisVirginiaO

regonConnecticutN

ew York

Missouri

New

JerseyPennsylvaniaRhode IslandM

assachusetts

Vermont

ColoradoN

ew Ham

pshire

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

U.S. Avg.$6.80

Indiana$6.95

State Revenue Performance

State General Fund Revenue Growth

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

6.9%5.4%

2.9%

-0.8%

-3.6%

13.1%

7.4% 7.5%5.7%

4.5%2.4%

-7.4%-6.4%

6.3%

Note: FY 10 and FY 11 per December 2009 Revenue Forecast

Revenue Growth and Higher Education Appropriations 2000-2011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

GF growth HE approps

State Expenditure Growth

F1996 F1997 F1998 F1999 F2000 F2001 F2002 F2003 F2004 F2005 F2006 F2007 F2008 F2009-----

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

6.5%

9.7%

4.9%

8.0%

7.1%

5.1%

0.8%

4.1%

7.6%

2.7%1.9%

2.8%

3.9%

0.5%

2.3% CAGR 2006-20095.6% CAGR 1996-2005

Real Per Capita Expenditures*

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009$2,100

$2,150

$2,200

$2,250

$2,300

$2,350

$2,400

CAGR = -1.3%

* Includes Major Moves Investments

Revenue Collections FY 2006 – FY 2011

FY06 FY07 FY08 FY09 FY10 FY11$11,000

$11,500

$12,000

$12,500

$13,000

$13,500

$14,000

$14,500

$13,135

$13,701

$14,005

$12,906

$12,076*

$12,836*

*projected

25

July

August

September

October

Novem

ber

Decem

ber

January

February

March

April

May

June

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Percent Change (FY2010 vs. FY2009)

Targets from May Forecast

Targets from Decem-ber Forecast

Year-to-date = -10.5%Last year = -7.4%

Comparison of Forecasted to Actual Revenue

The Good News is: We Entered the Recession in a Strong

Financial Position

Budget Surplus/Deficit

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

(1,500.0)

(1,000.0)

(500.0)

-----

500.0

1,000.0

State Reserves (Cash – Liabilities)

2001 2002 2003 2004 2005 2006 2007 2008 2009

-400

-200

0

200

400

600

800

1000

1200

1400

1600

-179.199999999991

1329

The Bad News is: The Challenges are Unprecedented

Much Worse Than Prior Recessions

FY 1991 FY 1992 FY 2001 FY 2002 FY 2009 FY 2010

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

1%

4%

-1%

-4% -7% -11%

Sales Tax: CY 2009 vs. CY 2008TOTAL General Utilities Gas Vehicles Hospitality Home Impr Apparel Appliance/

Electronics

-30%

-25%

-20%

-15%

-10%

-5%

0%

-9%

-4% -4%

-25%

-9% -9% -10%

-4%

-11%

Budgeted Revenue: FY 2010-11

23,000

24,000

25,000

26,000

27,000

28,000

29,000

28,143

27,452

26,748

24,913

Dec-08 Apr-09 May-09 Dec-09

Current Spend

Forecast reduced over $3 billion in one year. Missed forecast 17 straight months

6/30/09 3/1/10 6/30/10 6/30/11

($1,500)

($1,000)

($500)

$0

$500

$1,000

$1,500

$1,329

$379 $211

($909)

Total State Reservesin millions

Without Budget Management, State Reserves would be Depleted by End of Biennium

Summary– Progress, But More Action Needed

-$1.8 billion (=December 2009 revenue projection vs. May 2009 budget)

+$770 million (= agency and education reductions)

+$1 billion (= all remaining reserves and rainy day funds)

-$112 million (=revenue loss since December 2009 forecast)

= -$142 million deficit if no further actions are taken

Goal– continue to take necessary actions to spend within our means, align operating expenses with operating revenues and avoid tax increases

State Fiscal Outlook• Even if current forecast is met, state

reserves balances will be fully expended• Next legislative session – portends most

difficult biennial budget in memory:– Loss of federal stimulus funds ($867M SFSF)– Revenue and expenditure imbalance– No state reserves to draw down

Distributing Scarce Resources

37

Commission Budget Responsibilities and Priorities

• Debt Service• College Completion Incentives:

– Number of Degrees– On-Time Degrees– Low Income Degrees

• Enrollment/Student Course Success Incentive• Research Funding Incentive• R&R• Economic Development • Two-Year Transfer Incentive• Student access and success (SSACI)

Evolution of CHE Funding Recommendations

2001 2003 2005 2007 2009

Enrollment Change (credit hours enrolled)

Enrollment Change (credit hours enrolled)

Enrollment Change (credit hours enrolled)

Enrollment Change (credit hours enrolled)

Enrollment Change (successfully completed credit hours)

Inflation Adjustments Inflation Adjustments Inflation Adjustments Inflation Adjustments

Equity Adjustment Equity Adjustment Equity Adjustment Equity Adjustment

Plant Expansion/leases Plant Expansion/leases

Program Adjustment

Research Support Incentive

Research Support Incentive

Research Support Incentive

Research Support Incentive

Change in number of degrees

Change in number of degrees

Change in On-Time graduation Rate

Change in On-Time graduation Rate

Two Year Transfer Incentive

Two Year Transfer Incentive

Low Income Degree Completion Incentive

Workforce Development Incentive (funding non-credit coursework)