FY2009 Operating Budget and Student Charges

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5-18-2008

FY2009 Operating Budget and Student Charges FY2009 Operating Budget and Student Charges

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1

FY2009 OPERATING BUDGET

FY2009 OPERATING BUDGET

&

&

STUDENT CHARGES

STUDENT CHARGES

May 18, 2008

May 18, 2008

MW109(854).ppt 5/13/08

SECTION I

3

FY09 FINANCIAL PLANNING TIMETABLE

This process determined the lowest tuition increase necessary to ensure quality and fund inflationary costs given FY09 appropriation

2007 2008

Sept Oct Nov Dec Jan Feb Mar Apr May

FY08 Financial Forecasts X X X

Campuses prepare FY09 structural gap analysis X

Supplemental request submitted 15

Multi-year planning

Presidents' Council meets to discuss FY09 budget

process & parameters 13

Board of Trustee discussion of FY09 budget parameters 13-14

Campuses prepare multiple budget scenarios with varying tuition rates and expense assumptions Presidents review budgets with Chancellor

17 14

Supplemental budget as legislated 31

Presidents' Council review of consolidated budget 8

Trustee Finance Committee reviews proposed budget &

student charges 9

FY09 BUDGET DRIVERS

Essentially flat appropriation excluding research funding

Slight decline in enrollment

Increases in compensation, benefits costs, GASB 45, and fuel above

inflation

Minimize student cost increases (In-State, undergraduate comprehensive

cost increase of 8.3%)

Financial aid increases from planned sources of $7.2 million (11.4%)

In order to balance budget, substantial operating cost reductions of $15.7

million (3% of operating costs) are planned across UMS

Every attempt has been made to minimize the impact on quality and program offerings

5

STATE APPROPRIATION

FY08 FY09

Total Increase % Total Increase %

Unrestricted E&G

Biennium Appropriation as originally legislated $ 185.7 $ 8.0 4.6% $ 189.1 $ 3.4 1.8%

UMS Supplemental Request (addt'l $8.0 million) $ 197.1 $ 11.4 6.1%

Supplemental Budget as legislated $ 186.0 $ 0.3 0.2%

FY08 FY09

Total Increase % Total Increase %

MEIF - Research & Development

FY09 OPERATING BUDGET

(Excluding Restricted)

FY07 FY08 FY09 Proposed

Actual Forecast Budget

Revenues

Tuition & Fees $199.0 41% $212.7 43% $232.6 46%

Dining & Residence 53.3 11% 58.2 12% 56.7 11%

Less: Waivers/Scholarships (30.8) (6%) (34.5) (7%) (38.9) (8%) Net Student Charges Revenue $221.5 46% $236.4 48% $250.4 49% State Appropriation (excludes MEIF) 177.8 37% 185.7 37% 186.0 36% Interest Income/Gift Revenue 11.8 2% 2.5 1% 6.4 1% Indirect Cost Recovery 13.6 3% 13.4 3% 12.3 3% Other Sales/Services/Auxiliary 54.4 12% 55.2 11% 54.9 11%

Total Net Revenues $479.1 100% $493.2 100% $510.0 100%

Expenses

Compensation & Benefits $305.1 65% $326.6 64% $344.0 66%

Utilities 26.7 6% 30.9 6% 32.0 6% Interest 6.9 1% 9.0 2% 10.4 2% Other Expenses/Depreciation 116.0 25% 121.1 24% 116.8 22% Matches/Transfers 12.8 3% 20.0 4% 19.0 4% Additional Reductions - - (1.5) -Total Expenses $467.5 100% $507.6 100% $520.7 100% Operating Increase/(Decrease*) $11.6 ($14.4) ($10.7) Cash Flow Operating Increase/(Decrease) $11.6 ($14.4) ($10.7) Plus Depreciation 21.3 23.5 25.8

Less: Capital Expenditures (9.4) (11.4) (6.1)

Debt Service Principal (7.8) (8.2) (9.0)

7

FY09 OPERATING BUDGETS BY UNRESTRICTED FUND

(Excluding Restricted)

E&G Auxiliary Total

Revenues

Tuition & Fees $232.6 55% - - $232.6 46% Dining & Residence - - $56.7 65% 56.7 11% Less: Waivers/Scholarships (37.6) (9%) (1.3) (2%) (38.9) (8%) Net Student Charges Revenue $195.0 46% $55.4 63% $250.4 49% State Appropriation (excludes MEIF) 186.0 44% - - 186.0 36%

Interest Income/Gift Revenue 6.4 2% - - 6.4 1% Indirect Cost Recovery 12.3 3% - - 12.3 3% Other Sales/Services/Auxiliary 22.9 5% 32.0 37% 54.9 11% Total Net Revenues $422.6 100% $87.4 100% $510.0 100%

Expenses Compensation $320.4 74% $23.6 27% $344.0 66% Utilities 22.4 5% 9.6 11% 32.0 6% Interest 4.2 1% 6.2 7% 10.4 2% Other/Depreciation 70.4 16% 46.4 53% 116.8 22% Matches/Transfers 17.7 4% 1.3 2% 19.0 4% Additional Reductions (1.5) - - - (1.5) Total Expenses $433.6 100% $87.1 100% $520.7 100% Operating Increase/(Decrease*) ($11.0) $0.3 ($10.7) Cash Flow Operating Increase(Decrease) ($11.0) $0.3 ($10.7) Plus Depreciation 20.9 4.9 25.8 Less: Capital Expenditures (4.7) (1.4) (6.1) Debt Service Principal (5.5) (3.5) (9.0)

Net Change ($0.3) $0.3 $0.0

FY09 OPERATING BUDGETS BY CAMPUS

(Excluding Restricted)

UM UMA UMF UMFK UMM UMPI USM SWS Total

Revenues

Tuition & Fees $105.0 $19.4 $18.9 $7.7 $5.2 $7.8 $68.6 - $232.6 Dining & Residence 31.1 0.0 7.9 1.4 1.7 1.8 12.8 - 56.7 Less: Waivers/Scholarships (24.2) (2.0) (2.8) (1.0) (1.0) (1.1) (6.8) - (38.9) Net Student Charges Revenue $111.9 $17.4 $24.0 $8.1 $5.9 $8.5 $74.6 - $250.4

State Appropriation 88.7 14.6 10.9 4.5 4.5 6.8 44.0 $12.0 186.0

Other Income 43.7 2.8 1.9 0.8 0.4 1.0 17.5 5.5 73.6

Total Net Revenues $244.3 $34.8 $36.8 $13.4 $10.8 $16.3 $136.1 $17.5 $510.0 Expenses

Compensation & Benefits $149.7 $25.9 $25.9 $8.9 $7.2 $11.9 $101.3 $13.2 $344.0

Utilities 17.5 1.4 2.6 1.0 1.1 1.4 5.8 1.2 32.0 Other/Depreciation 81.7 8.2 9.2 3.8 2.9 3.7 32.1 4.6 146.2 Additional Reductions - - - - - - (1.5) - (1.5) Total Expenses $248.9 $35.5 $37.7 $13.7 $11.2 $17.0 $137.7 $19.0 $520.7 Operating Loss* ($4.6) ($0.7) ($0.9) ($0.3) ($0.4) ($0.7) ($1.6) ($1.5) ($10.7) Cash Flow Operating Loss ($4.6) ($0.7) ($0.9) ($0.3) ($0.4) ($0.7) ($1.6) ($1.5) ($10.7) Plus Depreciation 13.6 1.0 1.4 0.5 0.5 0.8 5.5 2.5 25.8

Less: Capital Expenditures (3.9) (0.2) (0.5) (0.1) (0.1) (0.1) (0.8) (0.4) (6.1) Debt Service Principal (4.8) (0.1) (0.4) (0.1) (0.1) - (2.9) (0.6) (9.0) Net Change $ 0.3 $ - $ (0.4) $ - ($0.1) $ - $ 0.2 $ - $0.0 *Depreciation only partially funded resulting in operating loss

9

Financial

– FY09 budget reflects $5 million in cost reductions and reallocations which includes 44 position reductions.

– FY09 base budget is balanced by significantly reducing positions & other

expenditures coupled with a growth in budgeted credit hours and significant tuition & fee increases.

– FY09 base budget provides for increases in:

• Compensation pursuant to collective bargaining and Board policy • Budgeted depreciation

• Financial aid to assist in offsetting price • Utilities and fuel costs

– FY09 budgeted enrollment is 1.8% over Fall 08, approximately 1% below ’08 actuals – FY09 includes 9.6% to 9.8% tuition increases, a 9% mandatory fees increase, a 7% room

and board increase, and a 4% overall compensation increase.

– Tuition waivers and scholarships increase by 11% to offset tuition and fee increases.

– Units and department expenditures are not funded at appropriate levels to support necessary operational costs to offset the years of erosion.

– Pressure is emerging on the sustainability of credit hour generation given reductions in faculty positions.

Strategic

– Work towards planned implementation of Excellence Model:

• Extensive academic strategic planning • Stabilizing the existing financial condition • Assessment of existing capacity

• Increase retention to include the continuation of the Transitions Program and First-Year Resident Living-Learning Program

• Increase net tuition

• Maximize use of financial aid

• Academic program improvements and department consolidations

• Strong capital planning and increased facility renovation and construction • Targeted student recruitment to include focus on diversity

• Realignment of financial resources to reflect enrollment changes

– Advance the Capital Campaign and Development Office to the next level

– Stronger delivery into mid-coast region through Hutchinson Center expansion and partnerships

– Continued momentum on research and economic development – now exceeding $100 million

– Implementation and further development of the Comprehensive Campus Master Plan to include public/private partnerships

– Strengthen the Honors Program

– Consolidate graduate offices into a graduate center with graduate housing in Stodder Hall

11

Challenges

– The short and long-term financial challenge is to find a solution to chronic revenue shortfalls through a sustainable business model.

• Workforce management •Organizational consolidations • Energy management •Town/gown relations

• Dining, other auxiliary services •Academic management • Effective outsourcing •Facility benchmarking

– Need to provide appropriate levels of compensation – Need to fund Deferred Maintenance

– Increase enrollment growth given declining demographics – Strengthen emergency security efforts

– Increase State base appropriation for operations, capital, and MEIF – Determine offsetting effects of continuous position reductions

– Fund utility expenses and increased employee benefits

Financial

– FY09 budget reflects $536K in cost reductions and 5.5 net FTE position reductions

• Savings due to efficiencies realized from UMA/UC consolidation • 2% across the board cuts in non-compensation budgets

– Tuition increase of 9.2% – Enrollment flat

Strategic

– Fully integrate UMA/UC operations and take a leadership role in revitalizing the UMS distance education mission

– Establish Development/Fundraising and Institutional Research Offices

– Develop new academic programs and delivery systems to address UMA’s emerging transition as a baccalaureate institution

– Implement BS Nursing completion program

– Implement Baldrige continuous quality improvement assessment on campus – Implement an orientation program for new faculty

Challenges

– Reverse downward enrollment trend

– Identify funding to update and equip dental clinic on UCB campus – Continue to address UCB’s significant deferred maintenance

– Acquire MPBN building on UCB campus – Identify and implement energy efficiencies – Succession planning

13

Financial

– FY09 budget reflects $1 million in cost reductions and reallocations and 3 net position reductions

– Revenues: budgeting heretofore unbudgeted revenues (non-degree credit hrs., etc.) – Expenses: budgeting actual costs of part-time faculty and overloads

– Investments of about $210K in strategic plan initiatives – FY09 tuition increase less that originally estimated

Strategic

– Accountability measures: milestone calendar, spending strategy and priority list for freezes – Any increase or decrease less than projected for state appropriation will go to student aid – Development efforts will focus on student aid and the new arts center

– Strategic plan is our guide for investments

• Curriculum adjustment

• Marketing in support of institutional image and admissions • Advising & retention

• Curriculum delivery efficiencies • Athletics – addition of 3 sports • Financial planning

• Advancement work

– Keep campus engaged in strategic process

– Determine how to maximize the utility of PeopleSoft

Challenges

– Timing implications of implementations of Scannell & Kurz and Swardlick recommendations – Enrollment: when will strategies have the intended impact?

– Future mission & cutting if enrollment not realized – Fundraising

– Fuel costs

– Student aid & loss of Perkins Loan fund – Campus morale and communications

– Funding of needed renovations in E&G and auxiliary areas

Financial

– 12% increase is high but necessary in order to provide a quality program

– Compensation & energy remain the two fastest growing segments affecting the budget – Long range desire to hold tuition increases to no more than 1% above inflation

– Continue to move toward desired residential life level

Strategic

– Match or exceed break-even point in order to maintain a balanced budget – Increase visual aspect of website and publications

– Endowment campaign – goal of $2.5 million over 3 years

– Continue to promote & market campus facilities to outside organizations to generate additional revenue

– Continue efforts to fill existing facilities through financial incentives and by increasing our recruitment efforts for students in southern Maine and New England.

Challenges

– Energy costs – need to explore other energy sources such as solar, wood, hydrome, etc. – Maximize the use and benefit of PeopleSoft

– One-stop student services – need to change office structure to enhance services but will require additional capital funding

15

Financial

– FY09 budget reflects $600K in cost reductions and reallocations and 10 net position reductions

– Level enrollment

– Proposed 12% in-state and out-of-state tuition increase

– Unified fee increase to support “smart” classrooms & instructional technology

– HEPI increases for academic departments with other operating increases held to minimum – Residence halls still below capacity (68%) but occupancy steadily increasing

– Childcare center closed & fitness center operation restructured to eliminate annual deficit

Strategic

– Net tuition and financial aid strategies reconfirmed

– Student recruitment strategy refined to improve yield and push the ELA brand (ongoing) – Classrooms and laboratory modernization during summer’08

– Environmental Liberal Arts (ELA) planning and implementation continues, strategically aligning curriculum, degree programs, and campus experience

– New website integrated with ELA marketing and student recruitment campaign

Challenges

– Maine demographics, especially severe in Washington County

– Funding to support the full implementation and marketing of ELA mission and focus – Flat appropriation, deferred maintenance, internal loan repayment, no reserves

Financial

– FY09 budget reflects $118K in cost reductions and reallocations and 3 net position reductions

– Flat enrollment

– Improved retention in residence halls – Increased fundraising opportunities

Strategic

– Continued fundraising – exceed last year’s target – Strategic planning document completed

– Academic restructuring near completion – Melmac grant studying retention

– Compass Planning Grant Native American awareness

– Budget Advisory committee representing all constituents of campus

– Dean of Students – position filled and now reviewing student service organization operation to provide more effective and efficient services for the student body.

Challenges

– Funding depreciation requirements – Cost of utilities

– Folsom project underway, completion scheduled for fall semester – Wind power – exploring several prospects

– Reorganizing athletic department

– NMCC cost of education – student recruitment – Reduction of workforce to meet budget reductions

– Rising cost of providing a safe, clean, comfortable, and affordable housing

17

Financial

– FY09 budget will ultimately reflect $7.5 million in cost reductions

• Details on the number of the positions is being finalized and will be shared with the Board of Trustees at the May meeting. The final number of position eliminations will be much higher than the 30 previously discussed. • $6 million in cost reductions have been identified to date

• $1.5 million in additional cost reductions are actively being pursued

– A 10.1% across the board tuition increase planned for undergraduate and graduate students. Law School tuition will increase 5.5% or less. Mandatory fees will increase 12.9% and differences in how the Unified Fee is calculated (based on location and term) will be reduced.

– Budgeted credit hours are based on actual credits generated in FY08.

– The auxiliary budget for Residence Life is based on Portland Hall being closed and a 90% occupancy rate.

– All ITV & compressed video revenue is being included in the base budget for the first time.

– $500K being added for Marketing, $150K for library acquisitions, and $150K to support enhanced advising.

– USM is increasing institutionally funded scholarships by 10.1% ($179K).

Strategic

– Integrated marketing plan being implemented.

– Implementation of new General Education curriculum in conjunction with enhanced advising and retention efforts.

– Enhanced recruitment with special emphasis on articulation agreements with the Maine Community College System.

– Tuition pricing, to include differential tuition possibilities, and financial aid studies underway

Challenges

– Increasing labor relations and legal costs due to workforce management. – Unanticipated costs related to reorganization.

– Managing workforce productivity and morale while downsizing.

– Escalating costs for the operation and maintenance of new and existing facilities, to include those needed to support R&D initiatives.

– Making the $7.5 million in reductions necessary to balance the budget.

19

SYSTEM-WIDE SERVICES BUDGET HIGHLIGHTS

Financial

– Reduced budget by approx. $1 million in order to balance • Compensation & benefit increases ($800K) offset by

– Savings from efficiencies – Reduction of 3 FTE positions – No salary increases for senior staff

– Reduction in legal, marketing, insurance, travel, equipment

– Primary sources of funding are state appropriation and investment income

• Excess investment earnings are set aside for one-time strategic campus initiatives such as PeopleSoft implementation and matching state bond funds for capital renewal

Strategic

– Maximize use of technology investments

• PeopleSoft

• Regional Optical Network

• Digital conversion of broadcast ITV

– Transfer University College operations to UMA

Challenges

– Fund inflationary increases with limited or no increase in appropriation

– Current fixed income investment environment; UMS share of Mainsail II loss

• Meeting commitment to match State bond funds for capital renewal projects - $4 million over the next 2 years

– Meet increased demand for IT services, security, and improved functionality

SECTION II

ENROLLMENT AND

PROPOSED STUDENT CHARGES

(See Appendix for Detailed Student Charges)

21

ENHANCED RECRUITMENT EFFORTS

UMS market research and advocacy campaign

Advertising campaigns Strategic financial aid K-12 Partnering

Retention initiatives

Articulation agreements, transfer incentives, seamless transition Redesigned System & campus websites

Improved data information system being implemented

-

Data-driven planning and institutional research

-

Successful Shared Processing Center

PROJECTED MAINE HIGH SCHOOL

GRADUATES

12,000 13,000 14,000 15,000 16,000 17,000 18,000 19,000 20,000 91-9 2 93-9 4 95-9 6 97-9 8 99-0 0 01-0 2 03-0 4 05-0 6 07-0 8 09-1 0 11-1 2 13-1 4 15-1 6 17-1 8 19-2 0 21-2 2 Max. 07/08

23

PROJECTED HIGH SCHOOL GRADUATES - NORTHEAST

(includes CT, ME, MA, NH, RI, VT, NY, NJ, PA)

400,000 500,000 600,000 700,000 1991 -92 1993 -94 1995 -96 1997 -98 1999 -00 2001 -02 2003 -04 2005 -06 2007 -08 2009 -10 2011 -12 2013 -14 2015 -16 2017 -18 2019 -20 2021 -22 Max. 07/08

UMS ENROLLMENT - ANNUAL CREDIT HOURS

UM 1.2% 1.1% 1.6% 1.8% (1.0%) 250,000 260,000 270,000 280,000 290,000 300,000

FY05 FY06 FY07 FY08 FY09 Budget 9,855 FTE UMA 0.0% (4.5%) (1.4%) (5.9%) (1.9%) 70,000 80,000 90,000 100,000 110,000

FY05 FY06 FY07 FY08 FY09 Budget 2,840 FTE UMF 0.2% (5.3%) 3.0% 3.3% (1.8%) 60,000 65,000 70,000 75,000 2,028 FTE UMFK (2.0%) (2.2%) 4.6% 3.2% 15.6% 28,000 30,000 32,000 34,000 1,000 FTE

25

UMS ENROLLMENT - ANNUAL CREDIT HOURS

UMM (7.8%) (4.5%) 1.0% (4.9%) 0.0% 15,000 17,000 19,000 21,000 23,000 25,000

FY05 FY06 FY07 FY08 FY09 Budget 661 FTE UMPI 6.5% (1.2%) (2.5%) (5.2%) (7.6%) 27,000 32,000 37,000 42,000 47,000

FY05 FY06 FY07 FY08 FY09 Budget 1,083 FTE USM 0.0% (1.1%) (1.3%) (0.3%) 0.6% 202,000 207,000 212,000 217,000 222,000 227,000 232,000

FY05 FY06 FY07 FY08 FY09 Budget 7,899 FTE

UMS ENROLLMENT - ANNUAL CREDIT HOURS

SYSTEM TOTAL

(0.8%)

(1.2%)

0.4%

(0.3%)

0.8%

622,000 672,000 722,000 772,000

FY05 FY06 FY07 FY08 FY09

Budget

25,366

FTE

27

FY09 ANNUAL TUITION INCREASES

Note: Undergraduate & Law annual tuition based on 30 credit hours (32 credit hours at UMF). Graduate annual tuition based on 18 credit hours.

IN-STATE OUT-OF-STATE

FY08 FY09 FY08 FY09

Annual Annual Annual Increase Annual Annual Annual Increase

Tuition Tuition $ % Tuition Tuition $ %

UNDERGRADUATE UM $6,540 $7,170 $630 9.6 $18,750 $20,580 $1,830 9.8 UMA 5,220 5,700 480 9.2 12,630 13,800 1,170 9.3 UMF 6,528 7,296 768 11.8 14,208 15,072 864 6.1 UMFK 5,100 5,700 600 11.8 12,780 14,310 1,530 12.0 UMM 5,100 5,700 600 11.8 14,130 15,840 1,710 12.1 UMPI 5,100 5,700 600 11.8 12,780 14,310 1,530 12.0 USM 5,940 6,540 600 10.1 16,410 18,060 1,650 10.1 GRADUATE UM $5,850 $6,426 $576 9.8 $16,848 $18,504 $1,656 9.8 UMF - 5,886 - - - - - - USM 5,346 5,886 540 10.1 15,192 16,722 1,530 10.1 LAW $17,400 $18,360 $960 5.5 $27,480 $28,860 $1,380 5.0 Weighted Avg. 10.0% 9.8%

FY09 MANDATORY FEES INCREASES

UNDERGRADUATE Annual Increase FY08 FY09 $ % UM Communications $30 $30 - -Recreation Center 196 204 $8 4.1 Unified Fee 1,474 1,606 132 9.0 Student Activity 90 90 - -$1,790 $1,930 $140 7.8

UMA Unified Fee $720 $750 $30 4.2

Student Activity 45 45 -

-$765 $795 $30 3.9

UMF Unified Fee $499 $550 $51 10.2

Student Activity 130 130 -

-$629 $680 $51 8.1

UMFK Unified Fee $540 $600 $60 11.1

Student Activity 113 113 -

-$653 $713 $60 9.2

UMM Unified Fee $430 $470 $40 9.3

Student Activity 240 240 -

-$670 $710 $40 6.0

UMPI Unified Fee $480 $480 -

-Student Activity 160 160 -

-$640 $640 -

-USM Unified Fee $630 $720 $90 14.3

Student Activity 100 104 4 4.0

29

FY09 MANDATORY FEES INCREASES

Note: Law annual fees based on 30 credit hours. Graduate annual fees based on 18 credit hours.

Annual Increase FY08 FY09 $ %

GRADUATE

UM

Communications $30 $30 - -Recreation Center 196 204 $8 4.1 Unified Fee 602 656 54 9.0 Student Activity 40 60 20 50.0 $868 $950 $82 9.4

UMF

Unified Fee $282 $282

-USM

Unified Fee $378 $432 $54 14.3

LAW

Unified Fee $630 $720 $90 14.3

Student Activity 40 40 -

IN-STATE, UNDERGRADUATE, FULL-TIME

TUITION & MANDATORY FEES COMPARISON

$7,102 $6,670 $5,740 $5,770 $5,753 $7,157 $5,985 $8,330 _10.1% $7,822 10.4% $7,364 10.5% $6,340 11.1% $6,410 11.5% $6,413 11.4% $7,976 8.5% $6,495 9.2% $9,100 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000

FY08 FY09 FY08 FY09 FY08 FY09 FY08 FY09 FY08 FY09 FY08 FY09 FY08 FY09 FY08 FY09

31

OUT-OF-STATE, UNDERGRADUATE, FULL-TIME

TUITION & MANDATORY FEES COMPARISON

$13,420 $14,800 $13,433 $14,837 $13,395 11.4% $14,950 11.8% $16,550 11.8% $15,023 6.2% $15,752 9.0% $14,595 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 $22,000 $24,000 FY08 FY09 UM FY08 FY09 UMA FY08 FY09 UMF FY08 FY09 UMFK FY08 FY09 UMM FY08 FY09 UMPI FY08 FY09 USM FY08 FY09 WEIGHTED AVG. Tuition Fees $20,540 9.6% $22,510 $17,140 10.2% $18,884 $18,063 9.3% $19,738

NEW ENGLAND LAND-GRANT UNIVERSITIES

ESTIMATED FULL-TIME UNDERGRADUATE TUITION & MANDATORY FEES

FY09

$8,678 $9,100 $9,338 $10,232 $11,756 $12,814 $24,776 $22,510 $24,050 $21,729 $25,326 $29,652 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 Uni vers ity o f Rho de Is land UN IVER SITY OF MA INE Uni vers ity o f Con nect icut Uni vers ity o f M assa chus etts Uni vers ity o f New Ham pshi re Uni vers ity o f Ver mon t In-State Out-of-State

33

SELECTED NEW ENGLAND STATE COLLEGES & UNIVERSITIES ESTIMATED

FULL-TIME UNDERGRADUATE IN-STATE TUITION & MANDATORY FEES

FY09

Source: Telephone calls & websites

$3,1 32 $5,5 52 $6,3 40 $6,3 42 $6,4 10 $6,4 13 $6,4 19 $6,4 95 $7 ,042 $7,0 88 _$7,364 $7,5 36 $7,6 76 $7,8 44 $7,9 76 $8,4 20 $9,1 11 $9,3 07 $7,6 32 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 MC CS Ave rage Rho de Is land Col lege Uni v. o f M aine at P resq ue Is le Sale m S tate Col lege Uni v. o f M aine at M achi as Uni v. o f M aine at F ort K ent Wes tfield Sta te C olle ge Uni v. o f M aine at A ugus ta Cen tral Con n. S tate Uni v. Wes tern Con nect icut Uni v. o f Sou ther n M aine Eas tern Con n. S tate Uni v. John son Stat e C olle ge Lyn don Stat e C olle ge Cas tleto n Uni v. o f M aine at F arm ingt on Plym outh Sta te C olle ge UM ass Bos ton UN H - Man ches ter

SELECTED NEW ENGLAND STATE COLLEGES & UNIVERSITIES ESTIMATED

UNDERGRADUATE FULL-TIME OUT-OF-STATE TUITION & MANDATORY FEES

FY09

$12, 482 $12, 499 $14, 452 $14, 595 $14, 950 $15, 023 _$15,75 2 $16, 028 $16, 179 $16, 225 $16, 266 $16, 270 $16, 340 $16, 550 $16, 673 $18, 884 $21, 317 $ 23,0 59 $0 $5,000 $10,000 $15,000 $20,000 $25,000 Sale m S tate Col lege Wes tfield Sta te C olle ge Rho de Is land Col lege Uni v. o f M aine at A ugus ta of M aine at P resq ue Is le niv. of M aine at F ort K ent v. o f M aine at F arm ingt on Cas tleto n Cen tral Con n. S tate Uni v. Wes tern Con nect icut John son Stat e C olle ge Plym outh Sta te C olle ge Lyn don Stat e C olle ge Uni v. o f M aine at M achi as Eas tern Con n. S tate Uni v. Uni v. o f Sou ther n M aine UM ass Bos ton UN H - Man ches ter

35

FY09 PROPOSED ROOM & BOARD RATE INCREASES

$7,484 $7,724 $6,722 $6,260 $7,297 $6,620 $5,980 3.5% $6,192 5.0% $6,574 4.8% $6,940 6.5% $7,158 7.0% $8,008 8.0% $8,344 6.6% $7,776 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 FY08 FY09 UM FY08 FY09 UMF FY08 FY09 UMFK FY08 FY09 UMM FY08 FY09 UMPI FY08 FY09 USM FY08 FY09 WEIGHTED AVG. Room Board

NEW ENGLAND LAND-GRANT UNIVERSITIES

ESTIMATED ROOM & BOARD FY09

$8,008 $8,114 $8,534 $8,596 $9,624 $10,078 $0 $2,500 $5,000 $7,500 $10,000 $12,500 UN IVER SITY OF M AIN E Uni vers ity o f M assa chu setts Uni vers ity o f V erm ont Uni vers ity o f N ew H amps hire Uni vers ity o f Con nect icut Uni vers ity o f Rho de Is land

37

SELECTED NEW ENGLAND STATE COLLEGES & UNIVERSITIES

ESTIMATED ROOM & BOARD

FY09

Source: Telephone calls & websites $6,1 92 $6,5 74 $6,7 26 $6,9 40 $7,1 58 $7,2 20 $7,2 34 $7,3 62 $7,5 08 $7,5 09 $8,3 44 $8,3 90 $8,4 00 $8,6 18 _$8,855 $9,0 44 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 Uni v. o f M aine at P resq ue Is le Uni v. o f M aine at M achi as Wes tfie ld S tate Col lege Uni v. o f M aine at F ort K ent Uni v. o f M aine at F arm ingt on Cas tleto n Fitc hbur g St age Col lege Sale m S tate Col lege John son Stat e C olle ge Lyn don Stat e C olle ge Uni v. o f Sou ther n M aine Rho de Is land Col lege Plym outh Sta te C olle ge Cen tral Con n. S tate Uni v. Eas tern Con n. S tate Uni v. Wes tern Con nect icut

UMS IN-STATE UNDERGRADUATE COMPREHENSIVE STUDENT COST OF EDUCATION

(Tuition, Mandatory Fees, Room & Board)

$6,495 $12,532 $15,708 _$15,598 $12,984 $15,134 $17,108 $13,353 8.5% 9.0% 7.9% _7.9% 6.9% 9.1% 8.3% 8.2% $0 $4,000 $8,000 $12,000 $16,000 $20,000

UM UMA* UMF UMFK UMM UMPI USM

FY08 FY09

39

NEW ENGLAND LAND-GRANT UNIVERSITIES

ESTIMATED IN-STATE UNDERGRADUATE COMPREHENSIVE STUDENT COST OF EDUCATION (Tuition, Mandatory Fees, Room & Board)

Source: Telephone calls & websites

$21,348 $18,346 $18,962 $17,108 $18,756 $20,352 8.2% 6.5% 5.8% 7.2% 5.6% 6.7% $0 $5,000 $10,000 $15,000 $20,000 $25,000 UNIVERSITY OF MAINE University of Massachusetts University of Rhode Island University of Connecticut University of New Hampshire University of Vermont FY08 FY09

NEW ENGLAND LAND-GRANT UNIVERSITIES

% OF IN-STATE UNDERGRADUATE STUDENT HEADCOUNT

85% 80% 61% 35% 57% 76% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% University of Connecticut UNIVERSITY OF MAINE University of Massachusetts Amherst University of New Hampshire-Main Campus University of Rhode Island University of Vermont

41

SECTION III

FINANCIAL AID

UMS WAIVERS

Total UMS waivers increase by approximately $500K annually

Approximately 45% of waiver costs are state mandated

($ in Millions)

FY08 FY09 Mandated by: FY05 FY06 FY07 Forecast Budget State Foster Care $0.2 $0.1 $0.2 $0.2 $0.2 State/UMS High School Aspirations 0.4 0.5 0.7 0.8 0.8 UMS North American Indian* 2.2 2.5 2.6 2.8 3.1 UMS Senior Citizens 0.1 0.1 0.1 0.2 0.2 State Veteran's Dependent 1.1 1.2 1.4 1.5 1.7

TOTALS $4.0 $4.4 $5.0 $5.5 $6.0

*In addition to the waiver, room & board scholarships for eligible North American Indian students who live on campus total approximately $750,000 annually

43

PLANNED FINANCIAL AID INCREASES

UMS unrestricted waivers & scholarships increasing from $34.5 to $38.9 million UMS endowed scholarships increasing from $2.9 to $3.2 million

Pell Grants maximum award increasing from $4,310 to $4,731 (+$421) Racino scholarship funding increasing from $600K to $700K in FY09

FY09 Estimated Increase FY09 Budget $ in millions %

Planned Financial Aid Increases:

Unrestricted Waivers & Scholarships $38.9 $4.4 12.6%

Endowed Scholarships 3.2 0.3 9.4%

PELL Grants 27.4 2.4 9.8%

Racino Scholarships 0.7 0.1 16.7%

SECTION IV

OPERATING EXPENSES

&

45

OPERATING EXPENSES

($ in millions)

FY07 FY08 FY08 FY09 FY09 BUDGET TO: ACTUALS BUDGET FORECAST BUDGET FY08 BUDGET FORECAST

Compensation & Benefits $298.1 $314.2 $309.9 $327.3 4.1% 5.6% Negotiated compensation increases and increased benefit costs.

Health Insurance - Retirees 7.0 13.0 16.7 16.7 28.5% - Funding retiree medical Utilities 26.7 29.2 30.9 32.0 9.7% 3.7% Energy increases Interest Expense 6.9 10.0 9.0 10.4 4.2% 14.9% Revenue bond financing Other Expenses 116.0 113.5 121.1 116.8 2.9% (3.5%) Primarily USM aligning

budgets more closely to prior year actuals

Restricted Fund Matches/Transfers 12.8 18.9 20.0 19.0 0.8% (5.0%) Primarily UM's funding of Maine Agricultural and Forest Experimental Station & Cooperative Extension Services

USM Additional Reductions - - - (1.5) - - USM has identified $6 million in cost reductions. Need to identify another $1.5 million

WORKFORCE MANAGEMENT

Workforce reductions necessary to balance budget

- Every effort made to maintain quality of academic programs & institutional missions

An estimated 139 positions to be eliminated system-wide – both vacancies and lay

offs

Eliminated salary increase for senior administrators across the System totaling

$300,000

TOTAL UNRESTRICTED FTE EMPLOYEES

1,628 1,632 1,578 1,360 1,380 _1,336 1,665 1,675 _1,629 4,653 4,687 _4,543 0 1,000 2,000 3,000 4,000 5,000 6,000

47

ANNUAL % CHANGE IN EMPLOYEE BENEFITS

$37.5 $39.1 $46.3 $51.1 $49.0 $51.6 $52.4 $54.7 $16.7 $16.7* $8.6 $6.9 $122.5 $115.4 $97.6 $95.0 18.2% 2.7% 5.3% $0 $20 $40 $60 $80 $100 $120 $140 $160

FY06 FY07 FY08 Forecast FY09 Budget

Net Post Employment Medical Liability Other

Health (Medical & Dental Net of Employee Contributions)

(Social Security, Retirement, Life Insurance, Empl./Dep. Waivers, Workers Compensation)

(Pay-as-you-go thru FY07; GASB 45 beginning in FY08)

6.1%

SECTION V

49

FACILITIES OVERVIEW

7 Universities

11 major campus locations

10 University College Centers

7 major research facilities

Buildings – 9.6 million sq. ft.

Land >13,500 acres (2,300 developed)

$2 billion value

Age of Facilities 83 95 44 103 ₁₀₀ 166 0 20 40 60 80 100 120 140 160 180

0-10 yrs 10-20 yrs 20-30 yrs 30-40 yrs 40-50 yrs 50+yrs

N u m b e r o f B u il d in g s

Source: Maine Risk Management Property Insurance Compilation Survey FY2008

Replacement Value Comparison

Bureau of General Services 36% University of Maine System 53% Community College System 8% Maine Maritime Academy 3%

DEPRECIATION & DEFERRED MAINTENANCE

Depreciation

Depreciation is the cost of allocating capital asset to expense over the determined useful life of the asset

Goal in place to fully fund depreciation by 2017

- Budgeted capital expenditures plus debt service principal will equal depreciation expense

- Helps ensure future major replacement needs are funded

Funding depreciation, however, does not fund the deferred maintenance/capital renewal needs in excess of $500 million

Impact of Deferring Maintenance

Negative image due to poor building appearance High risk of building system failures

Increase in emergency reactive repairs Significant increase in operating cost Adverse learning environment

51

OUTSTANDING UMS REVENUE BONDS AS OF JUNE 30

($ in Millions)

*

Balloon payment which will be refinanced in 2012.

$206 $198 $190 $151 $143 $135 $126 $120 $113 $106 $99 $91 $85 $78 $71 $64 $58 $52 $46 $40 $33 $25 $19 $13 $9 $4 _$1 $1 _$0 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 $150 $160 $170 $180 $190 $200 $210 $220 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 MW50Z(281).XLS * Notes:

• Legislative approved revenue bond ceiling of $220 million • All bonds are fixed rate

MAJOR PROJECTS IN PROGESS

Campus Project Budget Cost

Estimated Completion (Fiscal Year)

UM Dining Hall Renovations - Wells $12.3 2008

Laboratory for Surface Science Technology 2.0 2009

Stodder Hall Renovations 4.3 2009

Residential Hall Renovations 2.8 2010

Student Recreation Center Tennis Courts 1.0 2008

Hutchinson Center 4.0 2009

Maine Center for the Arts - Phase I 11.0 2009

Colvin Hall Renovation 2.3 2009

Heat Plant Backpressure Turbine 1.0 2009

Energy Infrastructure Projects 1.1 2010

Jenness Facade Recon 1.2 2009

Aubert Hall Building Renovations* 6.0 2010

Fogler Library Climate Control* 1.5 2010

Coburn Hall Renovation 0.9 2009

Building Renovations/Classroom Upgrades* 3.0 2011

Athletic Field Turf Projects 2.2 2009

Sub-Total $56.4

53

MAJOR PROJECTS IN PROGESS

Campus Project Budget Cost

Estimated Completion (Fiscal Year)

UMA Library Renovation Bangor _{$1.5 2009}

Jewitt Hall Addition - Augusta* 1.0 2010

UMF Preble/Ricker Science Facility 2.6 2010

Emery Arts Center 5.7 2010

Stone Hall Renovation 0.9 2009

Merrill Hall Renovation 0.4 2009

UMFK Powell Hall Renovations* 2.0 2010

UMM Renovation Torry Hall/Science Building _{2.3 2009}

Lewiston-Auburn Classrooms and Library Renovations* 2.0 2010

University Commons 33.2 2009

UMPI Folsom-Pullen Renovation - Phase 1 2.6 2009

Wind Power Project _{2.0 2009}

SYS Regional Optical Network 4.9 2009

Maine Street Peoplesoft Implementation _{5.9 2010}

Sub-Total $67.0

TOTAL $123.4

*Pending Board Approval

FUNDING FOR MAJOR PROJECTS IN PROGESS

$ IN MILLIONS

STATE BONDS AND APPROPRIATIONS $32.7

UMS REVENUE BONDS - ISSUED 31.6

FUNDRAISING/INSTITUTIONAL CAPITAL FUNDS 59.1

55

SECTION VI

MULTI-YEAR FINANCIAL PLANNING PROCESS

Agenda for Action Goal for Financial Sustainability: “UMS will continue to be a financially stable enterprise over the long run, addressing the key issues and

challenges of the future through a multi-year planning process that embraces prudent financial controls, transparency, cost containment, revenue enhancement, and optimal sizing of the institutions, functions, and activities.”

Summer 2008, in readiness for the FY10/11 biennium request, the UMS will complete its multi-year financial planning exercise (currently in progress for the next two

bienniums) giving consideration to:

- Tuition strategy and affordability

- Historical state support (operational, capital, and MEIF)

- Capital renewal needs

- Market-based total compensation (salary & benefits)

- Energy costs and conservation

- Declining demographics

- Multi-year efficiency strategies

57

FINANCIAL SUSTAINABILITY OUTCOMES

Hold annual cost increases to the Higher Education Price

Index (HEPI)

Fund retiree healthcare annual costs by 2012

Fully fund annual capital depreciation by 2017

Maintain healthcare premium rates for active employees at

no more than the New England healthcare cost trend

average

Monitor and achieve goals for selected financial indicators

- Operating results – break even or slightly positive net change annually

- Debt service coverage ratio – strive for operational cash flow to be 2 times debt service

- Unrestricted net assets to debt – strive for unrestricted net assets to be one-third of debt

- Annual debt service shall not exceed 5% of annual expenses - Maintain or increase instructional and

academic support expenditures – as a percentage of total operations

STATUS

FY02 to FY07 – annual average increase of 4%

On Track

On Track but significant deferred maintenance backlog

Current year claims are challenging our ability to achieve this goal

Break even budget for FY09

3 times in FY07

.3 in FY07

2.4% in FY07

38% in FY02 40% in FY07