An Analysis of the Finances of the University of New Mexico Rudy - PowerPoint PPT Presentation

An Analysis of the Finances of the University of New Mexico Rudy Fichtenbaum Professor Emeritus of Economics President, AAUP

Budgets: Starts with B and Ends with S This presentation is NOT about the budget or analysis of any budget It is about how faculty can use financial statements to assess the financial health of your institution and the priorities of the administration Most budget “models” are about the administration needing excuses to: 1. Stop hiring tenured faculty 2. Eliminate as many liberal arts programs as possible

What Data Will We Need? Audited Financial Statements NOT Budgets. Why not? • Budgets are Just Plans • What about those budget holes?

Comparison of Data Sources: Audited Financial Statements vs. Budgets Audited Financial Statements Budgets are created by report what ACTUALLY university happened administrators, are not required to be audited Audited financial statements are or reviewed by an certified by an independent outside party, and outside auditor, using standard budgets are not accounting rules and principles subject to standard accounting rules and Bond ratings are determined by principles. Budgets examining numerous standard ratios are just plans or from audited financial statements, as projections which well as other data such as always balance enrollment, applications. This is all done by an outside, independent party.

Comparison of Data Sources Audited financial statements are certified by an independent Budgets are created by outside auditor, using standard university accounting rules and principles administrators, are not required to be audited or reviewed by an outside party, and Bond ratings are determined by budgets are not subject examining numerous standard ratios to standard accounting from audited financial statements, as rules and principles. well as other data such as enrollment, applications. This is all done by an outside, independent party.

Basic Accoun+ng Constructs

Statement of Net Assets or The Balance Sheet Liabili;es & Assets Net Assets Cash & cash Accounts equivalents Payable Accounts Long-Term Receivable Debt Property, Plant Net Assets & Equipment

Assets, LiabiliJes and Net Assets • Assets – Liabili;es = Net Assets • Assets + Deferred OuJlows – Liabili;es - Deferred Inflows = Net Posi;on

Total Assets & Deferred OuMlows $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $- 2012 2013 2014 2015 2016 2017 Total assets & deferred ouJlows Adjusted Total Assets & OuJlows

Factors AffecJng Assets • The major factor affec;ng assets was the removal of the Land Grant Permanent Fund (LGPF)from the University’s assets. • The State of New Mexico changed its policy regarding the presenta;on of the University’s beneficial interest in the LGPF within the State’s Comprehensive Annual Financial Report (CAFR) • The University used to show its share of the net asset value of the LGPF as a permanently restricted net asset. In effect it was an endowment. • This change in presenta;on does not impact the University’s beneficial interest in the LGPF assets, and the University will con;nue to receive its beneficial interest in the earnings of the LGPF as required by law.

Current and Non-Current Assets $2,000,000,000 $1,800,000,000 $1,600,000,000 $1,400,000,000 $1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 $- 2012 2013 2014 2015 2016 2017 Total current assets Total non-current assets

Short and Long-Term Investments $450,000,000 $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $- 2012 2013 2014 2015 2016 2017 Short-term investments Long-Term Investments

Capital Assets, Net $1,400,000,000 $1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 $- 2012 2013 2014 2015 2016 2017

Pur Purchases o hases of Capit f Capital A al Asse ssets ts $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- 2012 2013 2014 2015 2016 2017

Sources of Capital Funding $102,605,287 $23,886,242 Capital appropria;ons $331,833,614 Capital Grants & Gics Financed by the University

Total LiabiliJes and Deferred Inflows $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $- 2012 2013 2014 2015 2016 2017 Total Liabili;es & Inflows Adjusted Total Liabili;es & Inflows

Current & Non-Current LiabiliJes Current & Non-Current Liabili+es $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $- 2012 2013 2014 2015 2016 2017 Total current liabili;es Total non-current liabili;es

Factors AffecJng LiabiliJes • Other Post-Employment Benefits (OPEB) • Star;ng in 2008 universi;es were required to start showing a liability for post-re;rement benefits. Typically, post-re;rement benefits are health benefits for re;rees. • Most universi;es fund these benefits out of current opera;ons as opposed to having assets set aside to balance the liability. • Having to show these liabili;es reduced unrestricted net assets on paper • To account for this change we add the OPEB liability back into unrestricted net assets • The other major factor influencing liabili;es and unrestricted net assets is GASB 68

GASB 68 • In 2015 major change in how public pensions are treated in university and college financial statements • Universi;es and colleges to show their propor;onate share of any unfunded liability in a public pensions system as an ins;tu;onal liability. • Affects es;mate of unrestricted net assets the major component of reserves • Also affects es;mate of change in net assets and es;mate of opera;ng expenses.

Total Debt $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $- 2012 2013 2014 2015 2016 2017

RaJo of Debt to Total Revenue 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2012 2013 2014 2015 2016 2017

Total Net Assets $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $- 2012 2013 2014 2015 2016 2017 2018 Total Net Assets Adjusted net assets GASB 68, OPEB & LGPF

Restricted Net Assets $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $- 2012 2013 2014 2015 2016 2017 restricted non-expendable (adjusted LGPF) restricted expendable

Unrestricted Net Assets $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 $- 2012 2013 2014 2015 2016 2017 $(200,000,000) $(400,000,000) unrestricted Unrestricted adjusted for GASB 68, OPEB, and LGPF

Summary of the Statement of Net PosiJon $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $- 2012 2013 2014 2015 2016 2017 Adjusted Total Assets & OuJlows Adjusted Total Liabili;es & Inflows Total adjusted net posi;on

Revenues, Expenses & Changes in Net Assets Total Revenues Total Expenses Change in Net Assets

Revenues, Expenses & Change in Net Assets • Total Revenue – Total Expenses = Change in Net Assets • Total Revenue – Total Expenses = Change in Net Posi;on

Total Revenues and Expenses $2,400,000,000 $2,300,000,000 $2,200,000,000 $2,100,000,000 $2,000,000,000 $1,900,000,000 $1,800,000,000 $1,700,000,000 $1,600,000,000 $1,500,000,000 2012 2013 2014 2015 2016 2017 Total Revenue Total Expenses (Adjusted for GASB 68 & OPEB)

Pa PaJent Revenue as a Pe Percent of OperaJng Revenue 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017

Sources of Revenue in 2017 4% 2% 3% 12% 4% Student tui;on and fees Grants & contracts Sales and services Auxiliary enterprises 25% State & local support Federal funding Investment income (loss) 38% Gics Other 8% 4%

Sources of Revenue (Excluding PaJent Revenue) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 Student tui;on and fees Grants & contracts Sales and services Auxiliary enterprises State & local support Federal funding Investment income (loss) Gics Other

TuiJon v State AppropriaJon $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $- 2012 2013 2014 2015 2016 2017 Student tui;on and fees State appropria;ons

Public Service as a Percent of OperaJng Expenses 70% 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017

AllocaJon of Resources in 2017 (Excluding Public Service) 7% Instruc;on 11% Research 32% Academic support 3% Student services Ins;tu;onal support 8% Opera;on and maintenance of plant Student aid 8% Auxiliary enterprises 4% 21% Other opera;ng 6% expenses

AllocaJon of Resources (Excluding Public Services) Figure 27 Alloca;on of Resources 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 Instruc;on Research Academic support Student services Ins;tu;onal support Opera;on and maintenance of plant Student aid Auxiliary enterprises Other opera;ng expenses

Salaries for Professors

Salaries for Associate Professors

Salaries for Assistant Professors