The University of Idaho Argonaut

Nasty is never the preferred term to use when describing a financial situation, but according Lloyd Mues, vice president of Finance and Administration, a nasty future is what the University of Idaho may find itself in.
With several handouts and graphs, Mues presented “just the facts” to get the university thinking about the importance of starting next year on the right foot at Tuesday’s Faculty Council meeting.

“We have got to get a grip on this, this year,” he said. “It’s not time to wring our hands and say, ‘Oh my god.’”
Fiscal year 2007 left UI with a $2.8 million deficit caused by benefits, Mues said. He said a foreseeable savings was noted should the university change their health plan early and thus, is one of the reasons the change was made. It was imperative funding set aside for benefits be tapped in order to pay for the new plan, Mues said.
He said UI avoided costs of about $1.2 million, but used the same amount in savings to make the change.

Funds for 2009 are available, Mues said, but 2010 may provide challenges. He said he expects the university budget will require an extra $4.8 million in 2010 to make needed payments and start contributing to a reserve fund.
Mues said reserves are “fairly limited.” He said the administration would like to set aside 5 percent of their revenue for reserve funding but is currently nowhere near that amount.
This year’s operating revenue — money acquired through student tuition and fees, grants and contracts and auxiliary buildings like the bookstore — has decreased by $1 million. Mues said it is not uncommon this revenue fails to meet university need, but it is “abnormal” the total decrease.

Appropriated operating costs rose $18.9 million from last year due, in part, to raised utility and security costs. 60 percent of the operating costs were spent on salaries and benefits.
“If you take the salaries, benefits service and supplies, you leave a very, very small amount of dollars to go out and do much of anything,” he said.
Mues said many institutions are getting loans just to make payroll.
 “We must increase revenue or we must shrink the institution,” he said.

Expected income from investments like the $173,000 invested in Wachovia, a national business financing service, were off by 1.8 percent this year, decreasing the expected $3.3 million.
Revenue increases from student tuition and state appropriation, which makes up 37 percent of the university’s total revenue, are no match for significant drops in recruiting numbers, Mues said. Recruitment fell from 22,300 to 19,800 this year, a decrease of 10 percent.
Faculty council member Paul Oman noted revenue from grants and contracts fell this year by about $3 million. He said he attributes this loss to the difficulty of conducting research on campus. campus.

“The level of bureaucracy on this campus is to a point where (researchers) are taking the research off campus and bringing zero research dollars to this campus,” Oman said. “It’s not hard to do … so the administration is going to have to address this issue or continue to watch that category shrink.”
Mues said the issue will resurface throughout coming years. How the university decides to appropriate funds will determine future success of this and other revenue sources, he said.
“Figuring out the level of risk we’re comfortable in taking is really going to be a challenge these next few years,” Mues said. “If we get too risk aversive, we will stimulate more behavior. If we get too risk-non-aversive, we will be putting everything at risk.”

Mues said each year UI is spending 100 to 101 percent of its appropriated income.
Extra funding departments don’t use that is not appropriated by the state can be carried over from year to year. The money is called a Y account because it is not owned by the department that created it, but rather by the university as a whole. This year’s Y accounts totaled $16.4 million, a number that has been relatively unmoving over the last three years, Mues said.
The consistency is a sign UI’s profit margins are not decreasing or increasing, Mues said, making “strategic reallocation” a must.

“I think there are enough experts walking around campus and we need to utilize them more than spending money in significant amounts,” he said.
UI falls in the highest one third of all state institutes in the Rocky Mountain Northwest in Y account funds. A request was made for a list of all Y accounts broken down by department. Mues said this list could be compiled.
“None of this has been a secret,” Mues said.