New budget reflects $41 million revenue swing

Iowa State budget leaders have assembled a general fund operating budget for the new fiscal year that's $41.2 million -- or 5.6% -- leaner than last year's $742 million budget. The state Board of Regents approved fiscal year 2021 budgets at its July 29 virtual meeting.

The operating budget of $700.8 million reflects decreases to four revenue sources:

  • $33.4 million less in tuition, due to enrollment projections lower than last fall and no rate increases. Because the tuition distribution formula counts enrolled students and student credit hours taught, tuition losses will be felt to different degrees across the colleges.
  • $3.2 million less in state operating appropriations, Iowa State's share of an $8 million reduction for the regents system by the 2020 Iowa Legislature.
  • $2.5 million less in interest income on university investments and endowments, due to the global economic downturn.
  • $2.2 million less in indirect cost reimbursements on research, due to research scaling down during the pandemic.

More regents coverage

July 29 meeting highlights

In addition to meeting these reductions, units must cover at least $2.1 million in new FY21 expenses for:

  • Unavoidable cost increases of $1.4 million for expenses such as insurance premiums, IT licenses, University Innovation Alliance participation and service agreements (fire, transit) with the city.
  • Merit employee pay increases totaling $690,011 under the terms of the state's contract with the American Federation of State, County and Municipal Employees.

Associate vice president for institutional financial strategy Bonnie Whalen, who leads the institutional budget management team tasked with developing the university budget, said the pandemic has injected a lot of uncertainty into FY21. Units are reviewing all expenses and using all funding sources to balance their budgets, and the focus remains on delivering an outstanding student experience and maintaining excellence in teaching, research and outreach, she said.

Budget reduction strategies

The following list outlines strategies and tools ISU units will use to meet FY21 reductions.

1. To right-size the university and match local needs, departments will make personnel adjustments, such as not filling vacant positions or eliminating positions, for an estimated salary/benefits savings of $21.5 million. Through at least December, a faculty or staff vacancy requires senior vice president or president-level approval to fill. President Wendy Wintersteen told board members the impact could be 100 faculty positions, as well as professional and scientific, merit and graduate and undergraduate student employee positions.

2. Changes to employee benefits will create additional savings. These could include:

  • As President Wintersteen announced earlier this month, the university portion of TIAA/VALIC retirement contributions will be reduced 2 percentage points for 10 months, beginning Sept. 1, for an estimated savings of $4.8 million.
  • The cost-saving impact of a new retirement incentive plan, also approved July 29 by the regents, won't be known until after March 1, 2021, when the application window closes and departments know which of three incentives their approved employees selected. Up to 1,200 employees could be eligible for the plan.
  • The university benefits committee is reviewing medical benefits and other benefit programs and will make recommendations to reduce these costs.
  • A change to the tuition reimbursement program for professional and scientific and merit staff, effective fall semester, limits reimbursement to Iowa State courses only.

3. Postponing or canceling equipment purchases and replacements and building repairs will save an estimated $10.5 million. In her July 10 memo, President Wintersteen also announced a temporary freeze on renovation and building projects, except those driven by private donations or safety needs.

4. Institutional student financial aid will diminish with enrollment; an early estimate is $5.5 million.

5. Supply and service budgets will be trimmed an estimated $1.4 million. A key piece may be employee travel for university business -- restricted as much by the pandemic as budget constraints. For example, the regents' systemwide rolling 30-day ban on international business travel, announced March 10, remains in effect.

6. And finally, President Wintersteen requested a 10% reduction to her current salary of $590,000.

Big picture

Iowa State's overall budget is $1.4 billion, a decrease of $128.9 million (8.4%) from last year. About two-thirds of the decline is in restricted budgets. Totaling $700.2 million this year, the restricted side of the budget includes sponsored research, endowment income, building projects and self-funded auxiliary units such as athletics, residence, dining, printing, parking, utilities, recreation services, bookstore, Reiman Gardens, Iowa State Center and the Memorial Union. In sum, those budgets are down about 11% from $787.9 million a year ago. Auxiliaries experienced significant revenue losses, for example in the form of canceled conference and NCAA tournaments, a shuttered bookstore, postponed or canceled conferences and student housing and dining refunds for spring semester.

The restricted side of the budget includes state building appropriations, adjusted by legislators in June, totaling $15.525 million for two projects:

  • $8.9 million for a new state Veterinary Diagnostic Laboratory, year three of a six-year commitment. Construction should begin next spring.
  • $6.625 million for the Student Innovation Center, year five of a six-year commitment

Due to some uncertainty about fall sports schedules in the pandemic, the regents postponed reviewing athletics department budgets until their September meeting. The Cyclone athletics department's proposal to expand the north and south concourses at Hilton Coliseum also was postponed to the September agenda.

Federal COVID relief

The federal Coronavirus Aid, Relief and Economic Security (CARES) Act provided Iowa State with $21.6 million in April. The first $10.8 million will be awarded to eligible students as direct aid and, so far, Iowa State has awarded $9.2 million. The remaining $1.6 million of the student portion is expected to be distributed by the early weeks of fall semester. Whalen said senior leaders are reviewing all COVID-19 related costs to determine the most appropriate use of the second $10.8 million, which is designated for the institution.

Whalen said the university also has begun the process to seek reimbursement from the Federal Emergency Management Agency for eligible costs related to COVID-19. She clarified that lost revenue due to the pandemic is not reimbursable by FEMA.