Approval of Minutes: Minutes of the meeting of October 10, 2001 were approved as distributed and will be put on the Committee website.

Fiscal 2002 Operating Results as of October 31, 2001

Key revenue indicators as of October 31, 2001 were presented to the Committee.

General funds tuition revenue through October totaled $175.2 million. While this attainment is consistent with budgeted levels, there is some variation among the divisions. Several divisions experienced higher than budgeted enrollment. The School of Nursing has 34 more full-time students and 12 more part-time students than budgeted, which generated an additional $364 thousand in tuition revenue. The School of Medicine has 32 more graduate students resulting in a $738 thousand increase in revenues. The School of Advanced International Studies exceeded its estimate of 430 students by 99 in the fall semester and attained an additional $1.4 million in tuition compared to budget.

The Schools of Public Health, Professional Studies and the Peabody Institute experienced enrollment below budget. The resulting tuition shortfalls were $768 thousand, $765 thousand and $154 thousand, respectively. Each of these divisions is taking appropriate action to accommodate the decreased revenue.

F&A recoveries are $4.9 million (8.8%) more than projected for October. Most research divisions experienced significantly better recoveries than projected and these results are consistent with reported increases in the sponsored research base throughout the University. Net recoveries are $5.1 million (9.3%) higher than this time last year.

The School of Arts and Sciences F&A recoveries are up $1.5 million (24.8%) due to increases at the Center for the Social Organization of Schools (CSOS) and Public Health's recoveries are up $1.2 million (10.6%) due to increased activity in the departments of International Health and Mental Hygiene. The Academic and Cultural Centers (up $116 thousand, 20.8%) is primarily attributable to JHPIEGO's recoveries. The University Administration figure is also attributable to JHPIEGO, which shares its F&A recoveries with University Administration in lieu of paying the UA tax.

Chairman Steinwachs asked if any surplus F&A recoveries stayed within a division or transferred to University Administration. Dr. McGill stated that the divisions keep the surplus F&A recoveries and are used at the division's discretion.

The organized research MTDC base is slightly more than projected through October ($2.2 million, 2.1%) and has grown significantly over last year (11.8%). Of particular note is the 13.7% growth in excess of budget in organized research base at the Bloomberg School of Public Health, driven by spending of the Gates award for measles research and increased spending in the department of Epidemiology.

The other sponsored activity MTDC base is up slightly over budget ($1.1 million, 2.8%) and significantly greater than last year through October with 24.1% ($7.8 million) growth. The Schools of Arts and Sciences and Engineering have exceeded budget significantly, $1.3 million and $557 thousand respectively, due to re-categorizing of grants from organized research to other sponsored activities. The School of Public Health is slightly under projection due to fluctuating USAID funding for the Center for Communication Programs.

The Committee discussed the ongoing efforts being made by the Controller's Office to correct any miscoded sponsored accounts. This exercise is important as fiscal 2002 will be the base year for the upcoming F&A negotiations and will help maximize the University's overall F&A rates and recoveries.

Clinical services revenue is $66.9 million and is 2.7% higher than budgeted. This is $2.7 million (4.2%) higher than last year at this time. Effective January 1, 2002 the Bayview Physicians will merge with the School of Medicine and will be reported at future meetings.

Mr. Puddester also presented the sources and uses of funds through October. He pointed out that it is too early in the year to draw a lot of conclusions. Through October, the total operating surplus is $38.7 million (Table 1, line 30) compared to an anticipated surplus of $32.7 million. The general fund operating surplus is $42.2 million, an increase of $4.7 million over the projected surplus of $37.5 million. This increase is due primarily to more robust facilities and administrative cost recoveries and higher than expected clinical revenues. In the sponsored and designated funds, the University experienced a $3.5 million operating shortfall instead of the projected $4.9 million shortfall.

Revenues

Total University revenues received through October are $792 million (Table 1, line 17), 6.1% greater than anticipated for this period. There is improvement, relative to budget, both in general funds as well as sponsored programs and designated funds.

General funds totaled $329.9 million, $4.8 million (1.5%) more than expected. Tuition revenue (Table 1, line 1) is at budget in total, but there is considerable variation among the divisions. F&A recoveries (line 7) are $4.9 million (8.8%) more than projected for October. Most research divisions are experiencing significantly better recoveries than projected earlier and these results are consistent with reported increases in the sponsored research base throughout the University. Provost Knapp commented on the vulnerability of Maryland State Aid and the potential reductions. Maryland State Aid could be reduced up to 25% for each semester. Dr. Young asked if this reduction ever happened at the University and Provost Knapp responded that this did occur in the early 1990's. Mr. Puddester added that the divisions are historically cautioned to assume only a 2% growth rate, per FTE.

The better than expected level of grants and contracts is reflected in higher revenue attainment in the designated fund category. Total sponsored and designated funds are $462.1 million through October. This total is $41 million more than projected for this period. Sponsored grants and contracts (Table 1, line 6) account for $23.9 million of that variance. Revenue from the Applied Physics Laboratory (line 16) was also strong, totaling $167.2 million through October. This amount was $14.3 million, or 9.4%, above budgeted levels.

Designated gifts (line 9) are below budget levels through October. Given the uncertainty of gift receipts, most divisions use a straight-line projection and monthly variations are expected. The large gift received by the School of Medicine is not reflected in this report, but will be in November. Finally, other sources revenue (line 13) is significantly ahead of budget and represents numerous small increases throughout the University.

Expenditures

Total expenditures for the four-month period are $743.9 million compared to a budget of $713.6 million (Table 1, line 26.) General fund expenditures are $2.7 million lower than projected for the period. Most categories of spending are below budget, resulting in lower overall spending. Exceptions include clinical services and a small variation in library spending on the East Baltimore campus.

Spending for Sponsored Programs and Designated funds was significantly higher ($33 million) than expected. Expenditures for Instruction and Research were $22.8 million (Table 1, line 18) more than projected, reflecting the increase in grant and contract activity. Applied Physics Laboratory expenditures are $14.3 million (line 25) more than expected through October, also reflecting greater contract activity.

Table 2 reports the divisional total surplus or deficit as of October 31, 2001. Most divisions are in better than budgeted positions through October. Dr. Young asked what would happen if the situation were reversed and the financial picture was bleak. Is there a way to balance deficits over a number of years? Provost Knapp responded that the divisions would have several options, such as drawing down on quasi endowment, slowing down on faculty appointments and other hiring freezes. Dr. Townsend asked if divisions are able to draw down on the almost $40 million year-to-date total surplus to fund things such as the new Chemistry building. Provost Knapp remarked that there is no real way to do something like that without taxing the other divisions since the University operates under a decentralized nature.

Chairman Steinwachs asked whether there was any pressure to keep the tuition rates down since the University is doing very well financially. Provost Knapp responded that the University is recommending to the Trustees 4.0% and greater increases for many of the divisions. Provost Knapp stated that these types of increases are supported by the fact that expenditures such as total salaries and infrastructure needs are not fully funded by tuition rate increases. Dr. Young asked if the percentage increase in tuition is reviewed at the competing schools. Provost Knapp replied that an annual review of the COFHE schools is done prospectively and the University sets its Homewood undergraduate rate at 0.1% below the median for the upcoming year. Provost Knapp also stated that some Trustees have concerns about the University pricing themselves out of the market.

Divisional Balances as of June 30, 2001

Endowment Balances

The market value of the University endowment at the end of fiscal year 2001 totaled nearly $1.8 billion. This represents a $27 million, or 1.5%, decrease from the prior year's market value. Included in these balances are funds added to endowment principal during the fiscal year, unrealized gains and losses, distributions to the divisions, funds used to pay investment management fees and a portion of the Development Office budget.

Other Balances

Fund balances for the University at the close of fiscal year 2001 totaled $432.6 million. This represents an $84.8 million, or 24.4%, increase over fiscal year 2000. Overall, general fund balances declined (10.4%), while designated funds and endowment payouts being held for future expenditure posted 34.7% and 15.7% gains, respectively. Virtually all of these balances are committed for specific purposes, such as capital projects and donor or sponsor designated purposes.

Facilities and Administrative Capital Reserve

Beginning in fiscal year 2000, the five major research divisions budgeted only a portion of F&A recoveries, reserving the balance for capital and other one-time expenses, such as renovations and maintenance items, recruitment packages and to pay off loans. University-wide the reserve totaled $11.8 million in fiscal year 2001. This compares to a budget estimate of $11.7 million. In fiscal year 2002, the budget for additions to this reserve totals $14.2 million.

Faculty Salaries

Associate Provost Zeller distributed a draft memorandum to the Deans regarding the faculty salary review to be completed by the Committee. Provost Knapp and Chairman Steinwachs will send the memorandum jointly. The Deans are asked to name a divisional contact person for discussions with the faculty representative on identifying peer institutions, benchmarks, and the role that salary plays with faculty retention. The divisional faculty representative will then present this information at an upcoming Committee meeting.

Mr. Zeller also distributed a recent survey done by TIAA/CREF for Harvard University. This survey evaluated the importance of job factors for doctoral students and faculty. The factors were work balance, chances of tenure, location, department, institution, and salary. Location and work balance were the most important factors for doctoral students and junior faculty while department and location were surveyed as most important for tenured faculty. Salary ranked fifth for both the doctoral and junior faculty and ranked third for tenured faculty.

The next committee meeting is scheduled for Thursday, March 28, 2002, 9:00 a.m.

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Last updated 06Apr02 by dgips@jhu.edu