Approval of Minutes: Minutes from the meeting of November 15, 2006 were approved as distributed.

Fiscal 2007 First Quarter Operating Results

Through September, the financial results for the University are slightly better than budgeted, although it is too early in the fiscal year to draw conclusions on final results. The total operating surplus for the first quarter is $66.5 million compared to a budgeted surplus of $63.2 million. Total grants and contracts revenue as generated by expenditures is up only 3.2% over FY 2006 as of September but below budget by 2.4%. Increased budgetary pressure at the NIH and other federal agencies has led to fewer awards and more conservative spending on existing awards. Declines in F&A recoveries (down $5.9 million, 9.1%) generally track declines in sponsored grants and contracts and are also reflective of more subcontract activity that generates no recoveries. Most categories of spending are near budget. Lower spending on sponsored research, at the Applied Physics Laboratory (down $4.0 million, 2.2%) and for operation and maintenance of plant (down $1.1 million, 1.9%) are offset by increases in instruction and research, general services and administration, and auxiliary enterprises.

Compared to the prior year, revenues are growing at 3.1% versus expenses that are growing at 5.1%. However, when adjustments are made for one time occurrences, revenues grow less than one percent slower than expense growth. That comparison will be closely monitored as an indicator of a structural problem.

FY 2008 Planning Assumptions

The Committee reviewed budget and planning assumptions for fiscal 2008 through 2012:

Tuition increases were recommended by the Deans and approved by the Board of Trustees.

Maryland State aid has increased as the state fiscal condition has improved. FY 2008 assumes a statutory increase from $1,268.25 to $1,469.73 per capita.

Facilities and administrative cost recovery rates have been negotiated through FY 2008. On-campus organized research will be budgeted at 64% for FY 2008. For planning purposes, FY 2009 through FY 2012 rates will remain at 64%. Other rates will be 25% for off-campus organized research, 32.2% for on- campus other sponsored activity and 18.8% for off-campus other sponsored activity.

Subject to approval by the Investment Committee, endowment payout assumes 2% growth in FY 2008 and FY 2009. Thereafter, increase are 3% annually. A $3 million budget enhancement for Development is included in FY 2008 increasing to $3.75 million in FY 2009 and $4 million in FY 2010 and beyond. This plan allows the University to achieve its 5% payout policy in FY 2008.

Salary budget increase guidelines are 3.0% plus a pool of 1% for an extraordinary merit pool.

Fringe benefits planning rates are 34% from FY 2008 through FY 2010, 35% in FY 2011, and 37.5% for FY 2012.

Employee Benefit Plans

Ms. Hayes, Ms. Conway and Mr. Alexander gave a Benefits Update that summarized costs, strategies and opportunities. Trends in health care costs from industry sources project annual increases of 10-12%. In addition, University offers a rich prescription plan that costs $27 million per year and offers little incentive for using less expensive generic drugs. The Benefits staff is exploring vendor changes and a potential plan design change in order to incur some savings. There was further discussion about retirement plans with some focus paid to the defined benefit plan for support staff. Dr. McGill informed the Committee that pension reform may impact the funding of this plan and that there is review of whether the University should switch to another type of plan.

The Committee was asked to provide advice and support as a new process is constituted to review employee benefits.

Report of Trustee Sub-Committee on Homewood Undergraduate Tuition

Dr. Knapp reported to the Committee on the tuition review by the Board of Trustees. He indicated that the focus is on Homewood undergraduate tuition and its impact on competitiveness. He pointed out further that there is a difference in the price and the cost after discounting from financial aid and that every student is subsidized to some degree because the cost of educating a student is higher than the tuition.

In the fall of 2005, the trustees convened a subcommittee to review the tuition policy from a strategic perspective looking at factors of enrollment planning, program planning and financial aid. Key findings were that tuition increases over the past ten years, though intended to, have not covered the cost of inflation, financial aid or program development. In six of the past ten years, inflation plus financial aid consumed more than the available tuition revenue by a cumulative $4.4 million. In addition, the percent of tuition paid by students has dropped from 76% in 1987 to 70% in 2006.

The policy adopted by the Board of Trustees in October prioritizes returning a portion of tuition revenue directly to undergraduate financial aid. The policy also requires an analysis of fixed operating and current program costs including discussion of the significant cost drivers as compared to a projection of HEPI for the following year. Finally, the policy allows for the creation of essential new initiatives in the areas of academic and student life that have no other funding sources.

HopkinsOne Update

Dr. McGill updated the committee on the status of the implementation. The first payroll run is to occur on December 26th with the full system going live on January 2nd. A SWAT team of over 300 people will be available system-wide to assist users on site and a call center will be established to triage questions and direct users to experts who will be available around the clock at Mt. Washington and Eastern. Dr. Hemker asked about the status of training and Dr. McGill reported that some training will be postponed until after go-live. Dr. Steinwachs mentioned that staff had received COEUS training but faculty had not.

Respectfully submitted,
Frederick W. Puddester

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