Approval of minutes Minutes of the meeting of March 14, 2001 were approved as distributed.

Fiscal 2001 Operating Results Through February 28, 2001

Mr. Puddester presented the University's key revenue indicators through February 28, 2001. General funds tuition revenue is $2.8 million (1.0%) higher than budgeted through February. This modest over-attainment is due in part to an additional $1.9 million in the School of Public Health, which experienced higher than expected enrollment in its Masters of Health Science program. Also, the School of Advanced International Studies (SAIS) exceeded its estimate of 430 students by 40 and generated an additional $1.2 million compared to budgeted figures. The Schools of Medicine and Engineering both reported modest additional tuition revenues for the period.

The School of Nursing reported a $948 thousand shortfall in tuition revenue through February, up slightly from December. The school indicated that the Doctor of Nursing Science (DNSC) program and the graduate programs experienced enrollment lower than projected, resulting in the shortfall. Unrestricted gifts will be used to address the shortfall in general fund revenues. All other divisions are currently at or near their estimated amounts.

F&A recoveries (after the internal interdivisional transfer and settlement) are $700 thousand (0.6%) more than budgeted through February. Most research divisions reported significantly higher recoveries compared to budget through February. Over-attainment ranged from 7.8% for Engineering to 10.6% for Arts and Sciences. Medicine and Public Health did not post similar gains due to account clean-up activity since the last reporting period. By year-end, Medicine expects to exceed budget by $5.2 million and Public Health projects a modest shortfall. Steady growth is still the trend for F&A recoveries. Through February, total recoveries are 13.8% greater than last year and both Medicine and Public Health report increases in excess of 14% compared to this time last year.

The organized research MTDC base is above budgeted amounts through February by $8.1 million (4.5%) and has grown nearly 11% over the comparable period last year. The organized research base for three divisions, Arts & Sciences, Engineering and Medicine, all exceed budget. The School of Public Health reports under-attainment in the organized research base through February, reflecting the re- categorization of certain grants and contract from organized research to other sponsored activity. The combined MTDC base through February exceeds budget.

The "Other Sponsored Activity" MTDC base is also greater than projected through February with 9.8% ($6.3 million) growth over budgeted amounts. Led by Public Health, JHPIEGO and Engineering, this growth rate represents a 21.7% ($12.4 million) increase over February of last year.

Clinical services revenue for the School of Medicine is 2.9% higher than projected through February. To date, clinical revenue is $126.6 million. This is $5.1 million (4.2%) higher than last year at this time.

Mr. Puddester presented the sources and uses of funds through February 28, 2001. The University's fiscal outlook as of the end of February 2001 is better than budgeted. Year-to-date results (TABLE 1) show a total surplus of $72.3 million compared to an estimated surplus, through February, of $17.8 million.

The general fund surplus totals $57.8 million, $9.5 million higher than budgeted for this period. A surplus is to be expected at this time of the year due to tuition receipts early in the period that will later be offset by expenditures. The larger than anticipated surplus is due to higher tuition and clinical revenue and lower overall spending were the primary contributors to this improved position. Sponsored and designated funds show a surplus of $14.5 million through February. This compares to a budgeted shortfall of $30.5 million. The improved position is attributed to more sponsored grant and contract activity and the receipt of a $28 million gift to the School of Medicine for the Cell Engineering Program, which was reported in the December Finance Committee report.

February's results for general funds also represent an improvement over the same period last year. The total general fund surplus last year at this time (TABLE 3) was $36.9 million, much less than the $57.8 million reported through February 2001. In sponsored and designated funds, the surplus through February is $14.5 million, which is $31.0 million less than last year. This is attributed to the expenditure of funds in fiscal year 2001, which had already been booked as revenue in prior years.

Revenues

Total revenues received through February (TABLE 1) were $1.4 billion, 5.9% greater than expected for the period. General funds came in slightly above budget as higher tuition and clinical revenues offset lower than expected auxiliary enterprise revenue.

Total sponsored and designated fund revenue represents a significant improvement over estimated levels through February. Sponsored and designated funds total $837.8 million through February, $70.1 million, 9.1%, more than expected. Higher than expected grant and contract activity, gifts and other sources are the primary contributors to this positive result.

Compared to last year at this time (TABLE 3), almost all revenues have increased significantly. Total revenues are up $128.7 million, which represents a 10.2% increase over last February. The principal contributors include grants and contracts (up $42.3 million), gifts (up $28.1 million), and APL contract revenue (up $23.2 million).

Expenditures

Total expenditures through February (TABLE 1) are consistent with expectations. Expenditures total $1.3 billion, which is $20.5 million (1.6%) more than budgeted. General fund expenditures are slightly lower than anticipated due to lower than anticipated plant costs and lower expenses at the Applied Physics Laboratory. Most other categories of general fund expenses are either at or below anticipated levels through February. Sponsored and designated fund spending is slightly higher (2.9%) than expected for the period. Most of the increase is attributed to higher than expected spending in instruction and research.

Total expenditures are 11.6% higher than the same period last year (TABLE 3). General fund spending increased in every category, and represented a 5.9% increase over the prior year. Expenditures in the sponsored and designated category increased by 15.5% over fiscal year 2000, led by increases in instruction and research and at the Applied Physics Laboratory.

Year-End Projections

Consistent with prior practice, the divisions have provided a general fund projection to year-end based on results through February. Overall the divisions expect to end fiscal year 2001 with a general fund surplus of $5.4 million (TABLE 2). This compares favorably to a budgeted surplus of $4.9 million. This improvement is due almost entirely to increased facilities and administrative recoveries, tuition and clinical revenue. Most other revenue sources and expenditure categories are projected to be at or near budget. The projected surplus is $3.5 million less than reported in December, as the Applied Physics Laboratory now plans to invest a greater portion of their surplus in facilities improvements.

As in past years, the division will recognize gifts, unrestricted endowment and other funds to balance their respective general fund budgets.

Divisional Results

The financial results for most divisions met or exceeded expectations through February. All divisions expect to meet budget by year-end.

The School of Medicine ended February with a surplus of $12.6 million, compared to an estimated shortfall of $23.1 million. This improved picture is due principally to the receipt of a $28 million gift for the Cell Engineering Program. Other contributors to this overall improvement include higher than anticipated grants and contracts (up $6.4 million) and clinical revenues (up $4.1 million). These better than anticipated revenues were offset partially by greater than expected expenditures for sponsored research and instruction. Medicine projects to break even in general funds at year-end.

The Krieger School of Arts and Sciences reported a $28.7 million surplus through February, which compares favorably to a $14.9 million budgeted surplus. A major contributor to this positive position is a $5 million (18%) increase, over budgeted amounts, in grants and contracts. Much of this surplus is attributable to second semester tuition revenue that was recognized in February and it is anticipated that the surplus will decline over the coming months. Arts and Sciences projects to break even in general funds by year- end. Most revenue sources are expected to meet budget with the exception of F&A recoveries, which are projected to exceed budget by $1.6 million, or 9.9%. Much of this over- attainment is attributable to increased activity at the Center of Social Organization of Schools (CSOS).

The surplus in the School of Engineering as of February totals $14.9 million. Like Arts and Sciences, significant over-attainment in grants and contracts (18.1%) contributed to the positive outlook. Gifts were also $1.7 million more than anticipated. As a result, the School expects to utilize fewer reserves to balance the FY 2001 budget.

The Bloomberg School of Public Health reported a $5.1 million deficit through February, slightly higher than the anticipated $4.9 million shortfall. Net tuition and fee revenues exceeded expectations by $3.0 million as tuition was above budget and student aid trailed budget expectations. Results for sponsored and designated funds met expectations as increased grants and contract revenues were offset by corresponding increases in research spending. However, the effects of sponsored account clean up led to under-attainment of facilities and administrative recoveries (down $1.5 million). Public Health projects to report a balanced general funds budget by year-end. Tuition revenues are projected to exceed budget by $1.8 million and to be partially offset by a shortfall in facilities and administrative recoveries of $800 thousand. These overall revenue increases are offset by projected increases in plant spending and student services. The School of Nursing ended February with a small general fund deficit compared to a projected year-to-date surplus $1.4 million. Revenue shortfalls in tuition ($782 thousand), facilities and administrative cost recoveries ($194 thousand) and clinical services ($71 thousand) all contributed to this deficit. Expenditures through February are over the budgeted amount by $188 thousand. The School projects a balanced budget by year-end. The tuition revenue shortfall is projected to be $767 thousand by year-end while facilities and administrative cost recoveries are projected to improve, but not meet budget by $147 thousand. These shortfalls are projected to be offset by additional transfers from gifts and unrestricted endowment ($825 thousand) and lower than budgeted expenditures.

Review of Operating and Capital Budget for Fiscal 2002 and Five-year Plan 2002-2006

The fiscal 2002 budget is year one of the Five-Year Plan. TABLE 4 summarizes the budget. The University is budgeting a $17.8 million total surplus. The general fund surplus is budgeted at $3.4 million and the designated fund surplus is budgeted at $14.4 million. Total revenues are budgeted at $2.1 billion, an 11.5% increase ($220.6 million) over fiscal 2001 budget. Significant increases over fiscal 2001 are budgeted in tuition ($23.6 million), grants and contracts ($40.4 million), gifts ($61.7 million), and the Applied Physics Laboratory ($25.0 million.) The significant increase in gifts is mainly due to the change in budgeting practice whereby gifts will be booked when received instead of when spent. Total expenditures are budgeted at $2.1 billion, an 8.5% increase ($166.1 million) over fiscal 2001 budget. Significant increases over fiscal 2002 are budgeted in instruction and research ($96.6 million), plant operations ($16.5 million) and the Applied Physics Laboratory ($24.9 million.) The Committee reviewed the Five-Year Plan for fiscal years 2002 through 2006. A slide presentation covered the operating and capital budget, key Plan assumptions, changes in budget presentation, and a divisional review. The Five- Year Plan projects a period of continued financial health, with improved balances projected for most divisions. In addition, revenue from all the University's major sources is expected to grow steadily throughout the Plan. This projection will allow several divisions to embark on initiatives that are expected to fuel additional growth. The current Plan specifically projects substantial increases in research, and to some extent the growth of this revenue source may provide the working capital necessary to support enhancements and new initiatives. Yet increases in research come with increased costs, and the financial benefits of research are not distributed across the entire University.

Fund-raising will play a significant role in the financing of new initiatives. The Trustees have approved a new campaign to begin in FY 2002. Additional resources for the Development Office of $4.3 million will be funded from endowment payout, in addition to the current funding of $6.9 million. A Capital Plan has been developed that details the facility needs throughout the University. This Plan includes projects that focus on the University's core activities: instruction, research, clinical and student services, totaling $654 million. The largest component of the capital budget, in terms of dollars, is research and instruction with $559 million planned over the next five years. The Schools of Medicine and Public Health and the Applied Physics Laboratory represent the majority of the proposed research space, although both Arts and Sciences and Engineering also plan to construct research buildings. Student services improvements on the Homewood campus are budgeted at $14 million. Additionally, information technology systems are proposed at $57 million with system replacement projects in student services and administration. Basic infrastructure improvements are included at $23 million.

Faculty Salary Trends and Revenue Sources Major Categories

As a follow-up item to the March 14, 2001 Committee meeting, Mr. Puddester presented the faculty salary trends and revenue sources by major categories. At the last meeting the Committee discussed divisional sources of funds and the Chairman requested data on faculty salaries and head count. This report attempted to identify trend lines for total revenues compared with faculty salaries and faculty head count and not intended to compare division to division.

Mr. Puddester stated that the quality of the current data was questionable and would require a refinement. Chairman Young remarked that the criteria for head count might vary between divisions; therefore, the divisional information is more meaningful than the Total University data. Mr. Puddester referred the Committee to the data for the Krieger School of Arts and Sciences as an example. Dr. Paulaitis commented that the support of faculty on grants and contracts should be considered and Provost Knapp asked if the data counts vacant positions or faculty on leave. Another refinement would be to consider whether faculty salaries related to part-time programs should be included if not part of the faculty head count (but are part of the gross tuition and fees.)

Mr. Puddester commented that the current report would be modified and presented to the Committee at a later meeting.

Role of the Committee

Chairman Young raised the issue of how the Committee could fulfill its communications role more effectively in future years. He asked in what ways could the Committee interact more fruitfully with administration and in what ways do respective colleagues receive information. Chairman Young suggested that the website should be better known and that one-way to do this would be for the Provost to remind department chairs of the kinds of information available on the Committee's website. Dr. Rose suggested that several times a year there be a short column in the Gazette summarizing the committee's discussions.

Provost Knapp remarked that there is a need for a formal, structured relationship between the FBAC and individual divisional faculty committees. Provost Knapp stated that this does not currently exist widespread and asked how to improve the flow of information. Chairman Young suggested that the charge of the Committee should be to present information twice a year to its respective divisions at the Provost's discretion as to which divisional committee that the presentation is made.

Chairman Young expressed the view that there should be more regular interaction between the Committee and members of the Board of Trustees. He suggested that one way to structure this would be to invite a member of the Finance Committee to attend the FBAC meetings. Alternatively the FBAC chair could attend portions of relevant board meetings.

The Committee concurred with Chairman Young and Dr. Townsend remarked that the University runs like a corporation and not as an educational institution.

Faculty Survey Update

Associate Provost Zeller provided a brief update on the faculty retention survey presented earlier this academic year. Mr. Zeller commented that the anecdotal information is important and that while salary is part of the discussion as to why faculty leaves the University it has not been the driving force behind departures. Mr. Zeller remarked that they still did not receive much response to the survey and in the future may modify the approach to the survey by sending via electronic mail and requesting only one year's worth of data.

Chairman Young announced that this was his last meeting in the role of chairmanship. Dr. Donald Steinwachs was announced as his successor.

Dr. Young thanked the Committee and the administrative staff for preparing reports and gathering data for Committee discussion. He remarked that one of the important problems facing the University, and a natural topic for this Committee, is to consider how to strike an appropriate balance between conserving and adding to the University's resources on the one hand, and using these resources to expand the intellectual mission of the University on the other.

The meeting adjourned at 12:00 p.m.

© 2001 The Johns Hopkins University. Baltimore, Maryland. All rights reserved.
Last updated 17Oct01 by dgips@jhu.edu