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Institutional Research and Planning
Room 113 1871 Old Main Drive
Shippensburg, PA 17257
Phone: (717)-477-1154
Fax: (717)-477-4077
Email: irp@ship.edu

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Chapter 7 - Financial Planning and Institutional Development - Recent Developments

The internal budget request process parallels and accompanies other institutional and academic planning at Shippensburg and is described fully in Chapter Nine of the Self-Study. It is a continuous cycle that follows guidelines for program planning which are issued by the Office of the President in December of each academic year and which asks all divisions of the campus community to plan for the ensuing three years. The guidelines provide specific financial parameters for the given fiscal year, and divisional planning is divided into "maintenance/enhancement" and "new" goals that are compared with historical funding patterns. The requests go through approval processes within each division and are then consolidated in the Office of the President by the end of spring semester.

Budget projections and financial statements from the university are submitted each summer to the Office of the Chancellor and are used in developing the appropriation request of the State System Of Higher Education to the governor and the state legislature. During this process over the past five years, the university and the State System as a whole have had to manage with continually constrained fiscal resources. Increases in financial support from the Commonwealth have not kept pace with inflation. State appropriations have risen 10.9 percent since FY92/93, well below the climbing costs of operations. To offset this limited increase in direct state support, tuition and fees for resident undergraduates have risen by 24 percent and for non-resident undergraduates by 39 percent over the same period.

Despite these limited increases in Commonwealth support, state appropriations still comprise approximately 47 percent of the university budget. These funds are distributed by the State System to the institution through a system-wide formula that was revised in FY95/96. Prior to that date, the percentage of state appropriations for each State System university was frozen at FY90/91 levels. The new allocation formula calculates each university's need based on its number of full-time equivalent students (FTES) and the size of its physical facilities. To provide funding stability and to minimize the impact of minor fluctuations, student enrollments are averaged over three years. Each university's revenue then is divided by calculated need to determine its percentage of funding, and this figure is compared to the system average. Because the goal of the formula is to fund each university at or near the system average, appropriations are redistributed from those campuses that are "over-funded" to those that are "under-funded." A transition factor is built in to insure smooth shifts toward this average. The amount lost by any one campus in a single year is capped at a rate that is determined using the total amount of new revenue that will be realized in the coming fiscal year. After an initial downward adjustment of $285,612 in 1995/96, Shippensburg has been funded at very close to the system average.

Enrollment Management

Because the formula is primarily driven by the number of full-time equivalent students, the institution monitors its own enrollments and those of the other campuses carefully. Indeed, each State System university is expected to maintain its enrollments within a pre-set "band," a practice begun in the 1991/92 academic year. The purpose of the band, which has high and low target enrollments and theoretically withdraws funding if the limits are exceeded, is to match resources at each campus with the number of students. In recent years, Shippensburg has stabilized its enrollments near the top of its band and has been within one percent of its target. (Table One) Within the last year, the university has received approval to increase the enrollment band by two percent. The new figure will allow the institution to meet increased enrollment expectations and to maximize resources more efficiently.

Table 7-1 Undergraduate Enrollment Band Data

Acad. Year

Head Count

FTES Actual

FTES Target

Variance Act.-Tar.

Upper Limit

Variance Act.-Tar.

1991/92

5504

5259

5110

149

5213

46

1992/93

5443

5191

5110

81

5213

-22

1993/94

5375

5139

5110

29

5213

-74

1994/95

5363

5153

5110

43

5213

-60

1995/96

5386

5148

5110

38

5213

-65

1996/97

5435

5196

5110

86

5213

-17

1997/98

5466

5250

5110

140

5213

37

During the past decade, the enrollment bands and other State System directives have not made it necessary for Shippensburg University to make drastic changes in its enrollment policies. Unlike many institutions within the system, enrollment at Shippensburg was relatively stable before 1991/92, and the university deliberately avoided increases in admissions despite growth in applications, a pattern that continued in the 1990s. This enrollment stability is the result of slightly more restrictive admissions policies, but it is also maintained through two strategies. The first is the placement of restrictions on the number of majors in each academic department, or enrollment "caps," and the second is the establishment of high criteria for admittance or transfer into some departments, or admission "gateways." Enrollment caps serve as a safety net to prevent the university from exceeding established limits, and gateways act as filters to prevent certain programs from going beyond their caps. Both the caps and the gateways are reviewed continually, and they are linked to classroom instructional capacity and available human resources.

The enrollment caps and the admissions gateways are part of a varied and detailed system for tracking enrollment patterns at all levels of the institution, including students with declared majors, in the undeclared division and in non-degree programs. This system is administered by the Enrollment Management Team, which meets weekly and includes the Associate Provost, the Dean of Admissions and the Director of Institutional Research and Planning as well as a faculty representative. The team uses a continuing enrollment and full-time equivalent student production model to produce program-specific projections that are then used in the development of enrollment plans. The model considers projected outflows from graduation, voluntary withdrawals, dismissals, inter-department/college transfers and changes from full-time to part-time status. It weighs inflows from entering students and transfers from other institutions, readmissions, students returning from leaves of absence and internal transfers. The team also considers demographic yield and profile data for the areas that the university serves and coordinates its work with other planning processes of the university, such as the annual Faculty Staffing Plan.

Financial Management

Effective enrollment management policies have been coupled with reliable fiscal processes and administration in other areas of the university, and they have enabled the institution to maintain its reputation for sound financial management. Shippensburg has been able to balance its budget each fiscal year, minus the effects of carrying a mandated accounting device that measures potential post-retirement benefits and compensated absences liability. The post-retirement liability is the funding that would be needed to pay for the health benefits of current employees after they retire, and the compensated absences liability is the money that would be needed to be pay for all accrued leave time if the university were to shut its doors. Indeed, both in FY96/97 and in FY97/98 the institution showed a surplus. (Table Two)

Table 7-2 Education and General Budgets for FY96/97 to FY 99/00

FY96/97 Actual Dollars

FY97/98 Actual Dollars

FY98/99 Projected Dollars

Percent Variance

FY99/00 Projected Dollars

Percent Variance

Tuition and Fees

26,527,183

27,206,351

27,165,333

0.2%

27,165,333

0.0%

State Appropriations

26,620,919

27,343,083

28,977,787

6.0%

28,977,787

0.0%

Other

3,613,452

3,860,850

3,176,649

-17.7%

3,176,649

0.0%

Total Revenue

56,761,554

58,410,284

59,319,769

1.6%

59,319,769

0.0%

Personnel

44,668,545

46,140,796

48,577,234

5.3%

50,017,045

3.0%

Services/Supplies

7,603,898

7,726,481

7,726,937

0.0%

7,935,564

2.7%

Capital

1,835,280

1,833,362

1,833,362

0.0%

1,882,86

32.7%

Transfers

2,077,825

1,157,983

1,174,051

1.4%

1,318,658

12.3%

Total Expenditures

56,185,548

56,858,622

59,311,584

4.3%

61,154,130

3.1%

Revenues Less Expenditures

576,006

1,551,662

98,185

-1,834,361

In addition, several standard performance ratios, which are used by many institutions of higher education and are shown in Table Three below for FY95/96 and FY96/97 at Shippensburg, indicate that the university has lived well within its means.

Table 7-3 Performance Ratings
A. Net Total Revenues to Total Revenues

1996

(000)

1997

(000)

Current Funds Revenues

Education and General

$56,305

$56,762

Auxiliary

11,293

11,976

Current Funds Expenses

Education and General

(55,630)

(56,215)

Auxiliary

(11,186)

(11,713)

Net Total Revenues

782

810

Net Total Revenues Percentages

1.2%

1.2%

B. Net Education and General Revenue to Total E & G Revenues

1996

(000)

1997

(000)

E & G Revenues

$56,305

$56,762

E & G Expenses

(55,630)

(56,215)

Net E & G Revenues

675

547

Net E & G Revenues Percentages

1.2%

1.0%

C. Net Auxiliary Revenues to Total Auxiliary Revenues

 

1996

1997

Auxiliary Revenues

$11,293

$11,976

Auxiliary Expenses

(11,186)

(11,713)

Net Auxiliary Revenues

107

263

Percentages

0.9%

2.2%

Other measures of the financial health of the institution are performance indicators that the State System has recently adopted to assess the fiscal efficiency of each campus. These indicators have initially been calculated for a three-year period beginning in 1994, and five of them are shown in Table Four. Together, they indicate that Shippensburg has improved its cost-effectiveness in most areas during the three-year time frame. The institution was able to reduce the instructional cost/student credit hour ratio by 0.5 percent in comparison with the system average increase of 3.7 percent. There was also an increase in student credit hour production of 1.61 percent, while instructional cost increases were limited to 1.14 percent, which brought this expenditure close to the State System average.

The performance indicator that reflects university expenditures in relation to full-time equivalent students also shows that Shippensburg is operating more efficiently. By increasing the number of FTES while containing expenditures, the university's ratio increased by only 2.2 percent in comparison with an average system increase of 5.0 percent. During the three-year time frame, the institution also became more flexible with budget revenues dedicated to non-discretionary purposes. The amount of discretionary funds was increased by 2.6 percent, while other campuses increased by only half this amount. Additionally, the university's financial operating ratio, which indicates whether an institution's annual operating revenue is sufficient to maintain its annual expenditures, increased by 0.2 percent, and the total student costs at the university increased by almost the same rate as the system average. (Table Four)

Table 7-4 Financial Performance Indicators

 

1994/95

1995/96

1996/97

3 Year Change

% Change

Instructional Cost/ Student Credit Hour

$148.29

$151.93

$147.61

($0.68)

-0.5%

System Average

$141.88

$148.23

$147.07

$5.19

3.7%

 

 

 

 

 

 

Expenditure/Student Ratio

$9,229

$9,798

$9,518

$289

3.1%

System Average

$9,254

$9,654

$9,634

$380

4.1%

 

 

 

 

 

 

Budget Flexibility

17.9%

17.8%

18.3%

0.5%

2.6%

System Average

17.3%

17.6%

17.6%

0.2%

1.3%

 

 

 

 

 

 

Financial Operating Ratio

4.54%

4.22%

4.06%

-0.48

-10.65%

System average

4.04%

4.34%

4.32%

0.28

6.85%

 

 

 

 

 

 

Student Costs

$7620

$7,874

$8,160

$540

7.1%

System average

$7552

$7,778

$8,112

$560

7.4%

Despite the healthy financial picture of the university, projecting budgets for the institution beyond the current fiscal year is very difficult because the major sources of revenue-tuition rates and state appropriations-are not controlled by the university. Compensation for personnel and the costs of fringe benefits are also determined at the state level. There are, however, several trends and recent actions that will affect these budgets in the immediate future. The Board of Governors of the State System froze tuition for FY98/99 and, at the same time, there was only a modest rise in state appropriations of 4.95 percent. The projected small surplus for the current year will be achieved through savings realized from the freezing of operating budget allocations. Levels of expenditures in the following years can be expected to grow at rates greater than inflation. Estimated salary increases of 2 to 3 percent plus step increases for all bargaining units and increases of roughly 10 percent in employer contributions for health care benefits also contribute to this projection. In addition, the growth in costs will include $600,000 in debt service payments for the next 20 years as part of the State System Academic Facilities Renovation Program, and the institution will be financially responsible for any claims, liabilities or additional expenses arising from these renovation projects. (See Table 2)

Renovations and Maintenance

Since 1995, the university has spent $14,341,000 on renovations to campus facilities. These projects have included upgrades to classroom buildings, such as the improvement of air quality in Franklin Science Center and the installation of new air conditioning systems in Memorial Auditorium, Dauphin Humanities Center and Shippen Hall; and infrastructure maintenance and improvements, such as the upgrading of the campus electrical distribution and sewage control systems. Funding for these changes and for others to academic facilities has come through the university budget and through the Capital Budget process at the state level. There have also been improvements to the residence halls, which are financed by a separate auxiliary fund accumulated from student fees and by bond issues. The most recent of these projects is ResNet, the wiring of student dormitory rooms to allow access to the university mainframe computer and library system, e-mail and the Internet, which was completed in December of 1998.

At the same time, two State System performance indicators that apply to maintenance and repair expenditures (Table Five) show Shippensburg below the system average in these categories.

Table 7-5 Maintenance And Repair Performance Indicators

 

1994/95

1995/96

1996/97

3 Year Change

% Change

Maintenance/

Replacement Ratio

3.18%

2.57%

1.73%

-1.45%

-45.6%

System Average

3.09%

2.85%

2.80%

-0.29%

-09.4%

 

 

 

 

 

 

Maintenance/

Budget Ratio

5.09%

4.43%

3.41%

-1.67%

-32.93%

System Average

5.46%

5.39%

5.38%

-0.08%

-1.49%

While these figures indicate sound management of resources, they are somewhat misleading. The amount and the percentage of its revenues that the university spent on major repairs and renovations in 1995/96 and 1996/97 decreased due to a shift of resources to major new building construction and can be expected to increase in the immediate future. The Capital Budget approved by the state in 1997 authorized $17,126,000 for maintenance and repair projects to be completed between 1999 and 2003. These include upgrades to sewer lines and to the university steam system and major renovations in Franklin, Shippen, Rowland and Shearer Halls.

The 1997 statute also authorizes, but does not provide state funding for, several other important projects, including further renovations to many classroom and administration buildings. But the centerpieces of the authorization are the proposed construction of two new facilities-an Instructional Arts building, which would provide greatly expanded educational and public space for the performing arts, and a significant addition to Ezra Lehman Library. Both projected buildings are part of the university's facilities master plan, a document that was completed and approved by the Council of Trustees in September of 1998.

Facilities Master Plan

The master plan, which was prepared by a professional firm after extensive discussions and consultation with the campus and regional communities beginning in 1995, projects facilities changes at Shippensburg University over three planning cycles-0-5 year, 5-10 year and 10-20 year horizons-ending in 2017. Several issues emerged during the discussions and consultation that framed the finished plan. Very few campus structures, it was discovered, had been updated or modernized in the previous 18 years, and others not since the 1960s. Several other buildings, specifically those on the National Register of Historic Places, imposed constraints on proposed alterations. Utility systems, particularly the sewage, steam and electrical systems discussed above, had reached the end of their expected useful life. The professional consulting firm also called attention to what it termed circulation problems-that is, conflicts between automobiles and pedestrians and the lack of unifying green spaces where students and others could move unhampered by vehicular traffic.

The completed plan lists 71 proposed realignments, renovations and new facilities to be considered for implementation, as monies become available, over the next two decades. In addition to staged improvements in nearly all academic and residential facilities and in the campus infrastructure, the plan envisions a green way without vehicles running north and south through the campus. Staff and student parking will be moved to the periphery of the campus, and new street patterns will be created that will remove all but service traffic from the center of the university. Altered facilities use will include the conversion of Henderson Gymnasium to a center for student services and the transfer of women's athletics to Heiges Field House.

The Instructional Arts facility and the addition to the library projected by the master plan will be financed with monies both from the Commonwealth of Pennsylvania and from the Shippensburg University Foundation. This mixed funding, which began in 1993 for all new buildings in the State System, requires that 25 percent of the cost of new construction be raised from private sources, with the state providing the remaining 75 percent. The university used this method of financing to design and construct the Mathematics and Computer Technology wing of Dauphin Humanities Center in 1996 and the Grove Hall classroom facility in 1997. The addition to Dauphin Humanities Center is a 35,000 square foot structure that houses the Mathematics/Computer Science Department and the university Computer Center. Grove Hall is a 70,000 square foot classroom building that contains the John L. Grove College of Business, two academic departments and a modern electronic classroom. To construct these buildings, the Shippensburg University Foundation provided $3.4 million after a capital campaign ending in 1995.

Shippensburg University Foundation

The Shippensburg University Foundation, which was chartered in the late 1970's, is a separate corporation governed by an independent board of directors that solicits, manages and expends funds in support of the university's mission and goals. It employs numerous development strategies in addition to capital campaigns for specific purposes such as building construction, including annual and planned giving drives and donations from corporations and foundations.

The recent record of the foundation suggests that the matching funds for the proposed new buildings included in the master plan will be raised in a timely manner. A major gift of $2.65 million has already been pledged for the Instructional Arts Center. However, the foundation will have to raise a total of approximately $10 million for both new facilities. This seems a realizable goal. Since 1989, the foundation has conducted two successful capital campaigns that have produced over $16.1 million for the university, and these funds have been used not only to finance Grove Hall and the addition to Dauphin Humanities Center but also for scholarship aid to students, the renovation of Shippen Hall and the enhancement of ongoing planned giving programs. The foundation is currently planning to launch a new seven-year capital campaign with a financial goal of between $25 and $40 million to be used for the projected buildings and for the enlargement of endowment funds.

That such an ambitious goal is within reach is indicative of the success of the foundation over the past decade. In addition to the two capital campaigns, the foundation's endowment has risen to over $14 million and total net assets have climbed to just over $19 million in 1998. In comparison, the endowment figure was approximately $6.8 million in 1994. Over the past five years, the foundation has raised over $14.4 million from its many sources. From these funds and from the continuing endowment, total direct support to the university between 1994 and 1998 was $7.25 million, with $2.85 million of that sum going to scholarships and loans to students, a figure that is among the highest in the state system. Indeed, the State System performance indicator that measures the fundraising to student ratio at each campus places Shippensburg well above any of its sister institutions between 1994 and 1997. (Table Six)

Table 7-6 Fundraising/Student Ratio

 

1994/95

1995/96

1996/97

1997/98

4 Year Change

% Change

Fundraising/Student Ratio

$551

$463

$356

$535

-$16

-2.9%

System Average

$253

$271

$260

 

 

 

The most universally accepted standard in higher education fundraising is the Annual Fund, that portion of revenues contributed each year that comes from alumni, parents and the campus community. Between 1993 and 1998, nearly $4.77 million was contributed to the Shippensburg Annual Fund, which is administered by the foundation, surpassing its goal in each fiscal year. The percentage of possible support within each contributing group was also extremely high; alumni participation averaged between 33 and 37 percent of possible givers during this period, and the percentages for parents and the college community were approximately 50 and 55 percent. These levels of support suggest both a strong loyalty to the university and a solid commitment to its goals.

Two other major projects in support of the institution have been recently undertaken by the Shippensburg University Foundation. The first is a three-year campaign to raise $1.8 million for the construction of a Spiritual Center and Interfaith Chapel, which will be located adjacent to the campus and will house the university's ministry program. Approximately $1.12 million was pledged to the project by the fall of 1998. The second is the purchase and construction of off-campus student housing. In June of 1998, the foundation purchased College Park Apartments, a residential complex for 300 students adjoining the campus near Heiges Field House and Seth Grove Stadium, for $2.95 million, which included a $695,000 donation. In addition, the foundation recently broke ground on a $6.1 million new student housing facility next to its own administrative offices on the Newburg Road. This projected 61-unit structure will provide residential suites and other rooms for 236 students, study lounges, Internet access and a fitness center, and it will charge reasonable rental fees. Together with projected renovations to College Park, the cost of both projects and associated expenses will be approximately $10.6 million, and no further charitable gifts will be required for construction. The foundation hopes that one beneficial consequence of both projects will be to relieve some of the pressure among students for adequate off-campus housing; currently between 30 and 40 percent of the student body live in housing surrounding the institution.

1996

1997

Auxiliary Revenues

$11,293

$11,976

Auxiliary Expenses

(11,186)

(11,713)

Net Auxiliary Revenues

107

263

Percentages

0.9%

2.2%

1996

(000)

1997

(000)

E & G Revenues

$56,305

$56,762

E & G Expenses

(55,630)

(56,215)

Net E & G Revenues

675

547

Net E & G Revenues Percentages

1.2%

1.0%