By Emily Rosenberg
Editor-in-Chief
The University is running a balanced budget of $175,574,460 for Fiscal Year 2024 (FY 24) with the use of $2,447,000 in reserve funds, according to Executive Vice President Dale Hamel.
This budget supports all operations of the University and includes a financial aid budget of $38,500,000 and a capital budget of $8,070,000.
The University’s operating budget, which includes nearly everything from student services, campus safety, and salaries to the college center operations, is $108,556,406.
The budget is supported by several revenue streams, including student tuition and fees, state appropriations, and federal grants.
The Board of Trustees approved the FY 24 budget during the May 2023 Board of Trustees meeting while anticipating the allocation of funding from the Fair Share Amendment and recognizing that all remaining COVID-19 relief funding had been expended.
The Fair Share Amendment to the Massachusetts Constitution requires all Massachusetts residents with an income of $1 million or higher to pay an additional 4% income tax. The revenues from this tax, according to the amendment, must go to transportation and education. This was the first year revenues from the Fair Share Amendment were available to be appropriated. According to the Massachusetts Legislature’s website, in the FY 24 General Appropriations Act, approximately half of the revenue from the Fair Share Amendment - $500 million - was allocated to transportation, while half was allocated to K-12 and higher education, with a large portion of the funding for higher education spending going toward a new initiative, MassRecconnect, providing free community college for residents 25 and older.
Hamel said the most significant funding the University received from Fair Share was additional financial aid. “That's great, and that helps students, which is important. Eventually, you think it will help both enrollment and retention because it's reducing the cost to students,” he said.
During the May 2023 meeting, the Board also approved a 2.5% increase in student fees and tuition after three years of the board voting to keep costs stable.
According to Hamel, the University was able to make up for the lack of student revenue during the years when tuition and fees did not rise through the use of Higher Education Emergency Relief Funds (HEERF). He said state appropriations also kept pace with the tuition and fees freeze.
Hamel said student revenues have been significantly impacted by lower enrollment. In FY 19, student revenues were $36 million, whereas in FY22, they were approximately $26 million - a $10 million difference.
Furthermore, student revenues have decreased 22.4% - $7.5 million from FY 13 to FY 23, he said.
Expected gross funds from undergraduate student tuition and fees in FY 24 is approximately $22,400,000. However, the University expects to remit about $135,000 of tuition back to the state in the budget, he added.
Hamel said the Budget Planning Committee goes through several exercises to minimize how much student tuition will have to be returned to the state, including budgeting for faculty going on sabbatical so they are not generating extra revenue because their salaries are what the state appropriations are directed toward.
As a comparison, Hamel said last year, the University sent only $125,000 of $17.5 million in student tuition back to the state.
“That is a pretty good percent,” he said. That is only approximately 0.75% of the University’s student revenues that were returned to the state.
Another piece of the University’s budget is financial aid, which is $38,500,000. According to President Nancy Niemi’s State of the University Address, 89% of students receive financial aid.
The financial aid budget is supported from state and federal loans and grants, including $15,000,000 in federal loans, $5,000,000 in non-federal loans, $450,000 in state no-interest loans, $5,500,000 in federal grants, $6,800,000 in state grants, including anticipated Mass Grant Plus funds, $940,000 in Framingham State Foundation grants, $388,000 in housing grants, $50,000 from the Independent Alumni Association, and $4,372,000 in University grants.
Hamel said when students receive financial aid, it does not impact gross student revenues. However, the disbursement of financial aid does cause a discount to be noted to total net student revenue for college-funded aid, such as FSU grants.
Hamel said the average annual cost for an education at Framingham State University is $37,000 per student, including room and board; the actual average cost for the student with state appropriation and financial aid is less than $4,000 per year.
This year, the net amount of state appropriations, including fringe benefits, was $57,318,000. In FY 23, net state appropriations was $55,000,000.
The entire state appropriation is directed toward University employee compensations. Hamel said personnel accounts for 65% of the University’s expenditures.
The University operating budget functions under 15 trust funds that are associated with specific student fees - for example, the College Operations Trust Fund houses 36 sub-accounts and is the largest with a student fee rate of $9,729.
Examples of departments funded under the College Operations Trust Fund are the Admissions Office, utilities, Registrar Office, and the Student Transportation Center, among others. The College Operations Trust Fund is 24% of the University’s total operating budget. Hamel said, “This structure ensures that income for a specific purpose is actually being spent on that specific purpose.”
The 13 other trust funds include Continuing Education, College Center, Residence Life, Career Services, Student Activities, Library, Danforth Art Center, Academic Support, Athletics, Warren Center, Health Services, Campus Safety, and General Purposes.
To better estimate the budget, Hamel said all revenues and expenditures are budgeted on a three-year rolling average at a 5% increase. The rolling average is the sum of money divided by the number of years.
Generally, budget planning begins in March when the prior year is then reviewed. The process is managed by a Budget Planning Committee led by Hamel. Each trust fund has a trust fund manager who is responsible for reviewing the previous fiscal year and writing a proposal for the new year that ultimately becomes the condensed approved expenditure by the end of the budget planning process in May.
If a division is looking to fund a new initiative, this would be built into their sub-account or “budget,” Hamel said.
He said although the University is running a balanced budget, there are future accrued expenses, such as “pension liabilities,” that are not considered.
He said while they are included in the University’s financial statements, they are ultimately the responsibility of the Commonwealth.
Hamel said another factor that impacts the University’s net budget is its endowments - donations made to the University. But those investments aren’t budgeted because the Budget Planning Committee cannot predict what the amount will turn out to be.
Another reason endowments are not budgeted is because these are restricted funds - money that must be allocated toward specific projects.
In FY 24, the Legislature allocated $20 million toward the endowment incentive program for the purpose of matching funds state institutions receive as donations, directing $5 million toward state universities.
“It's not going to help the immediate operating budget. It's going to help us in the future. When we have a larger endowment, we can budget a portion of those returns to support operations,” Hamel said.
Last fiscal year, the University endowment, not including the FSU Foundation Endowment, was $44.3 Million. Over the past ten years, the University’s endowment has increased $25.7 million - 138%. Except for last year, the University has experienced an increase in donations every year since FY 13.
Hamel said this increase in the endowment fund has resulted in the University significantly improving its financial position in the past five years, leading the University to “essentially break even.
Hamel said, “Going into the pandemic, if somebody said, ‘Could you break even over this period?’ I think we would have all been happy at that point. There's been various times where we've budgeted deficits, and then not ended up having deficits.” This is because the University was able to adjust expenditures, restructure bonds, and receive HEERF funding.
“Obviously, during the pandemic, there are some areas where expenditures went down significantly because activity stopped or largely stopped,” he added.
The University is budgeting the use of $2,447,000 in reserves across four accounts this fiscal year.
Reserves are essentially “rainy-day” funds the University may elect to use during challenging budget situations. Reserves are funds that accrue when the University has leftover sources of revenue at the end of a fiscal year that can be put away for unanticipated crises.
Hamel said the University has planned to use reserves for the previous three fiscal years, but each year, the funds have not had to be used.
Hamel said budgeting the use of reserves is “the worst-case scenario,” as once the fiscal year is in full swing, the University may be able to restructure some of the actual expenditures for collective bargaining to reduce a possible deficit. This normally happens sometime around February.
“You build up reserves and hopefully, you see investments from those reserves to support operations, but they're also for unusual circumstances,” Hamel said.
He added one of the reasons the University has not had to use reserve funds in the last few years is because of HEERF funding. The University received $20 million in HEERF funding, which was dispersed throughout the three years, mainly to assist with student financial aid.
HEERF was a one-time grant payment released from the Federal Department of Education to assist institutions of higher education struggling financially due to the effects of COVID-19.
Hamel said while the majority of these funds went toward student financial aid, the funds “backfilled” $3 million toward operations in both FY 22 and 23.
“We now have to wean ourselves off of that federal support by developing a budget that may use some reserves in the short term, but in the long term, get to the point where we have a balanced budget” without the use of reserves, Hamel said.
In the FY 24 budget, the use of reserve funds has been designated where departments are running a deficit. For example, the budgeted expenditure for Continuing Education is $7,299,000 and the anticipated revenue is $7,655,000, leaving a deficit of $366,000.
Other trust funds that are running deficits and for which the University has budgeted for the support of reserves are Academic Support, College Operations, and Arts & Ideas. A deficit exists when the total budgeted revenue is lower than the total budgeted expenditure.
The largest deficit exists in “College Operations,” an account which funds over 36 different offices at the University. The total deficit is $1.9 million.
Hamel said there are ways throughout the fiscal year to lower deficits and avoid using reserve funding. “We're hopeful that collective bargaining work will come in greater than what we had budgeted for so I don't think we'll close that deficit, but we'll reduce that deficit,” Hamel added.
Another account that is running a deficit is Residence Life. The deficit is $1,234,000. However, different from budgeting the use of reserves, this deficit is managed by debt service reserves - funds the University sets aside from previous years as a guarantee to the Massachusetts State College Building Authority that the University has at least one year of payment in the budget.
Hamel said a debt service reserve can be thought of as a “last-month deposit” that provides assurance that the annual debt service will be paid.
“When we restructured debt, we no longer needed those reserve funds to meet the new bond covenants, so that freed up those funds for use to support operations,” he said.
Last year, the University was considering selling Linsley Hall due to excess residential capacity. However, as Linsley Hall is the only residential building on campus with air conditioning, the administration has abandoned this option, deciding to keep it offline during the school year and utilize it during summer breaks to save on operation costs.
There is also a component to the budget that responds to the University’s five-year strategic enrollment plan.
Hamel said by the time the budget was constructed, there were several investments toward marketing and communications that the administration had already decided to make. For example, a new position for a communications coordinator that works closely with Admissions was created.
Some of these initiatives were completed in FY 23 but will continue to be funded throughout FY 24.
[Editor’s Note: See “Plan in works to increase undergraduate enrollment” published in the October 20, 2023 issue]
The FY 24 state budget also allocated an additional $50 million for all state universities, colleges, and the State University System for capital projects. Hamel said what projects might be funded through some of this money is decided by the Department of Capital Asset Management (DCAM).
Hamel said an example of an ongoing capital project is a sewer project at the Warren Conference Center. He said $500,000 was allocated for this project and will be available until December 2024.
He added another example of an ongoing project is renovations made to the McAuliffe Center, which cost approximately $7.7 million, and were partially funded from a $5 million grant from the American Rescue Plan Act.
Hamel said the University is “at the mercy” of DCAM, which determines the projects that may be funded during FY 24, so they have to hope that the state moves swiftly before the fiscal year ends.
“We're hoping to see future rounds of capital funding from Fair Share as well because it's not a base cost. It's a one-time [allocation] and then it's available - again the following year if the state chooses to allocate it the same way,” Hamel said.