Western $7 million in black 2010-12

By Matthew Hunt and Ellis Cross

October 24, 2012

Missouri Western has had revenues exceeding its budget by more than $7.4 million in the last three years, building up reserves that had been depleted for several years prior to 2009.

Interim Vice President for Financial Planning and Administration Rick Gilmore attributes the surpluses in part to being careful not to overestimate income from student fees and state revenue and not underestimating rising expenses.

“We budgeted very conservatively; I mean, I hate to use the word profit,” Gilmore said. “We did not know from time to time how much we were going to get cut.”

President Dr. Robert Vartabedian said outlook for the budget was a challenging time for Western last year.

“We had cut all operating budgets at that point by 30 percent,” Vartabedian said. “We had a near hiring freeze. We had (and still have) a considerable amount of deferred maintenance needs. On top of all this, we were looking at a potential state appropriations cut of 12.5 percent.”

The 12.5 percent cut proposed by Gov. Jay Nixon last year would have meant a $2.5 million cut. Instead, the state found money in other accounts and the appropriations total was a $500,000 increase. Last year’s budgetary rollercoaster left many members of the administration understandably queasy.

“The number one reason for the surplus in the last budget was cutting back cost wherever we could,” Gilmore said. “We have also left many positions open.”

Many positions have been left open and that action should lower the cost of instruction, but the cost of instruction has gone virtually unchanged for three years, according to the Budget and Activity Report. This report is given to the CAP Board of Governors at fiscal year end.

Those reports show a surplus of $2 million at the end of the 2010, $2.2 million at the end of 2011 and $3 million at the end of this past fiscal year, on June 30. That $3 million surplus was a sharp turnaround from the 2008 and 2009 fiscal year endings, when Western needed to pull a $4.3 million from reserves to balance the ledgers those two years combined. Those two years of withdrawals pulled the reserves down to $4.5 million, a 10-year low. The reserves are at a 10-year high now of $8.3 million.

The Board of Governors can do three basic things with reserves. They can increase them, spend them down, or maintain them. Western’s Board hasn’t decided yet what to do with these funds.

“This is a conversation the Board needs to have in the future,” Board of Directors Chair Kylee Strough said. “Keep in mind, reserves should not be used for ongoing expenses, but instead for one time purchases, improvements, etc. We are glad that we have reduced dependency on reserves for operations over the last few years.”

The total amount of income exceeding the budget is not going into reserves however. Revenue exceeding budget for 2012 was over $3 million dollars and only $1.8 million was put into reserves. The discrepancy happens again in 2011 when excess revenue exceeds the budget by $2.2 million and only another $1.8 million is going into the reserves account.

It gets even worse when you go to 2010 with revenue exceeding the budget by is over $2 million and only $200,000 is transferred to the reserves account. So, how has Western been able to post a $3 million surplus this past year when the state has cut its appropriation by $3 million? This is how:

• An increase in enrollment, which has gone up 27 percent from 2003 to 2011. • Sacrifices from students, who have faced tuition increases of 9.5 percent within the last 5 years

• Students sacrificed with cuts of more than $450,000 in scholarships in the last five years

• Sacrifices from faculty and staff, which had no pay increase until the 2 percent increase last year

• No additional personnel to accommodate increasing student population every year since 2003

• Cuts of 30 percent in operating budgets and in other university operations

The students’ sacrifices and the increased enrollment have also been especially critical. The total revenue from the student fees jumped 39 percent from 2008 to 2012 from $20 million in 2008 to 2012’s total of $28.8 million.

Students are making even more sacrifices this year, in spite of the recent surpluses. The BOG voted in May to increase tuition by $100.00 per semester for 15 credit hours, although any gain in total revenues from that increase will likely be more than offset by a decline in students this fall of 3.5 percent and more importantly, a decline in credit hours of about 5 percent.

In addition, the Student Senate voted in April to approve the Student Success Act that added another $75 for full-time students, $50 for part-time and $25 for summer session students.

The new student fees generated by the Sudent Senate, estimated to bring in over $700,000 for this fiscal year, have already brought in over $333,000 this fall semester. This act was passed by the SGA Student Senate and was supported by SGA President Jacob Scott.

“This Student Success Act was designed to help the university through this difficult time,” Scott said. “I think if given the same situation, I would do it all over again.”

Scott says that the SGA based their decision on the budget provided by the university. Scott had no knowledge of the Board of Governors Budget and Activity Reports during the time that they passed the Student Success Act.

The proposed tobacco tax, if passed by a vote of the people, is expected to generate an additional $2.2 million, Gilmore said. If both these streams of revenue come in, it could increase Western’s bottom line as much as $3 million more than last year’s surplus of over $3 million.