(A new series on how our money works)
By Brent Gustafson, Finance Director
The annual operating budget for the College of Liberal Arts is approximately $250 million for the current fiscal year. While this is a really big number, the CLA budget can be broken down into two main sources of income and two main types of expenses: tuition and state appropriations, and personnel and cost pools (the charges from the University for a variety of indirect costs).
The largest single source of revenue to finance CLA operations comes from tuition--primarily undergraduate tuition ($177 million of budgeted tuition in FY 2013, 75% of collegiate revenue). Appropriations from the State of Minnesota to the University make up the second largest component of CLA's revenues ($45 million in FY 2013, 19% of budgeted revenue). State appropriations are allocated to colleges through the University's annual budget process, and this amount has varied over time, and has decreased in recent years due to reductions in state funding for the University.
Beyond these two sources of revenue, the college receives smaller--but still significant--amounts from external grants, donated funds, and student fees.
Not surprisingly, over half of the college's spending in any given year goes for salaries and benefits for employees, and this includes faculty, staff, and graduate assistants. And, obviously most of this spending is in academic units for faculty and teaching positions.
Beyond those expenses, the college pays what are known as "cost pools" to the University ($90 million in FY 2013). Cost pools are a necessary part of the University's overall budget model, because all of the revenue in the University is distributed out to collegiate units, and it is not retained for University-wide expenses. Cost pools are a mechanism to finance University expenses by charging colleges. The University cost pools include things like: facilities maintenance, utilities, student financial aid, libraries, general purpose classrooms, and research support.
Only 11% of the college budget is spent on student aid, travel, and supplies and equipment.
Each year, the college makes budget allocations to each of the academic and administrative units through its annual budget planning process. This process spans a number of months over the winter and spring, and budget decisions are communicated to units in late spring.
In recent years, the college has experienced an imbalance in revenue coming into the college and the expenses necessary to operate. This budget challenge is driven primarily by changes in tuition revenue and will necessitate difficult decisions within the college about how to better align revenues and expenses in the future.
Future editions of these budget briefs will examine some of these topics in more detail (tuition, state appropriations, costs pools, instructional funding, etc.).
Next time: What we Control, What we Don't.