By Brent Gustafson, Finance Director
The budget for the College of Liberal Arts is financed primarily by tuition (75%) and state appropriations (19%). These resources are then spent on CLA operations, primarily on salaries and fringe for faculty, staff, and graduate assistants (54%), as well as overhead and shared costs to the University (35%, known as "cost pools"). [See the first article of CLA Budget 1001 for more on sources and uses of the CLA budget.] This piece is going to examine the college's largest revenue source--tuition--in more detail. For the current fiscal year (2013), CLA is budgeting tuition revenue of $177.3 million.
Tuition revenue includes tuition paid by graduate, professional, and undergraduate students. In CLA, 89% of our tuition revenue comes from undergraduates.
The University of Minnesota uses a budget model that allocates all "earned income" to colleges across the system. What this means for tuition is that all the tuition is earned at the collegiate level, and only through overhead charges (known as "cost pools") does that money get back to centralized University functions.
Within this structure, tuition is "earned" in two different ways: through enrollment and instruction. The University budget model gives 25% of a student's tuition to the college in which that student is enrolled (registration tuition). The remaining 75% of the tuition paid goes to the college that provides the instruction for the course (instructional tuition). Given the individualized nature of student course taking, that 75% portion of tuition will vary from student to student. Additionally, for any given student it is possible that the 75% portion of tuition will vary from semester to semester, and even from course to course.
1. A forestry major (CFANS) enrolls in a Spanish class. Of the tuition paid, 25% goes to CFANS, 75% to CLA.
2. A sociology major (CLA) enrolls in a Family Social Science class (CEHD). Of the tuition paid, 25% goes to CLA, 75% to CEHD.
3. A psychology major (CLA) enrolls in an art class. 100% of tuition is paid to CLA.
CLA has financial challenges related to tuition based on both aspects of the 75/25 tuition split. Overall enrollment in the college (undergraduate and graduate students) has declined from just over 17,000 students in fall 2009 to just under 16,000 students in fall 2012. This reduces the tuition available from the 25% paid to the college of enrollment.
Additionally, CLA has experienced a decline in the number of student credit hours of instruction taught in our courses. In academic year 2008-09, CLA delivered approximately 434,000 student credit hours (SCH) of instruction, while last year (AY 2011-12) that figure was approximately 393,000 student credit hours. While some decrease in SCH should accompany the decrease in the size of the student body, another trend has created pressure on CLA instructional tuition. CLA students are taking an increasing share of their credits in colleges outside of CLA:
• In 2008-09, CLA students took 73% of their credits in CLA, with the remaining 27% at other colleges;
• Last year (AY 2011-12), only 66% of CLA credits were taken here, while 34% were taken at other colleges.
There are likely a number of factors that are influencing these trends, reflecting trends in demand for particular fields of study as well as the menu of what's offered in CLA and other colleges.
Regardless of the source, the implication is that the combined effect of fewer students overall and a declining share of the instructional pie results in budgetary challenges for the college, as this creates downward pressure on our single largest revenue source.
Often the most visible aspect of tuition is the overall rate set by the Board of Regents, as well as any rate of increase. However, for any college within the University, the total amount of tuition earned is driven not just by price, but by volume. As a result of a decline in volume, CLA's tuition revenue does not change by the same percentage as the price increases of recent years. For example, for the current fiscal year, while the rate of in-state undergraduate tuition increased 3.5% (and 4% for non-resident and graduate student tuition), CLA has only budgeted a 2.4% increase in revenue from tuition due to the declines in enrollment and student credit hours described above.