Productivity, Quality, and Outcomes Agreement
Appendix B: Financial Implications of the PQO Agreement
MSU-Bozeman has identified resources which will accommodate the expenditures required for success of this Productivity, Quality, and Outcomes plan. These targets represent the best intentions of the Administration and Faculty, rather than a firm commitment. As circumstances change during the four years of the plan, budgetary decisions will reflect both the desired outcomes and changing economic conditions.
The sources of revenue to fund the plan will be a mixture of reallocated base resources and new general fund and tuition collections. General fund growth for the state pay plan is estimated at 2.3% and 3.9%, respectively, for FY 1996 and FY 1997. The total Commissioner of Higher Education's allocation of general fund/millage for FY 1996 and FY 1997 is estimated to be sufficient to fund the base level of operations required to support the outcome-based plan. Significant reallocation of the base budget in addition to application of incremental revenues will be required, which is viewed by the University as an appropriate means to focus on improved productivity. Projected growth rates of 3.03% per year in state funding for each of the four years covered in the plan are appropriately conservative.
The most significant source of new revenue to fund the plan is student tuitions. The historic commitment by the state to fund the universities continues, but in a much-decreased fashion. Montana's low tuitions, relative to its competitor states, place growing pressure to increase rates for residents and non-residents alike. As the cost of education rises, and as the states relative contribution to that cost declines, tuition will soon be the most significant revenue source to fund the academic enterprise. Tuition collections are anticipated to grow by about 17% during the current biennium over FY 1995. This estimate is the result of very conservative enrollment growth projections as submitted to the Commissioner of Higher Education and of tuition rate increases already approved by the Board of Regents. Acknowledging our dependence on state funding levels and enrollment projection refinements, we project 12% growth in average tuition rates for the FY 1998/99 biennium.
The attached tables identify specific outcomes included in the plan, and their related expenditures. Where dollar costs are identified, allocations of marginal funds have been made by the Presidents Executive Council for FY 1996. For example, $175,000 has been allocated to ensure access to specific courses needed for timely graduation (Goal 1.a). In addition, $50,000 was allocated to increase access to smaller sections (Goal 3.a).
The University is restructuring its information technology services under a Chief Information Officer who will be responsible for bringing together the computing resources scattered throughout MSU-Bozeman ultimately to provide students greater access to those technologies (Goal 5a). The Executive Council allocated $40,000 from new revenues and mandated internal reallocation of Systems and Computings budget to provide remaining needed funds for the restructuring (estimated at a total of $200,000).
The College of Letters and Science was allocated an additional $81,250 in its operating base beyond the resources called for in the plan to accommodate previous enrollment growth and thus to position the College for successful implementation of this plan.
Budgetary decisions for FY 1997-99 would be finalized in those years according to projected available revenue, but the numbers reflect intent to invest in the productivity initiatives. Base reallocation will be achieved through an iterative process of academic and administrative budget/program reviews. The objectives of these reviews will be to improve our programs and services while minimizing costs, so as to generate savings which will be dedicated to funding the improvements outlined in this document.
Salaries for faculty at MSU-Bozeman are nearly the lowest of all like institutions in the nation. Because MSU-Bozeman competes in a global market for its faculty, it must be able to provide competitive salaries to attract and retain excellent faculty. MSU-Bozeman accepts the obligation to provide its faculty compensatory rewards equivalent to its level of expectations of its faculty. Therefore, this document includes a salary plan that is designed to protect faculty salaries from inflation over the covered period.
For the purpose of comparing faculty salaries, MSU-Bozeman has identified a group of twenty-five Category I institutions located in states with 1993 per capita incomes between $16,297 and $18,434. These data were collected during the Montana University System's 1994 Cost of Education study. The per capita incomes fell between levels that closely bracket that of Montana.
The FY 1994 faculty salary for all ranks in the Comparison Group ranges from $36,200 to $57,900. The average is $46,400. The average salary for MSU-Bozeman is $40,700, or 87.72 percent of the Comparison Group average. If one assumes that the Comparison Groups average annual salary increase for the near future will be 2.50 percent, it is estimated that the average salary of this group will be $49,970 in FY 1997. In order for faculty salaries at MSU-Bozeman to maintain their relative status with the Comparison Group average, a salary increase of 6.9 percent per year, for FY 1996 and FY 1997, will be necessary. This two-year rate of increase will result in an average salary of $47,200 at MSU-Bozeman in FY 1997.
MSU-Bozeman intends to provide this level of salary increase for its faculty during each of the next two years. During the second year of the current biennium, a review would be conducted of the status of faculty salaries, the current market, and the progress made towards the objectives of the document. Based upon this review, the University would either modify or reaffirm its intentions to extend this rate (6.9%) of salary increase for another two years (i.e., through FY 1999).
The proposed rate of increase for faculty salaries will be a campus average. Individual increases will be based on factors such as the following:
- Institutional priorities
- Individual merit
- Academic discipline /market conditions/equity considerations
- Cost of living index.
Contract Professional staff and GTA/GRA salary increases at MSU-Bozeman are estimated at 5.0% per year for FY 1997-99. Classified staff salary increases are estimated to average 4.8% for FY 1997 (estimated for the specific mix of position/longevity for employees on the Bozeman campus, as differentiated from the estimated state-wide average of 3.9%). For FY 1998 and FY 1999, the conservative figure of 3.5% is used in the model. We estimate just over $300,000 per year in termination pay costs, based on historical experience.
Enrollment growth is anticipated throughout the period covered by the plan. No new faculty lines are budgeted in the current biennium which is consistent with our commitment to minimize faculty growth as much as possible. However, the combined student FTE growth of the current and following biennia will create the need for additional faculty lines to meet demand for instruction. For the FY 1998/99 biennium, we budgeted very conservatively at one new faculty per 22 additional students, given that our student faculty ratio is less than 20, and is expected to decline in accordance with the PQO plan. Further, we have allocated no additional funds for staff support of those faculty, nor operating funds, nor equipment funds for those positions.
We have identified one-time assistance to the Montana Agricultural Experiment Station, Cooperative Extension Service and Fire Service Training School in the FY 1996/97 biennium for salary increases not funded by the 54th Legislature. These funds are shown under Fund Transfers on the third page of the accompanying budget projections. We anticipate that we will seek legislative appropriations to fund the base obligations of these and future salary increases for faculty in these organizations.
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