Revenues & Expenses

The multiple sources of revenue that support Iowa State University, as well as the ways in which these revenues are used, are consistent with the University’s mission and its vision of advancing the land-grant ideals and putting science and technology to work. The tables and charts in 2004-2005 Fact Book provide an overview of funding and expenditure trends from the previous five years.

For the most recent fiscal year (FY2005), the university recorded revenues totaling over $827M and expenditures of $811M. Sources and uses are listed below.

The last decade marked a significant change in state support for higher education. State appropriations presently account for 28.5% of the University’s revenues, down from almost 40% of total revenues a decade ago. Conversely, tuition and fees now account for 23.4% of total revenues, up from 15.4% in FY1996. Contracts and grants also account for a larger portion of current total revenues (23.9% in FY2005 compared to 20% in FY1996).

Note: The basis of accounting used in the preceding revenue and expenditure tables differs from generally accepted accounting principles. For purposes of consistent comparisons to prior periods, financial report data has been adjusted to eliminate the effects of recent changes in accounting principles.

Each institution governed by the Board of Regents, State of Iowa, receives an annual appropriation from the state’s General Fund. This appropriation is combined with self-generated revenues in a budget plan that is submitted to the Board of Regents for approval prior to the beginning of each fiscal year. Appropriations are made to Iowa State University in the following categories: General University, Agriculture Experiment Station, Cooperative Extension Service, Institute for Physical Research and Technology, and Special Purpose, an appropriation targeted to the Leopold Center for Sustainable Agriculture, the Small Business Development Center, the ISU Research Park, and for Livestock Disease Research. State funds that come to the University under contracts for specific programs or services are included in the contracts and grants revenue category.

The state also makes capital authorizations and tuition replacement appropriations. Since the state of Iowa is prohibited from incurring long-term general obligation debt, the Board of Regents pledges the tuition revenues of the universities to support bond issues for academic facilities authorized by the state. Tuition replacement is an annual appropriation made by the state to replace tuition revenues that have been pledged to support debt service on authorized academic revenue bonds.

State appropriations increased only 3.4% between FY1996 and FY2005, a period during which enrollment increased from 24,431 (fall 1995) to an all-time high of 27,898 (fall 2002). Although enrollment has decreased steadily since Fall 2002--Fall 2005 enrollment was 25,741--the University has set a goal of stabilizing enrollment at 26,500.

The last five years have proved particularly challenging from a budget standpoint. The state of Iowa cut the University’s operating appropriations by over $63 million. While the state did provide $20 million for salary increases during this five-year period, the actual cost of compensation increases totaled $41 million. Thus, the University had to make significant budget cuts to compensate for this loss in state appropriations, fund salary increases, and fund over $40 million of unavoidable cost increases. Increased revenues from tuition have covered some but not all of the loss.

The Board of Regents annually sets tuition and mandatory fees. The University provides a wide range of tuition-related information each year and recommends changes in student fee rates. This information is provided to the Board of Regents and is used to inform their decision-making process. It’s available to the public on the University’s web site (see tuition and fees).

The University in FY2005 received 23.4% of its total revenue from tuition income. These were monies were used to support 42% of the General Fund, which is used to finance all of the University’s instruction costs as well as much of its infrastructure expenses. Obviously, tuition is a critical source of revenue and the operating budget is very sensitive to fluctuations in it.

Tuition and fee increases in recent years have been substantial and those increases have affected student access to higher education. This is a particular concern to Iowa State because its mission as a land-grant institution stresses accessibility. Consequently, a substantial portion of tuition revenue is earmarked for financial aid. In fact, Board of Regents policy requires the University to set aside at least 15% of gross tuition revenues for this purpose. Iowa State generally exceeds this requirement. During FY2005, 21.7% of gross tuition revenue or $35 million was devoted to grant aid--$26.6 million was awarded to undergraduates, $18.3 million of which went to students with demonstrated financial need. A more complete discussion of student financial aid is included in section 2.3.3 Investments & Changes.

A ten-year history of revenues from tuition and fees follows:

The tables below present a ten-year history of undergraduate tuition and fee rates.

Students also pay mandatory fees totaling $744 (FY2006). Mandatory fees are comprised of six individual fees: computer, $204; health, $170; health facility, $16, student activities, $60; student services, $188; and building, $106.

Beginning FY1987, engineering students were assessed fixed computer fees and other students were assessed variable computer fees for courses that required a significant amount of computer time. Since FY1992, all students have been assessed fixed computer fees. For FY2006, the fees are $437 for engineering students, $347 for computer science and management information systems students, and $204 for all other undergraduate students. In FY2005, revenues from student computer fees totaled $6.02 million. The allocation of computer fee revenues is determined by the Computation Advisory Committee (CAC), which is comprised of students, faculty, and administrators with students representing half of the membership. There is strong accountability for the distribution of computing resources to ensure student access and to expand the use of technology into all areas of the curriculum. Annual reports on the use of these funds are available on the CAC web site.

The Health Fee supports the student health center, providing students access to medical services and discounted pharmaceuticals. The Health Facility Fee is part of a bond obligation necessary to construct the Thielen Student Health Center and will be dropped when the bonds are paid in full on June 30, 2014.

The Student Activities Fee supports the student government, a wide array of student clubs, recreation services, and initiatives students negotiate with Intercollegiate Athletics. It also allows students unlimited use of the community bus service, CYRide. The Building Fee backs bond obligations for the Lied Recreation Facility, Ames/ISU Ice Arena, Hilton Coliseum, and the Memorial Union. A Special Student Fee committee comprised of five students and five administrators makes recommendations to the University’s president regarding increases for these fees and distribution of fee revenue. Student representatives are officers of the Government of the Student Body and Graduate and Professional Student Senate.

Individual course fees may also be assessed for specialized course-related materials, field trips, and consumable supplies. In FY2005 individual course-related fees totaled $1.47 million. These fees must be approved by central administration; they are billed and collected by Iowa State’s business office and not individual instructors or departments. The policy on special course fees is included in the University’s policy manual.

The institutions governed by the Board of Regents, State Iowa, control two broad categories of investments-- operating assets and endowment assets. For investment purposes, operating assets are defined as those general use and restricted funds not included in the institutions’ endowment portfolio. The portfolio consists of investments needed to meet the underlying cash requirements of the institutions. The investments are limited to fixed income securities with a maximum duration of 63 months.

The operating investments are comprised of various balances from accounts within each University’s operating funds, including state appropriations. Interest income is distributed monthly to these accounts based upon their proportionate share of the total balances. During FY2005, $4.9 million was distributed to the operating accounts.

The endowment funds of the institutions, in recognition of their long-term charters, are managed with the intention of obtaining the highest possible total return (current income plus net realized and unrealized appreciation) within the guidelines set forth by the Board of Regents. Each institution can establish spending policies for the endowment funds while maintaining the purchasing power over time.

Iowa State currently has a spending policy of 4.25% of the three-year rolling average of the market value. The income is distributed quarterly to the spending account of each endowment. During FY2005, $3.2 million was distributed to the spending accounts.

Iowa State generated $287 million in grants, contracts, and cooperative agreements during FY2005, an increase of nearly 5% over the FY2004 total of $274 million and the seventh consecutive record high. The figure includes all contracts and grants received directly from federal, state and local government units, corporations, and foundations. This funding is used for research, public service/extension activities, educational projects, student financial aid, buildings and equipment.

Funding for research totaled $180 million, a 10% increase over FY2004 and another record amount for Iowa State. For the past two years, this percentage increase has been in the double digits. Furthermore, over the past five years, research funding has increased 50%.

Total support from federal agencies increased by nearly 8% to $181.8 million. The largest contributors of federal funds to Iowa State included the Department of Agriculture ($45.7 million); the Department of Energy, primarily to the Ames Laboratory ($36.2 million); the Department of Health and Human Services ($23.9 million); the National Science Foundation ($27.0 million), the Department of Education ($17.0 million), the Department of Transportation ($9.6 million) and the Department of Defense ($7.6 million).

Support from non-federal sources remained steady at $105 million. The largest contributors of non-federal funds were foundations and associations ($34.1 million, which included $17 million for construction of new buildings); state, county and city government agencies ($30.3 million); businesses and corporations ($28.5 million); and other universities and colleges through joint projects ($9.6 million).

Tables showing 10-year trends in sponsored funding awarded to Iowa State can be found at Office of the Vice Provost of Research web site.

The Iowa State University Foundation is a private non-profit organization dedicated to securing and stewarding private gifts and grants that benefit Iowa State University. The Foundation works with Iowa State administrators, deans, and unit leaders to determine the University’s fundraising priorities. The Foundation staff and volunteer leadership work in partnership with University officials to generate private support for Iowa State.

The Foundation’s net assets on June 30, 2005, were $449 million. Excluding in-kind gifts, the Foundation raised $82.4 million during FY2005, a 30% increase over the previous year. The number of donors also increased to 55,279 in FY2005. Funds transferred to the University in FY2005 decreased 45% to $32.7 million, directly related to the decrease in privately funded building activity on campus in FY2005. FY2005 gifts included 10 new endowed faculty chairs/professorships/fellowships and 92 new student scholarships and fellowships. During the 2005 fiscal year, the university dedicated one new building, the Steve and Debbie Bergstrom Indoor Training Facility. This project was funded, in part, with private dollars.

The ISU Foundation financial statements are available to the public on the web.

Other significant resources of the University include: $12.4 million in federal appropriations, representing the formula funds for the operations of the Agriculture and Home Economics Experiment Station and the Cooperative Extension Service; $29.1 for the Ames Laboratory, which is operated by Iowa State under contract with the U. S. Department of Energy; $106.1 million for auxiliary operations such as the Department of Residence, Athletics, the Iowa State Center and Telecommunications; and $49.1 million in miscellaneous revenue.

Two new, significant documents shaped Iowa State’s FY2006 budget: Forward Thinking, Iowa State University’s Strategic Plan for 2005-2010 and the Board of Regents’ Partnership for Transformation and Excellence Plan.

Both plans are good roadmaps for transformation and excellence. The Partnership Plan provides the broad parameters for change and has already increased the visibility of Regent institutions with the people, of Iowa resulting in increased financial support from Iowa’s leaders. Forward Thinking outlines more specific priorities and goals for Iowa State University.

Iowa State’s mission, as stated in Forward Thinking, is to “Create, share and apply knowledge to make Iowa and the world a better place.” Transforming the world through the discovery and application of knowledge is what land-grant institutions were created to do, and our vision is to “be the best at advancing the land-grant ideals and putting science and technology to work.” That means achieving excellence in all areas of our mission.

Forward Thinking identifies five institutional priorities for the fulfillment of the University’s mission and the achievement of its vision. Those five priorities are:

• Education. Strengthen undergraduate, graduate, and professional education to enhance student success at Iowa State University and beyond.

• Programs. Increase the number of graduate, professional, and research programs that are among the very best--especially in areas that build on University strengths and address local and global critical needs.

• Economic Impact. Translate discoveries into viable technologies, products, and services to strengthen the economies of Iowa and the world.

• Iowa Life. Elevate the state’s appeal as a place to live, learn, work, and play.

• University Life. Ensure that the University is a great place to learn and work.

For the next five years, every decision involving resource allocation, both for existing and new programs, will be based on the program’s importance to one or more of these priorities. By adhering to these priorities and paying close attention to the many specific goals supporting each of them, Iowa State will achieve its vision and the Regents’ goals of transformation and excellence.

The guiding premise of the Regents’ Partnership Plan is that “Affordable, high-quality public higher education for Iowans and cutting-edge research that helps fuel the state’s economy is in the best interest of all Iowans.” The goals outlined in Forward Thinking are well aligned with those included in the Regents’ Partnership Plan. Iowa State’s FY2006 budget was built around a series of strategic initiatives that form the first steps toward the priorities outlined in both plans.

Funding to accomplish the goals of the Partnership Plan is dependent on

• Four years of moderate tuition increases for Iowa students and their families,

• An annual increase in state appropriations of $40 million to the Board of Regents for fiscal years 2006-2009

• Minimum reallocation of $20 million during each of the next four years

While the FY2006 tuition increase and the University’s reallocation plan are consistent with the Board’s Partnership Plan, new state allocations fell short of the $40 million requested. While the University was grateful to receive new state appropriations for the first time in several years, the overall funding picture for FY2006 constrains progress.

The University anticipates the following new revenues for FY2006:

State Appropriation increases from the Iowa Legislature for FY2006 came in three parts:

• $5,987,715 of recurring funds from the Education Bill - HF 816

• $2,500,000 of one-time funding from the state’s Infrastructure Bill - HF 875

• $1,120,000 of one-time funding from the Supplemental Bill - SF 342

• $79,978 appropriation from the Department of Administrative Services to offset fees DAS charges for their services

Most of the recurring funds were devoted to salary increases for faculty and staff in General Fund units that receive an appropriation from the Education Bill. Units funded through the Economic Development Bill (Institute for Physical Research and Technology(IPRT), Small Business Development Center(SBDC), and the ISU Research Park( ISURP)) funded compensation increases through reallocations.

The University was required to spend funds from the Infrastructure Bill on major building repair. It had anticipated allocating $1 million of institutional funds and reallocating an additional $1 million for building repair in FY2006. These institutional funds will now be redirected to other strategic priorities described below on a one-time basis. The University will use the entire $2.5 million from the Infrastructure Bill for major building repair.

The institutional funds originally intended for building repair combined with funds from the Supplemental Bill provided one-time money that has been used strategically in FY2006 to fund the University’s highest priorities, including new faculty positions, support for instruction and students services, and support for research. However, all of these uses require ongoing, permanent funding. Thus, implicit in Iowa State’s FY2006 budget is an early commitment to secure base funding for these initiatives from future increases in tuition or recurring funds from state appropriations.

Tuition. The increase in tuition revenue was based on the Board approved 4%, HEPI-based, tuition increase for undergraduate and graduate students, and a fall 2005 enrollment that was anticipated to be somewhat smaller than fall 2004. New revenues from this increase were dedicated to salary increases for faculty and staff, and to increasing funds available for student financial aid.

The Board of Regents approved an alternative to the HEPI-based tuition increase for professional students (veterinary medicine). Resident veterinary medicine students have been assessed a 12% addition to the HEPI-based tuition increase and non-resident veterinary medicine students an 8% addition. Revenue generated by this additional tuition has been used to directly benefit educational programs offered by the College of Veterinary Medicine and to increase financial aid available to veterinary medicine students.

Indirect Cost Recovery revenue is expected to increase 6% due to increasing levels of funded research anticipated in FY 2006.

Miscellaneous Fee. The shortfall in miscellaneous fee revenue was the result of a reduction in application fees ($167K) due to fewer applications received, reduction in deferred billing ($81K) due to lower enrollment, and reduction in general fund interest earnings ($400K) due to lower account balances and current interest rates.

Administrative Fee. Two years ago the University instituted a consistent administrative fee charged to self-supporting units, auxiliary enterprises, and other recharge activities that generate external income not subject to indirect cost recovery. In FY2006, the fee has been increased from 2.5% to 3% yielding an estimated $215,400 of additional income. The purpose of the fee is to recover a portion of the cost of administrative services such as payroll, accounting, public safety, etc. that support all activities at the University but are paid primarily from the General Fund. Similar administrative fee policies are common among Iowa State’s peer institutions.

Reallocation. Early in fall 2004, Iowa State began developing a plan to strategically reallocate $8 million for purposes that would yield progress on Forward Thinking, the University’s 2005-2010 strategic plan, and in a manner that would fully comply with the Board of Regents’ reallocation policy. Iowa State’s FY2006 budget included $9.2 million of reallocations. The additional $1 million resulted from reallocating funds originally budgeted for major building repairs for other strategic initiatives due to the appropriation from the state’s infrastructure fund.