State Tech approves tuition increase of up to 6.5 percent

By Neal A. Johnson, UD Editor
Posted 1/25/23

LINN   — State Tech Regents, at their meeting on Friday, approved a maximum tuition increase of 6.5% for the fall semester.

State Tech President Dr. Shawn Strong noted that approval …

This item is available in full to subscribers.

Please log in to continue

E-mail
Password
Log in

State Tech approves tuition increase of up to 6.5 percent

Posted

LINN  — State Tech Regents, at their meeting on Friday, approved a maximum tuition increase of 6.5% for the fall semester.

State Tech President Dr. Shawn Strong noted that approval doesn’t necessarily mean that will be the increase. “We’ll watch and see what other colleges and universities do over the next few months,” he said. “And try to keep in mind what they do as well, recognizing that the governor is making a significant investment in schools, but also recognizing our costs are going up at a very high rate. So again, we’re not necessarily going up to 6.5 percent, but we’ve got the leeway to do it.”

State Tech VP of Finance Jenny Jacobs explained that previously, base tuition and fees could not be increased by an amount that exceeded the statutory maximum as provided by the Missouri Department of Higher Education as required by the Higher Education Student Funding Act (HESFA). However, with the passage of HB 856, which went into effect July 1, the college will not have to base tuition increases on HESFA calculations for five years.

“Last year was the first year that the HESFA statute didn’t apply to us,” said Jacobs. “But this year, I would say, is the first year that we truly have an unrestricted ability to set our tuition and fees. We are focusing on covering recurring expenses with recurring revenue, and tuition generates recurring revenue.”

She estimated the college would exceed 70,000 credit hours. “We looked at my projection based on the rates of each credit hour for FY 24,” said Jacobs. “I’m basing these numbers on generating the exact same number of credit hours that we’re going to generate in FY 23.”

At a rate of 4.6%, Jacobs said, State Tech anticipates would generate approximately $714,000 with an increase from $196 to $205 per hour.

Jacobs recommended a 6.5% increase based on the Consumer Price Index (CPI) from December 2021 to December 2022 increase of the same amount. She added that under the old HESFA statute, the college would have been allowed to increase tuition by that rate.

With a rate of 6.5%, tuition would go from $196 to $209, and based on her calculations, Jacobs estimates the college would generate approximately $1 million in additional revenue.

Regents President John A. Klebba noted his estimation of CPI is actually understated relative to what people are seeing on food costs.

Regent VP Steve Sellenriek agreed, noting that in his business, he’s seeing about a 7% increase in costs. “I think it’s fair,” he said of the maximum tuition increase.

In other business, Jacobs told the board that golf course clubhouse financing of $13 million would be completed in two separate bond issues with identical terms.

Regents approved a resolution last year authorizing the issuance and sale of not to exceed $9,750,000 principal amount of Auxiliary System Revenue Bonds - Series 2022 and $3,250,000 in Series 2023 bonds. First State Community Bank is providing financing for the golf course clubhouse replacement.

The Series 2022 bonds closed on April 22, and the Series 2023 bonds will close on Feb. 2, at which time a draw totaling $1,089,757 will be processed to pay fees to Professional Contractors & Engineers, Inc. ($1,078,757) and Gilmore & Bell, P.C. ($10,000).

Jacobs explained that the 2023 and 2022 bonds will continue to be in the drawdown period, with interest-only payments required until July 1. At that time, all bond funds not previously drawn will be transferred to State Tech, and monthly principal and interest payments will begin on Aug. 1.

• Jacobs presented the financial report showing total current funds of $34,957,179, including $14,575,568 in cash (compared to $10,754,160 in 2021) and $1,609,955 in unspent proceeds from 2021 bonds.

“You can see the cash balance is going up significantly,” Jacobs told Regents. “You’ve heard us talk about that before. The college is putting a significant amount of money back into reserves to prepare for future projects.”

Accounts receivable at the end of 2022 totaled $2,513,282, down from $5,128,109 at the end of 2021. “It looks like a huge drop, and it all depends on A+ timing,” said Jacobs of the A+ Scholarship Program. “Sometimes, A+ reimbursement requests come in before Dec. 31, and sometimes they come in after, so there’s no big issue there.”

Jacobs added that State Tech has two outstanding bonds series. The 2021 series was pulled out initially to build the Utility Technology Center, but the college received state appropriation to pay for that.

Instead, those funds have been used to construct the Commercial Turf & Grounds building out at the country club. The portion that hasn’t been drawn yet is reflected in total assets.   

A total of $12,531,000 in 2021 revenue bonds payable remain, and Jacobs has drawn $4,227,636 of the principal balance on the 2022 bond series to reimburse expenses related to the clubhouse so far.

The Plant Fund shows total assets of $53,745,108, giving State Tech a total of $88,702,287 as of Dec. 31. On Dec. 31, 2021, the college had total assets of $79,980,907.

Jacobs noted the college is at a $3.6 million loss as of Dec. 31, 2022. “In a perfect world, at the end of the fiscal year, both the Restricted Grant Fund and the Restricted Aid Fund would be sitting at zero,” she said, adding that the enhancement grant awarded each year gave the college flexibility with supply chain issues. “We received reimbursement on equipment purchases in FY 21 but we weren’t invoiced for the equipment until halfway through 2022 because of late deliveries, so we will see an FY 23 loss in the Restricted Grant Fund.”

The auxiliary fund shows a $2.7 million loss, but there’s $3.6 million in clubhouse expenses, which will be funded by bond funds. “So you need to add back $3.6 million there,” said Jacobs. “That would be about $900,000 in income.”

The financial report indicates a $748,000 loss in unrestricted funds, but there’s $900,000 in CTG building construction expenses. “When you add that back in, we’re real close to break-even,” Jacobs said.

In comparing the budget to actual figures, Jacobs said she budgeted for 66,895 credit hours in FY 2023, but expects the college to finish the fiscal year with 70,556.

She is estimating 70,005 for FY 23. “That’s kind of a milestone for us,” said Jacobs. “We’re going to crack 70,000 credit hours this year, I believe.”

That would add $650,000 for FY 23 tuition. “The other success story this year is interest income,” Jacobs said. “I’m a conservative girl, so I based it on the prior year, not knowing exactly when that interest rate was going to turn around. It’s turning around and going fast. A year ago, our operating funds were earning .25 percent. Each month now, they’re drawing 3.86 percent, and that’s a significant amount for the college.”

Jacobs believes the college will add $300,000 in interest income to the bottom line.

“Auxiliaries, there’s a whole lot of ups and downs going on there,” said Jacobs. “I think at the end of the day, we can expect to be about $300,000 in revenue above the budget from ancillary systems.”

In summary, Jacobs said between $650,000 in tuition, $300,000 in interest, and $300,000 in auxiliary, State Tech should see about $1.2 million over the budgeted amount.

Expenses, meanwhile, had a bright spot in health insurance. Jacobs budgeted a 10% increase in premiums, fearing the worst.

Instead, the college saw a 2% decrease in the renewal rate. “That is essentially unheard of, and I’m thankful for the savings that we enjoyed there, but even more thankful that based on our claims data, we have a very healthy group of employees,” said Jacobs.

Between the lower premium rate and the 10% Jacobs had allocated, State Tech will see expenses under budget by almost $100,000 from the health insurance renewal. “You don’t hear a lot of people talking about savings from health insurance renewals these days,” Jacobs noted.

She added that another $271,000 in savings would be realized in unfilled positions plus benefits, bringing that total to approximately $400,000 to go with $100,000 from health insurance savings.

State Tech began the year with a special projects budget of $1.3 million and, to date, has encumbered $525,000 of that amount. Jacobs said that leaves approximately $840,000 in complete control of the college, meaning at any time, “we can say no more special projects will be completed and/or additional special projects will be completed,” she added. “So, we have the flexibility to go either way.”

She said the school could potentially end the year with a $1.7 million surplus.

Remaining business will be presented in upcoming stories.