UA revenue and expenses are expected to increase

The University of Alabama system’s proposed $1.1 billion operating budget projects increased revenue fueled by growth in state appropriations and tuition.

However, the budget also shows spending growth, driven by mandatory costs, merit increases and investment in strategic priorities.

The UA system board is due to vote on the budgets on Friday. The board’s finance committee on Thursday approved fiscal year 2020 budgets for the three campuses, system office and health system. The budgets would come into effect on October 1.

UA’s total revenue is expected to increase by 5%, with expenses increasing by 4.8%.

State appropriations increased by $13.8 million.

“This increase has allowed us to not raise tuition fees in the state for the second year in a row,” said Vice President of Financial Affairs Matt Fajack.

Tuition revenue is expected to increase by $13.2 million, primarily due to a 3.5% increase in out-of-state tuition fees this fall. Revenue from grants and contracts is expected to increase by $11 million.

University plans $9.8 million for 2.25% merit raises and promotions, $2.7 million for graduate stipends, $5.9 million for service pay increases adjuncts and $1.9 million for new faculty and staff with associated benefits.

The budget also includes an additional amount:

• $3.6 million for mandatory cost increases, such as software licenses, pensions, and health insurance

• $5.8 million for scholarships and student aid

• $4.3 million for debt service

The University of Alabama at Birmingham’s proposed operating budget for fiscal year 2020 is $1.41 billion, up from its current budget of $1.32 billion.

The UAB will receive an additional $15.6 million in government appropriations. Tuition revenue is expected to increase by $8.1 million due to enrollment growth and increased rates for out-of-state students. The campus also expects to realize efficiency savings of approximately $16 million.

UAB expects to end the current fiscal year with favorable finances, with better-than-expected revenue driven in part by enrollment growth and related ancillary services, the senior vice president of finance and directors, Allen Bolton.

Expenditures are expected to increase by $42.7 million. Increases include $17.2 million for a 2% merit increase and promotions, $18.7 million for strategic priorities such as campus security, $3.2 million for mandatory cost increases such as insurance and $3.6 million for debt service.

The University Hospital’s operating budget will grow to approximately $2 billion in the next fiscal year. System operating revenue is expected to increase 7% to $2.2 billion.

Growth is driven by inpatient volume, surgical cases, clinical work and emergency room visits, Chief Financial Officer Dawn Bulgarella said.

“We have budgeted for fairly modest increases in Medicare and Medicaid government payer reimbursements and small increases in our commercial payers,” she said.

State appropriations increased by 6.6% to approximately $37 million.

Operating expenses for 2020 will total $1.99 billion, including about $900 million related to compensation and contract labor costs, she said. Labor costs for health system projects will increase by $78.5 million, including new staff to account for patient volume and market wage adjustments. The budget also includes a merit increase of 2.2%

Transfers to support UAB’s academic mission are expected to rise 12.3%, to $168 million.

The proposed operating budget for the University of Alabama at Huntsville is $244.4 million, up from the current budget of $235 million. Total revenue is expected to increase from $239.4 million in the current budget to $247.8 million in the next fiscal year.

State appropriations will increase by $3 million and tuition revenue is projected to increase by $9.4 million based on enrollment growth and nonresident rate increases.

Spending is expected to increase by $12.9 million, including $2.7 million for a 2.25% merit increase, $2.95 million for scholarships, $1.64 million for strategic priorities such as diversity initiatives, $2.75 million for academic support and $2.6 million for deferred maintenance.

The system office budget would increase by 6.7%, primarily due to a $1.1 million increase for new positions, a 2.25% merit increase for existing staff, and salary of Chancellor Finis St. John.

Personnel costs account for about 82% of the budget increase, Vice Chancellor of Finance Dana Keith said. The proposed operating budget for fiscal year 2020 is $21.8 million.

The budget also includes an additional $245,000 for system-wide marketing and branding initiatives.