Compliance Status

Louisiana State University and A&M College is currently in partial compliance with this principle and will be in full compliance once the audit report and management letter for FY 2013 is issued by State Legislative Auditors.

Narrative

As the flagship institution of the state, Louisiana State University and A&M College (LSU) has the vision to be a leading research-extensive university, challenging undergraduate and graduate students to achieve the highest levels of intellectual and personal development.  Designated as a land-, sea-, and space-grant institution, the mission of LSU is “the generation, preservation, dissemination, and application of knowledge and cultivation of the arts” [1].

In implementing its mission, LSU is committed to:

• Offering a broad array of undergraduate degree programs and extensive graduate research opportunities designed to attract and educate highly qualified undergraduate and graduate students;
• Employing faculty who are excellent teacher-scholars, nationally competitive in research and creative activities, and who contribute to a world-class knowledge base that is transferable to educational, professional, cultural, and economic enterprises; and
• Using its extensive resources to solve economic, environmental, and social challenges.

LSU has demonstrated financial stability that supports the instruction, research, and public service missions of the university and the scope of its programs and services.  LSU has continued to show growth in enrollment, graduation rates, and self-generated revenue.

Unrestricted Operating Budget

Operating Budget and State Appropriations

The ten-year period from fiscal year 1999-2000 through 2008-2009, with the exception of 2005-2006 (Hurricanes Katrina and Rita), was a period of steady increases in state appropriations to the university.  In 2007-2008, the cumulative increases allowed the university not only to reach the average state appropriation per student of its peers in the Southern Regional Education Board (SREB) states for the first time in twenty-six years, but also significantly advanced its strategic plan (the National Flagship Agenda).  In 2008-2009, this period of sustained increases in appropriations helped to propel the university into the top tier of American universities, as reported in U.S. News and World Report.

Due to numerous financial factors, such as the decision to cut taxes for individuals and businesses, an increase in the number of tax credits and rebates, languishing severance tax collections, and a retrenchment in spending resulting from an eroding national economy, the revenues available to the state began to decline.  In January 2009, the university’s period of increases in state appropriations ended with the implementation of a $10.3 million mid-year reduction in state appropriations and the forecast of more cuts for the ensuing fiscal years.  The leadership of the university laid out principles to be followed throughout this multiyear budget crisis.  The overarching principle was to protect the academic core.  Priorities established to guide budgetary adjustments were to (i) preserve and protect the university’s academic, mission-driven, excellence-oriented core; (ii) maintain momentum in adapting and implementing the National Flagship Agenda; (iii) retain sufficient flexibility, if possible, to pursue programmatic “targets of opportunity;” (iv) seek every possible cost-saving efficiency in both academic and non-academic functions, including inter-institutional partnerships and collaborations; (v) pursue new sources of revenue, including successfully completing the Forever LSU (capital) Campaign; and (vi) protect jobs for critical personnel and long-serving employees.  The university has remained true to those principles during the subsequent state appropriated budget reductions.

From the first cut to state funds in January 2009 until the FY 2013-2014 budget, LSU’s state appropriations declined by $122.3 million, or 52 percent.  Tuition, fees, and other self-generated revenue increases mitigated most of the reduction and now comprise more than 70 percent of the total operating budget revenue (see Table 1).  Reliance on non-state revenue sources is a national trend among the public flagship state universities.  In all, the total operating budget decreased from $451.3 million in FY 2008-2009 to a low point of $430.5 million in FY 2009-2010 before returning to a $453 million budget for FY 2013-2014 [2] [3] [4] [5] [6]. Despite the budget challenges, student enrollment has grown over the past three years and is expected to grow again this fall [7].

For FY 2013-2014, the Louisiana Legislature and LSU System approved a total operating budget for the university of $453 million, up $7.6 million from FY 2012-2013.  The 1.7 percent increase is due to a $27.4 million increase in self-generated revenue, offsetting a $19.8 million reduction in state funds (see Table 1).  The LSU Board of Supervisors is scheduled to review and approve the FY 2013-2014 operating budget at its September 6, 2013, meeting.  The university expects modest annual budget growth over the next several years, yielded from a combination of rising state revenue projections and scheduled tuition and fee increases.

In May 2013, the state’s Revenue Estimating Conference revised the fiscal year 2013-2014 revenue forecasts upward by $155.1 million out of a state general fund budget of $8.35 billion.  The estimate for subsequent fiscal years shows a steady increase:  $8.5 billion in fiscal year 2015; $8.8 billion in fiscal year 2016; and $9.0 billion in fiscal year 2017. 

Tuition and Fees

Tuition and fees account for approximately 68% of the total FY 2014 unrestricted operating budget of the university.  Tuition and fee increases are approved by the legislature, the Board of Regents, and the LSU Board of Supervisors.  Under provisions of the Louisiana Granting Resources and Autonomy for Diplomas (LA GRAD) Act [8], LSU has been able to increase resident tuition and fees by 10% per year and non-resident tuition and fees by 15% per year since FY 2011.  In 2011-2012, the academic year for which the most recent data are available, LSU’s undergraduate resident tuition is 29% below its Southern Regional Education Board (SREB) peers.  Therefore, LSU maintains additional capacity to increase tuition without compromising its competitive advantage with enrollment. Table 2 reflects the annual tuition and required fees of full-time resident and nonresident undergraduate students of the University.

For FY 2011-2012, LSU ranked 13 out of 14 for in-state tuition and 11 out of 14 for out-of-state tuition, among its selected national land-grant peer institutions.  LSU’s tuition was $2,254, or 26% below the average, a fact that additionally demonstrates its capacity to increase tuition and fees while still remaining competitive among its peers (see Table 3).

Tuition Discounts

The university does not practice tuition discounting in the traditional sense, i.e., charging different student prices for the same educational opportunities.  However, the university does provide a number of tuition exemptions as approved by the LSU Board of Supervisors.  These are non-funded exemptions.  In accordance with Governmental Accounting Standards Board Statements No. 34 and No. 35, tuition revenues are reported gross with the related discounts and allowances recorded in a contra-revenue account called “scholarship allowances” in the financial statements.  The scholarship allowance, which represents the difference between the stated charge and the amount paid by the students and/or third parties on their behalf, includes the amount of university-provided exemptions that are not funded.  Scholarship allowances also include certain types of financial aid that are not otherwise reported on the financial statements as operating or non-operating revenue and expense.

To ensure LSU continues its commitment to Louisiana’s citizens by providing access to its academically–qualified, most financially needy students, the university created the Pelican Promise tuition exemption program, which began in fall 2007 [9].  The intent of this financial assistance program is to complement, supplement, and enhance existing and all future, state, and LSU scholarship and assistance programs.  The Pelican Promise program targets undergraduate Louisiana students whose family income is equal to or less than 150 percent of the poverty level and who are eligible for a Federal Pell Grant.  The value of the exemption is the equivalent of tuition and the registration fee.   

Enrollment

LSU’s student enrollment and demand has remained steady or increased over the past several years, despite increasing tuition and fees each year.   Enrollment has increased by more than 5% from FY 2009 to 2012. Table 4 reflects the fall semester head-count enrollment trends at the university.

The new first-year and transfer application statistics presented in Table 5 include applications, admissions, and matriculations at the university for the fall semesters. The spike in the number of applications from fall 2008 to fall 2010 was due to LSU’s entering into a contract with an enrollment marketing company to increase the number of undergraduate applicants to the university.  LSU was able to maintain the high level of applicants without the private company’s services. The application statistics indicate that a strong demand still exists among students to enroll at LSU even in the current economic environment of tuition increases each fiscal year.      

Figure 1 presents a graphical representation of the enrollment and demand trends:

The Student Population Breakdown (Figure 2) provides an enrollment distribution for undergraduate and graduate students by resident and non-resident status.  The enrollment trends in this figure further indicate LSU has the capacity to increase tuition and fees without dramatically affecting the enrollment population at the university.  This capacity has led to financial stability during a period of dwindling state resources.     

Figure 2. Student Population Breakdown

Competitive Advantage

The State of Louisiana provides the Taylor Opportunity Program for Students (TOPS) to Louisiana high school graduates meeting certain eligibility requirements and wishing to attend a Louisiana public college or university.  In fall 2012, 92% of the new in-state first-year students entering LSU held the TOPS scholarships, representing 74% of all new first-year students.  In fall 2012, over 55% of all undergraduate students at LSU received TOPS scholarships.  The Basic TOPS award for the 2012-2013 academic year was $5,183.  The annual tuition and required fees (based on 12 hours per semester) for the 2012-2013 academic year was $6,949, which resulted in an out-of-pocket cost for the student of $1,766.  The last time a full-time undergraduate resident student paid less than $1,766 was in 1987-1988.  Historical TOPS data in Figure 3 demonstrate the affordability of LSU’s tuition for in-state students and the consistency of the amount paid by the student.

Total University Revenues and Expenditures

Revenues

The university uses a diverse stream of revenues to support its annual activities as demonstrated by the following revenue tables:

While there have been significant reductions in state appropriations from 2009 to 2012, increases in tuition  fees, auxiliary, and other revenues have been used to mitigate these reductions (Figure 4).  Total revenues for the university have increased $31 million from 2009 to 2012.  This demonstrates the university’s ability to continue to generate revenue despite reductions in support from the state.  Tuition and fee increases have been modeled to provide revenue stabilization to meet annual expenditures.

In FY 2009, state appropriations comprised 31% of total current revenues.  In contrast, the FY 2012 state appropriations comprised 19% of total revenues, which were offset primarily by increases in tuition and fees (Figure 5):

Expenditures in each functional area have remained relatively consistent as a percent of total expenditures since FY 2009.  The university has maintained its commitment to instruction, research and public service (Table 7).    

Long-Term Debt

LSU does not borrow funds to support the day-to-day operations of the institution. The university does borrow funds to finance the building or renovation of facilities for auxiliary and ancillary units.  In 2002, the university implemented a comprehensive housing plan and in 2003 a campus master plan projecting capital expenditures throughout the campus.  Funding for these projects is expected from various sources, including state capital outlay appropriations and the issuance of revenue bonds.  Since 2004, the LSU Board of Supervisors has issued new Auxiliary Revenue Bonds in an aggregate amount of approximately $350 million to finance auxiliary and ancillary unit projects on campus.  Moody’s Investor Services and Fitch Ratings have assigned ratings of “A1” (Positive Outlook) and “AA-,” respectively, to the university [10] [11].  LSU submits a Continuing Disclosure Report on an annual basis to provide information to bondholders regarding the financial stability of the institution [12].  The university maintains a conservative debt profile with no variable rate debt and no interest rate hedges associated with its debt. Table 8 shows the schedule of bonds payable as of June 30, 2012:

All of the Auxiliary Revenue Bonds are secured by the revenue generated by the auxiliary and ancillary enterprises of the university.  Auxiliary revenues of the university have remained strong and continue to be a growing source of security for the university’s debt.  The auxiliary revenues have experienced an average annual growth of 5.81% since 2000.  In FY 2012, auxiliary revenues represented 35% of the university’s total operating revenues.  Historical pledged auxiliary revenues are shown below (Table 9, Figure 6):

Private Support

In June 2006, the Forever LSU campaign was publicly announced to establish a fund-raising goal of $750 million. The campaign’s four pillars were student support, faculty support, university-wide support, and campus infrastructure. In November 2010, it was announced that the campaign was successful with private donor contributions totaling approximately $753 million. Contributions to Forever LSU have enabled the establishment of 426 professorships, 38 chairs, and 794 scholarships. In addition, the campaign has allowed LSU to invest in major capital projects.   

The LSU Alumni Association, the LSU Foundation, and the Tiger Athletic Foundation actively seek support from the private sector to supplement state appropriations.

Alumni gifts generated through the association are used to support academic scholarships, alumni professorships, student jobs, faculty awards, and alumni programs, reunions, and publications.  In calendar year 2011, the Alumni Association received more than $2.2 million from alumni and friends [13].

The contributions to the Tiger Athletic Foundation benefit every athlete and team at LSU through scholarship and academic awards, as well as through the construction and maintenance of athletic facilities.  For the calendar year 2011, the Tiger Athletic Foundation received over $40.4 million in cash contributions [14]. 

Private giving through the LSU Foundation focuses on building its endowment for the university’s benefit and on gifts designated for specific purposes in the colleges and schools within the university, including professorships, scholarships, library and museum acquisitions, equipment and facilities, distinguished faculty chairs and fellowships, and other purposes that cannot be supported entirely with state funds.  In fiscal year 2012, the LSU Foundation received total gifts and pledges of $28.8 million [15] [16] [17] [18].  On June 30, 2012, the market value of total assets was $533 million (Figure 7). 

University Requirements for Core Requirement 2.11.1

“The member institution provides the following financial statements:

1. an institutional audit (or Standard Review Report, issued in accordance with Statements on Standards for Accounting and Review Services issued by the AICPA for those institutions audited as part of a system-wide or statewide audit) and written institutional management letter for the most recent fiscal year prepared by an independent certified public accountant and/or an appropriate governmental auditing agency employing the appropriate audit (or Standard Review Report) guide;
2. a statement of financial position of unrestricted net assets, exclusive of plant assets and plan-related debt, which represents the change in unrestricted net assets attributable to operations for the most recent year; and
3. an annual budget that is preceded by sound planning, is subject to sound fiscal procedures, and is approved by the governing board.”

LSU has a sound financial base and demonstrates financial stability to support the mission of the institution and the scope of its programs and services.

The Louisiana Legislative Auditor conducts an annual audit of the LSU System.  The audit is conducted in accordance with auditing standards generally accepted in the United States of America and with the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.  To satisfy the requirements under the SACSCOC Principles of Accreditation, an institutional audit of fiscal year 2012-2013 for LSU was requested of the legislative auditor by Dr. F. King Alexander.  Because the fiscal year for Louisiana and the LSU System ends on June 30, the audit report will not be completed by the September 2013 submission of the compliance report [19].  This information will be made available as soon as it is received. 

The audit report for the year ended June 30, 2012 stated that the financial statements were fairly stated and no material weaknesses in controls or violation of laws were found.  The financial position of the institution is positive despite recent economic challenges and demonstrates sound planning and fiscal management. 

Statements Provided as Required by Comprehensive Standard 2.11.1:

Net Tuition:  Under provisions granted in LA GRAD Act, LSU has been able to increase tuition and non-resident fees.  Net tuition revenue has increased 50% from FY 2009 to 2012.  The increase in tuition revenue has been used to mitigate the decreases in state appropriations, resulting in stable unrestricted revenues from FY 2009 to 2012. 

ARRA Fiscal Stabilization Funds: Received only in FY 2010 and 2011.

Total Expenses:  Due to the reduction in state appropriations, fewer unrestricted funds were used to support instruction, research, and public service.  Support from restricted funds increased to cover these functions.

Scholarships and Fellowships:  increased as a result of the increases to tuition and non-resident fees.  The cost to provide the awards to students is directly correlated to the tuition and fees assessed.

Cash and Cash Equivalents:  The decrease in cash and cash equivalents is due to a phase-out of the university’s CD program.  The CDs were reported as cash and cash equivalents.  As the CDs have been called, the university has increased its investments.

Capital Assets:  The increase in capital assets is due to construction of several major projects across campus, including:

Business Education Complex

Choppin Hall – Annex

Parking Garage

Residential College

Union Theatre Renovations

Bonds Payable:  The increase in bonds payable is due to the issuance of the 2010A and 2010B Auxiliary Revenue Bonds in FY 2010 in a total PAR amount of $118,875,000.

Other Post-Employment Benefits (OPEB):  In accordance with GASB 45, the university records a liability for OPEB.  This liability has traditionally existed at the university to record the costs of providing health care and life insurance to retirees.  As required by GASB 45, in FY 2008, the University began recording the liability as part of its financial statements.  The university has traditionally been able to fully meet its OPEB obligation. 

Total Net Assets:  The growth in total assets is primarily due to the increase in capital assets. 

Current assets:  Have increased as a result of the increase in investments.

Property and Equipment:  Has increased due to the construction of several capital projects across campus.

Total Operating Revenues:  Have increased as a result of increases in tuition and fees and auxiliary revenues.

Non-operating Revenues:  Have decreased as a result of decreases in state appropriations.

Long-term Liabilities – Non Current:  Have increased due to the issuance of the 2010A and 2010B Auxiliary Revenue bonds.

Operating Budget Planning and Approval Process

LSU annually prepares a balanced operating budget based on sound planning and development processes.  The budget development process takes a comprehensive approach, includes a broad spectrum of university participation, and considers several projections and potential impacts such as

• Changes in state appropriation allocation;
• Proposed changes to tuition and fees;
• Enrollment projections;
• Estimated state unfunded mandate costs, such as changes in employer retirement rates, health insurance rates, and state risk management insurance premiums;  
• Possible cost saving efficiency in both academic and non-academic functions; and
• Potential increased flexibility and autonomy for reducing expenses or increasing revenues through the LA GRAD Act in certain business-type functions, such as investments, risk management, and procurement [8].  

The budget projections and potential impacts are presented to the University Budget Committee.  This committee provides budget recommendations to the campus’ chief executive officer.  The scope of the committee’s charge includes ongoing budget issues, such as midyear cuts, budget increase or decrease scenarios, planning for future fiscal year impacts, and other budgetary matters of the institution.  The committee membership consists of the Executive Vice Chancellor & Provost, who serves as chair; the Vice Chancellor for Finance & Administrative Services, the Vice Chancellor for Research and Economic Development, the two Vice Provosts for Academic Affairs, the Associate Vice Chancellor for Budget & Planning, the Associate Vice Chancellor for Communication and University Relations; and four faculty members [20].  

The Executive Vice Chancellor & Provost, the Vice Provosts for Academic Affairs, and the Vice Chancellor for Finance and Administrative Services also meet with the vice chancellors and academic deans throughout the year to discuss current and future funding needs necessary to meet strategic plans and budget priorities.  The executive administration also meets with student groups, such as LSU Student Government and student newspaper representatives, to discuss budgetary matters. These discussions and meetings are used to develop budget scenarios and implement plans once the state appropriation process is complete.   

The state budget process begins in the fall before the upcoming fiscal year, with the state agency’s submission of budget requests to the Governor’s Division of Administration (DOA).  These requests are used to develop the Executive Budget that is the beginning of the legislative appropriation process.  The budget requests include budgetary information on prior year actual and current year budgeted revenues and expenditures, continuation budget requests, special program requests, and projected impacts of state mandate cost increases.  Public universities and colleges submit their budget requests through their management boards to the Louisiana Board of Regents (BOR), which in turn submits a request to the DOA on behalf of all institutions.  Pursuant to the budgetary responsibility for all public postsecondary education provided in Article VIII, Section 5 of the Louisiana Constitution and to the power to formulate and revise a master plan for higher education, including a formula for the equitable distribution of funds, the Board of Regents submits a request for full formula funding for all public postsecondary degree granting institutions [21].  Due to the economic conditions faced by Louisiana, the level of funding from the legislature has not followed the formula funding requested by the BOR [22].            

The budget request recommendations provide input for the governor and the legislature as they consider budget priorities for the upcoming year during the legislative session.  If the house and senate approve differing versions of the appropriations bill, a conference committee works out the differences and presents a compromise package to the house and the senate for approval.  Following ratification of the conference committee report, the bill then goes to the governor for signature, who may exercise line-item vetoes, which the legislature may override by a two-thirds vote. 

Once the higher education appropriation is approved by the governor, the BOR approves a plan for distribution of the funds to the Louisiana Higher Education Management Boards [23].  Article VIII, Section 7 of the Louisiana Constitution created the LSU Board of Supervisors with corporate powers [24], and Revised Statute 17:3351 lists the powers of the board, including the authority to accept and manage assets for the well-being of the LSU System [25]. Article VIII, Section 12 of the Louisiana Constitution clearly states that the appropriations for the institutions of higher education are made to their management boards [26].  Through annual action, the LSU Board of Supervisors allocates state appropriated funds to the campuses that report to them. 

Although the state, the BOR and the LSU System provide budget guidance, the state appropriation is provided as a lump sum to LSU, and the expenditures are not specified at an itemized operating level [27].  Using the budgetary information that has been recommended by the University Budget Committee, the vice chancellors, academic deans, campus chief executive officer, and the executive vice chancellor and provost finalize the amount of general funds that will be allocated to each college and major unit.  Following these final allocation decisions, the LSU Office of Budget and Planning distributes allocations and instructions for developing individual unit budgets [28].  Once the individual units complete the budget development process, the budgets are compiled for final review and approval by the university’s senior administration.  The final stage of the budget development process is to create the annual published budget documents in a format prescribed by the Louisiana Board of Regents and by the LSU System. The current and prior year’s budget documents are available in hard-copy in the LSU Hill Memorial Library and are available on the LSU Office of Budget & Planning Website [29]. 

The LSU Operating Budget is approved each fiscal year by the LSU Board of Supervisors [30] and by the Louisiana Board of Regents [31].