Analysis of The Financial Situation of Kutztown University, by Howard Bunsis

Analysis of the Financial Situation of Kutztown University
Howard Bunsis, Professor of Accounting, Eastern Michigan University

January 2018
Executive Summary
1. Kutztown University and the PASSHE System are both in solid financial condition. This
conclusion is based on several factors: high level of reserves, positive cash flows, and an
increasing Commonwealth appropriation. These factors are able to overcome declining
enrollment. This conclusion is supported by external confirmation: the strong bond rating
for the PASSHE System
2. Kutztown enrollment is declining, but the worst is likely behind us; the decline from fall 2015 to
fall 2016 was very steep, and the decline from fall 2016 to fall 2017 is much better news.
3. Combined with increases in tuition price and the commonwealth appropriation, 2018 is likely
going to be a very good year for Kutztown financially
4. The two component units, KUSSI and the Foundation, are both doing well, and they enhance the
strong financial condition of Kutztown. The Foundation is involved in interest-rate swaps
5. Budgeting by the Kutztown administration is very pessimistic, as revenues are under-estimated
and expenses are over-estimated. This analysis focuses on the actual results rather than
budgets, as actual results are audited by an outside independent party, and tell us what really
happened. Budgets are projections made by the administration, and are not audited by an
outside independent party. The budget presentations of the Kutztown administration are filled
with gloom and doom
6. There has been a significant decline in assistant professor hiring - a decline that will eventually
lead to a faculty comprised of more and more non-tenure track faculty.
7. This hiring pattern is consistent with the anti-union sentiment expressed by the PASSHE
administration in its recent strategic review and noted in bond reports
8. Faculty salaries are not increasing significantly, barely keeping up with inflation. Increases in
faculty salaries are much lower in both dollar and percentage terms than those awarded to the
top Kutztown administrators.
Table of Contents
Item Page #
Size of Kutztown relative to PASSHE System 2
Financial Analysis of PASSHE System 3
PASSHE System Pension Costs 11
PASSHE System Revenues 13
Financial analysis of Kutztown separately 18
Kutztown component units (KUSSI and Foundation) 24
Kutztown revenue analysis: Enrollment and appropriation 28
Kutztown expense and priority anlaysis 39
Kutztown number of faculty and other employees 45
Kutztown faculty and administration salaries 48
Kutztown degrees conferred, graduation and Pell rates 53
1
Size of Kutztown University in Relation to the PASSHE System
Source: Audited financial statements for the PASSHE System and KU
In Thousands, for 2016 System KU KU as % of System

Total Assets $3,406,070 $377,851 11.1%
Liabilities:
Bonds Payable $842,590 $102,243 12.1%
Pension $938,637 $75,267 8.0%
Retiree Health $1,106,643 $89,688 8.1%
Total Expenses $2,089,867 $183,856 8.8%

Total Revenues $2,026,388 $171,876 8.5%
Tuition Revenue $839,035 $66,865 8.0%

Commonwealth Appropriation $433,389 $34,415 7.9%
Fall 2017 Enrollment:

Undergrad 89,802 7,489 8.3%
Grad 14,977 840 5.6%
Total Headcount 104,779 8,329 7.9%
Full Time 86,905 7,346 8.5%

Part Time 17,874 983 5.5%
Total Headcount 104,779 8,329 7.9%
FTE Undergrad 83,611 7,153 8.6%

FTE Grad 8,606 422 4.9%
Total FTE 92,217 7,575 8.2%
% In State 90% 88%
• Considering there are 14 institutions in the System, if each institution were the same size,
the percentage of total would be 1/14 or 7.1%. KU is slightly larger than average in terms of
revenues, expenses, and enrollment
• We will examine the constructs in this table for the System, as well as for KU separately
2
Analysis of the financial situation of the PASSHE System
The source for this entire section are the annual audited financial statements for the PASSHE
System. The audited statements, NOT THE BUDGET, report what actually happened, and is by far
the most important source document to determine the financial performance of the system. The
same will be true when we analyze the performance of KU; we will examine budgets, but budgets
do not tell the story – actuals are what matters. In the budget analysis for KU, we will demonstrate
how the administration under-estimates revenues and over-estimates expenses in developing a
budget, one of the many reasons budgets (note the word budgets starts with “B” and ends with “S”)
are not the item we utilize to determine the financial performance of KU
The balance sheet for the PASSHE System over time is as follows, with the amounts in thousands:
Total Assets Total Liabilities Total Net Assets
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• At the end of 2017, the system has $3.7 billion of assets, with liabilities of $1.7 billion and
net assets of $2.0 billion
• We will investigate how much of the $2.0 billion of net assets are true reserves (and later do
the same for KU)
• The liabilities of $1.7 billion consists of $1.1 billion of debt. The two most recent debt issues
are described below
• In September of 2016, the system borrowed $298 million, to be used for:
o Renovation of an academic facility at Slippery Rock
o Upgrade of info tech infrastructure at Slippery Rock
o Upgrade steam plant at Bloomsburg
o Construction of student housing at Bloomsburg
o Acquisition of student housing at Mansfield
o Acquisition of student housing at Lock Haven
o Acquisition of student housing at Edinboro
• In December of 2017, the system borrowed an additional $128 million, to be used for:
o Academic and athletic facilities at Indiana
o Renovation of academic facilities at Slippery Rock
o Construction of an energy savings project at Slippery Rock
o Parking structure at West Chester
3
• The liabilities do not include:
o $1.0 billion pension liability (these were not added to university balance sheets until
2015)
o $1.1 billion retiree health care liability
o $120 million compensated absence liability
• Why do we exclude these items?
o First and foremost, these are obligations of the state, and these liabilities exist on
the Commonwealth’s financial statements. If there is an issue, the state must pay
o In the audited financial statements, the PASSHE administration states that: “Because
these liabilities are expected to be realized gradually over future years, and because
of their size, the universities fund them only as they become due.” In other words,
these three items are not considered true liabilities of the system
o The bond rating agencies exclude these obligations when considering the liabilities,
net assets, and reserves of all public universities and systems
o This does not mean that these obligations are not important; below, we will fully
analyze the details of these obligations, and report what matters most; how much
cash the system has to pay for these items each year
o We will later analyze these items with respect to KU
Analysis of Net Assets and Reserves

Net assets are broken down into four components:
• Invested in capital assets – this represents resources related to buildings and other capital
assets; since universities cannot sell the academic and other buildings, this item is not part of
reserves, and does not reveal anything about the financial freedom and flexibility of a university.
We ignore this amount in the determination of reserves, though we will see that it is the largest
component of net assets
• Restricted Nonexpendable: Donors contribute to the endowment, but the principle cannot be
spent
• Restricted expendable: This is defined by PASSHE as: “represents the portion of restricted funds
that is available for expenditure as long as any external purpose and time restrictions are met.”
These are resources set aside for future scholarships or capital projects, and the bond rating
agencies include these with total reserves, as it is good to have the money for definitive needs
set aside
• Unrestricted: This is defined by PASSHE as: funds that the Board or university presidents have
designated for specific purposes, auxiliary funds, and all other funds not appropriately classified
as restricted or invested in capital assets.” In reality, unrestricted is unrestricted, and these
amounts represent financial freedom and flexibility for the system and the universities within
the system. The administration will claim that these amounts are spoken for; however, if there
was a true no-way-you-can-get-out-of-it commitment, the external auditors would put these
amounts in the restricted expendable category
As we see in the table below, the PASSHE system had $1.269 billion of reserves at the end of fiscal
2017. To demonstrate the veracity of this calculation, the 2017 audited financial statements
reports the following:
“Moody’s details as State System strengths its substantial balance sheet reserves, with unrestricted
liquidity of $1.3 billion.”
4
Note that $1.269 billion can be rounded to $1.3 billion.
Below is the detail on reserves going back to 2007 for the PASSHE System:
Net Asset Analysis: 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Invested in Capital Assets 504,112 584,483 570,569 615,939 601,613 621,400 647,700 684,396 700,280 709,271 722,365
Restricted Non-Expendable 23,716 23,186 20,929 22,899 25,424 25,556 11,139 18,925 41,293 41,004 45,978
Restricted Expendable 54,586 37,399 46,981 45,033 51,077 60,663 81,344 84,378 56,780 73,451 75,292
Unrestricted 732,648 773,220 766,978 829,929 956,251 1,077,703 1,095,206 1,073,110 1,115,237 1,214,972 1,194,486
Total Net Assets 1,315,062 1,418,288 1,405,457 1,513,800 1,634,365 1,785,322 1,835,389 1,860,809 1,913,590 2,038,698 2,038,121
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Unrestricted 732,648 773,220 766,978 829,929 956,251 1,077,703 1,095,206 1,073,110 1,115,237 1,214,972 1,194,486
Restricted Expendable 54,586 37,399 46,981 45,033 51,077 60,663 81,344 84,378 56,780 73,451 75,292
Total Reserves 787,234 810,619 813,959 874,962 1,007,328 1,138,366 1,176,550 1,157,488 1,172,017 1,288,423 1,269,778
First, almost all of the reserves are unrestricted
To determine if reserves are large, we have to put context upon them.

A solid level of reserves is 25% of expenses.
What does this mean?

Reserves that are 25% of annual operating expenses indicates that the system has 3 months of
expenses in reserves; as we will see, the percentage for the PASSHE system is more than twice the
25% level. This is the main reason why the PASSHE system has a strong bond rating.
Also note the growth in reserves over time
Reserves Graphically:
Unrestricted Restricted Expendable Solid Level (25% of expenses)
1,400,000 1,400,000
1,200,000 1,200,000
1,000,000 1,000,000
800,000 800,000
600,000 600,000
400,000 400,000
200,000 200,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Consider: The PASSHE System has $1.3 billion of reserves.

Yes, there are issues with enrollment, but any claim that the system is in financial trouble is a claim
without merit, and the level of reserves simply dispels such claims easily.
We will also examine this for KU separately
To be more specific, to get a sense of whether these reserves are significant in size, we compare
them to two different items: total expenses and total debt.
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Primary reserve ratio = Total Reserves / Total operating expenses
Viability ratio = Total Reserves / Total debt
Primary Reserve Ratio 8.3% 5.5% 2.8% 2.6% 6.0% 8.7% 6.8% 1.8% -39.2% -41.7% -46.7%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Reserves 787,234 810,619 813,959 874,962 1,007,328 1,138,366 1,176,550 1,157,488 1,172,017 1,288,423 1,269,778
Total Expenses 1,624,206 1,713,725 1,830,909 1,859,162 1,908,741 1,906,742 1,968,077 2,024,839 2,039,463 2,089,867 2,176,734
Primary Reserve Ratio 48% 47% 44% 47% 53% 60% 60% 57% 57% 62% 58%
A ratio of 58% tells us that the system has 7 months of expenses in reserves; 6 months or 50% is
considered very high.
Below is the viability

Primary Reserve 8.3% ratio; for this2.8%
5.5% ratio, a2.6%
value of 250%8.7%
6.0% is the extremely
6.8% high value.
1.8% -39.2% -41.7% -46.7%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Reserves 787,234 810,619 813,959 874,962 1,007,328 1,138,366 1,176,550 1,157,488 1,172,017 1,288,423 1,269,778
Total Debt 650,060 682,590 783,189 872,854 991,130 937,831 956,687 913,681 852,047 891,236 1,119,221
Viability 121% 119% 104% 100% 102% 121% 123% 127% 138% 145% 113%
A ratio of 113% says that reserves are larger than debt;
However, the level of this ratio at 113% is actually less impressive than the 58% primary reserve ratio.
A 113% viability ratio is solid, but 250% is the extremely high level.
Annual Performance ratios: Net Asset and Cash Flow Ratios

There are two ratios utilized to ascertain how a university is performing in terms of annual
performance: the net income ratio and the cash flow ratio.
The net asset ratio = the change in net assets / total revenues
The change in net assets = total revenues – total expenses
Revenues and expenses are determined using the accrual method of accounting:
• Revenues count when they are earned, even if cash is not received.
• Expenses count when a cost is incurred, even if cash is not paid.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Revenues 1,704,682 1,753,339 1,772,375 1,903,164 1,962,628 1,978,356 1,954,148 1,972,088 1,962,790 2,026,388 2,049,791
Operating Expenses 1,591,205 1,680,515 1,754,180 1,816,873 1,871,768 1,862,813 1,923,794 1,975,922 1,993,264 2,035,457 2,083,686
Interest Expense 29,931 30,500 31,769 34,977 36,372 41,617 37,936 36,862 36,577 33,920 38,228
Loss on disposal of assets 3,070 2,710 44,960 7,312 601 2,312 6,347 12,055 9,622 20,490 54,820
Total Expenses 1,624,206 1,713,725 1,830,909 1,859,162 1,908,741 1,906,742 1,968,077 2,024,839 2,039,463 2,089,867 2,176,734
Change in Net Assets 80,476 39,614 (58,534) 44,002 53,887 71,614 (13,929) (52,751) (76,673) (63,479) (126,943)
As % of Total Revenues 4.7% 2.3% -3.3% 2.3% 2.7% 3.6% -0.7% -2.7% -3.9% -3.1% -6.2%
• For the last 5 years, this ratio has been negative, as total expenses are greater than total
revenues
• Before deciding that this is the end of the world, consider that there are numerous non-cash
items that help drive this result (depreciation expense; loss on disposal of assets). The cash
flow ratio will also be reported so we get a more complete picture of the operational
performance of the system.
• This ratio is akin to the profit margin with for-profit businesses
• Any net asset percentage above 5% is considered very high
The cash flow ratio measures annual performance on a cash basis.
6
The definition of the cash flow ratio is:
Cash flows from operations / Total revenues
Cash flows from operations equals:
• All cash in from tuition, auxiliaries and other sources, less
• All cash out from paying employees, vendors, and supplies
Another way to consider cash flows from operations is:

• The change in net assets
• Add: non-cash expenses such as depreciation expense
• Add: non-cash losses such as paper losses on investments
• Subtract: non-cash gains such as paper gains on investments
• Equals cash flows from operations
Below is the detail on cash flows, as reported in the audited financial statements
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CFO (356,780) (367,519) (386,076) (323,224) (321,447) (220,544) (392,531) (426,881) (450,305) (421,645) (440,410)
CFNCF 505,319 505,927 513,662 541,796 511,436 443,069 584,628 583,207 578,532 596,351 599,577
Interest (27,240) (25,141) (29,917) (37,033) (41,023) (27,973) (45,156) (44,387) (45,429) (43,450) (46,567)
Operating Cash Flows 121,299 113,267 97,669 181,539 148,966 194,552 146,941 111,939 82,798 131,256 112,600
Total Revenues 1,704,682 1,753,339 1,772,375 1,903,164 1,962,628 1,978,356 1,954,148 1,972,088 1,962,790 2,026,388 2,049,791
Cash Flow Ratio 7.1% 6.5% 5.5% 9.5% 7.6% 9.8% 7.5% 5.7% 4.2% 6.5% 5.5%
• CFO = cash flows from operation, and this is negative for every public institution in the country.
Why? Because this category does not include the state appropriation
• CFNCF = Cash Flows from non-capital financing activities, and is mostly the state appropriation
• We subtract out interest expense, as these are annual expenses. We do not subtract out debt
principle payments, and we also exclude any borrowing or investment purchases. Note that
Moody’s and other bond rating agencies do not subtract out interest, so our computation of
operating cash flows is more conservative
• For the PASSHE System, the cash flow ratio is positive each year. Notice how the operating cash
flows are more than $100 million most years; this is why reserves are growing.
We now have four ratios that are used to judge overall performance. Rudy Fichtenbaum and I have
developed a ratio score based on these four ratios, and we assign a score from 0 to 5 for each ratio,
then we apply weights to the different ratios. Similar methodology is utilized by several states and
bond rating agencies, with slight differences for the weights of each ratio.
7
Below is a summary of the ratios for the PASSHE System:
Level of Ratio 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Primary Reserve 48% 47% 44% 47% 53% 60% 60% 57% 57% 62% 58%
Viability 121% 119% 104% 100% 102% 121% 123% 127% 138% 145% 113%
Net Asset 4.7% 2.3% -3.3% 2.3% 2.7% 3.6% -0.7% -2.7% -3.9% -3.1% -6.2%
Cash Flow 7.1% 6.5% 5.5% 9.5% 7.6% 9.8% 7.5% 5.7% 4.2% 6.5% 5.5%
Score out of 5.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Primary Reserve 4.44 4.39 4.28 4.38 4.61 4.89 4.89 4.79 4.80 4.97 4.83
Viability 3.64 3.63 3.53 3.50 3.51 3.64 3.65 3.68 3.75 3.80 3.59
Net Asset 4.36 3.13 0.84 3.16 3.37 3.81 1.36 0.97 0.72 0.87 0.26
Cash Flow 5.00 5.00 4.76 5.00 5.00 5.00 5.00 4.84 4.11 5.00 4.75
Composite Fichtenbaum-
Bunsis Score 4.36 4.18 3.77 4.15 4.29 4.50 4.19 4.07 3.91 4.20 3.96
Graphic representation of the composite score

5.00
4.50
4.00 Maximum
3.50 Very Good
3.00 PASSHE
2.50 Solid
2.00 OK
1.50Moody’s Rates Over 500 UniversitiesTrouble
in the US
Includes vast majority of sector debt
1.00
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
» Over 230 four-year public universities » Nearly 275 private colleges and universities
» Almost $125 billion total rated debt outstanding » Over $85 billion of rated debt outstanding
The composite score
» Median rating of A1of
by3.96 in of2017
number is supported
institutions by therating
» Median Moody’s rating:
of A3 by number of institutions
Aa3 as of therating
» Median end ofofAa1
2017. Below
weighted are the
by rated debt Moody’s ratings
» Median forofall
rating public
Aa2 universities:
weighted by rated debt
US Public University Ratings US Private University Ratings

80 45
69 40
40 38
70
35 33 33
60
46 30 26
50 25
41 25
40 20 21
20
30 15
22 15 12
19 11
20
12 10
8 8
10 3 5
2 0 1 0
0 0
Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 SG S-T Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 SG S-T
Source: Moody's, ratings as of December 29, 2014. S-T represents those with only a short-term rating
The Financial & Strategic Outlook for Private Colleges 5

8
Aa3 is the 4th highest rating out of 20 rating categories, and the strengths for PASSHE are the
reserve and cash flows; the weaknesses are the debt level and the change in net assets.
121% The119%
Moody’s ratings 100%
104% over the 102%
last several
121%years 123%
are as follows:
127% 138% 145% 113%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Aa3 stable Aa3 stable Aa2 stable Aa2 negative Aa2 negative Aa3 stable Aa3 negative Aa3 negative Aa3 negative Aa3 stable Aa3 negative
If we assign a 10 for Aaa, 9 for Aa1, 8 for Aa2, and 7 for Aa3, with an additional 0.5 for stable, below
is the trend of these ratings over time for the PASSHE System:
PASSHE Bond Ratings
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Specifics on the bond ratings for PASSHE:

• The 2018 rating was reported in August of 2017, after the June 2017 fiscal year ended
• In the 2017 audited statements for the PASSHE System, they report:
o “The negative outlook reflects prospects for increasingly pressured operations and
cash flow due to growing benefit costs from state- sponsored plans and higher
compensation costs from its collective bargaining agreements governing most of its
employees. Further, the system faces the start of new negotiations with faculty as
the union contract expires in less than one year. These challenges all come in the
face of limited prospects for revenue growth as [the State System] projects fall 2017
enrollment to be lower than budget and limited opportunity growth in state funding.
Additionally, [the State System] confronts likely controversial decisions around the
system’s organizational cost structure that may prove difficult to execute following
the conclusion of the system review requested by the board.”
o “Challenges:
▪ High number of faculty and staff that are subject to collective bargaining
agreements, which pressure operations and limit cost management efforts;
▪ significant pension and OPEB liabilities along with increasing required
contributions;
▪ enrollment and financial challenges at some campuses, which may require
more aggressive restructuring efforts; high leverage, with $2.3 billion of total
debt
o Strengths:
▪ Substantial balance sheet reserves, with unrestricted liquidity of $1.3 billion;
9
▪ its significant scale as one of the nation’s largest higher education systems;
▪ effective State System governance and management, including strong fiscal
oversight and debt management;
▪ positive, although thinning, cash flow
▪ modest near-term debt plans with rapidly amortizing debt.”
Bond ratings of other institutions in Pennsylvania:

Institution Rating
Pitt Aa1
Penn State Aa1
PASSHE Aa3
Temple Aa3
Lincoln Baa3
Penn Aa1
Villanova A1
Duquense A2
Drexel A3
Delaware Valley Ba1
Conclusions:
• The System is in solid financial condition, and the rating is very good, which is most
important. The solid reserves and cash flows drive the conclusion
• However, Moody’s seems incredibly bothered by the union environment and the fact that
the faculty are unionized. I have not seen a bond rating that mentions unionization in public
higher education, and certainly not in such a negative light. It is very likely that the PASSHE
administration has a very negative view of unionization and faculty, as the administration
meets with Moody’s as these ratings are assigned
• In the 2017 audited financial statements, the admin makes reference to a study by the
National Center for Higher Education Management Systems (NCHEMS). This admin-
sponsored study made three or four references to collective bargaining:
o There should be no attempt to undermine the collective bargaining process.  
o Future collective bargaining agreements should promote nimbleness and be
financially feasible (code for hiring as few tenure-track faculty as possible)
o The role of faculty in advising on matters of academic policy should be distinct from
its role in collective bargaining.
o The legislature should consider permitting early retirement incentives to help align
staffing levels with enrollment.
• Taken together, along with the references in the Moody’s report, it is clear that the
administration is not supportive of faculty unionization. This is very unfortunate
10
PASSHE System Pension and Retiree Health Obligations
The System has three different pension plans for employees:
• Public School Employees Retirees System (PSERS)

• State Employee Retirement System (SERS)
• Alternative Retirement System (ARP)
The first two are defined benefit plan, and the last plan is a defined contribution plan.
APSCUF members appear to have an option for the last two plans
In addition, in June of 2017, a new law was signed into law that takes away the defined benefit plan
options for new employees. Employees will have the option of two different hybrid plans (cross
between defined benefit and defined contribution plans), and a defined contribution plan. In
addition, the ARP plan, where employees pay 5% and the employer contributes 9.29%, is still
available. The effect of these changes will likely be:
• Increases in out-of-pocket costs for employees
• Decreases in cash paid into the systems for employers
There is quite a bit of angst about the “unfunded liabilities” related to pensions and retiree health.
However, these unfunded liabilities need to be taken with a grain of salt:
• They are very susceptible to changes in assumptions; for example, a 1% change in the
discount rate used to bring future payments back to the present can affect the amount of
the liability by as much as 15 to 20% of the total amount
• The unfunded liability does not have to be paid out today; in fact, the only thing that
matters is how much cash the employer (PASSHE System) is paying out for these items. We
will report these amounts below.
• The funding ratio for the two pension plans
The balance sheet liabilities for the system for pension and retiree health are as follows:
Comp Absence Liability 91,800 95,500 99,600 104,000 101,800 108,200 109,900 114,700 114,600 115,400 119,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Pension Liability 0 0 0 0 0 0 0 0 798,744 938,637 1,022,458
OPEB Liability 561,118 621,030 662,633 722,574 791,452 864,395 933,690 1,007,071 1,058,749 1,106,643 1,145,088
Total 561,118 621,030 662,633 722,574 791,452 864,395 933,690 1,007,071 1,857,493 2,045,280 2,167,546
• Pensions were not included in public university balance sheets until 2015. Nothing changed
in terms of the cash paid for these benefits, but university administrators pushed for this
accounting change (GASB 68) so that balance sheets would look worse
• OPEB stands for other postemployment benefits, and covers retiree health and life
insurance, but is almost all related to retiree health. These are benefits that are paid in
excess of Medicare.
The cash paid is what matters, and below is the time series of cash payments from the System for
pensions and retiree health over the last 11 years (amounts in thousands):
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Cash for Pensions and OPEB:
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
PSERS 949 1,153 852 948 1,481 1,769 2,752 3,904 5,236 6,012 7,107
SERS 9,594 9,508 9,770 10,182 13,032 20,643 30,490 43,538 57,234 69,021 83,754
ARP (DC plan) 35,936 38,649 39,634 41,295 42,851 41,978 43,080 43,869 44,619 43,933 45,343
Total Cash Paid for Pensions 46,479 49,310 50,256 52,425 57,364 64,390 76,322 91,311 107,089 118,966 136,204
OPEB cash paid 34,726 23,316 43,847 31,830 37,245 38,729 42,975 44,201 36,869 40,060 39,241
Total Cash Paid for Pensions
and Retiree Health 81,205 72,626 94,103 84,255 94,609 103,119 119,297 135,512 143,958 159,026 175,445
Total Revenues 1,704,682 1,753,339 1,772,375 1,903,164 1,962,628 1,978,356 1,954,148 1,972,088 1,962,790 2,026,388 2,049,791
% of Revenues paid for
pension and retiree health 4.8% 4.1% 5.3% 4.4% 4.8% 5.2% 6.1% 6.9% 7.3% 7.8% 8.6%
• In 2017, the system paid $136.2 million for pension benefits, and $39.2 million for retiree
health benefits. Total cash paid was $174.4 million
• This $174.4 million is 8.6% of total revenues (over $2 billion in 2017). This percentage has
increased since 2007, but the increases are not bankrupting the PASSHE System; the
increase from 2016 to 2017 was $17.3 million. An increase of $17.3 million, given the
increases in tuition revenue and the Commonwealth appropriation, are quite modest. In
addition, the System has $1.3 billion of reserves. Any claim that an increase of $17 million
will hurt are not supported by the facts. Lastly, the changes that were enacted in the June
2017 legislation will likely diminish the annual increases in these retirement costs
12
PASSHE System Revenues and Commonwealth Appropriation
The revenue
ARP rate (ER/EE) distribution
9.29/5.00 for the PASSHE
9.29/5.00 9.29/5.00 System over time
9.29/5.00 9.29/5.00 is as 9.29/5.00
9.29/5.00 follows:9.29/5.00 9.29/5.00 9.29/5.00 9.29/5.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tuition 566,262 594,230 637,934 667,366 723,490 786,417 804,199 809,310 816,573 839,035 855,701
State Appropriation 487,873 504,240 497,168 465,197 465,197 412,751 412,751 412,751 412,751 433,389 444,224
ARRA 0 0 0 65,226 38,158 0 0 0 0 0 0
State Capital 20,876 13,045 11,726 2,358 1,337 9,748 14,835 14,835 13,610 15,714 16,081
Grants and Contracts 247,514 255,112 252,077 301,653 315,254 320,693 298,503 304,422 296,320 294,097 292,270
Auxiliaries 248,851 262,914 280,002 294,239 319,005 327,139 332,890 331,431 324,007 323,358 327,781
Other Revenue 154,182 136,843 105,194 174,709 139,682 131,356 105,805 114,174 113,139 136,509 129,815
Total Revenue 1,704,682 1,753,339 1,772,375 1,903,164 1,962,628 1,978,356 1,954,148 1,972,088 1,962,790 2,026,388 2,049,791
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tuition 33.2% 33.9% 36.0% 35.1% 36.9% 39.8% 41.2% 41.0% 41.6% 41.4% 41.7%
State Appropriation 28.6% 28.8% 28.1% 24.4% 23.7% 20.9% 21.1% 20.9% 21.0% 21.4% 21.7%
ARRA 0.0% 0.0% 0.0% 3.4% 1.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
State Capital 1.2% 0.7% 0.7% 0.1% 0.1% 0.5% 0.8% 0.8% 0.7% 0.8% 0.8%
Grants and Contracts 14.5% 14.6% 14.2% 15.9% 16.1% 16.2% 15.3% 15.4% 15.1% 14.5% 14.3%
Auxiliaries 14.6% 15.0% 15.8% 15.5% 16.3% 16.5% 17.0% 16.8% 16.5% 16.0% 16.0%
Other Revenue 9.0% 7.8% 5.9% 9.2% 7.1% 6.6% 5.4% 5.8% 5.8% 6.7% 6.3%
Total Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
• The increase in the % of revenue coming from tuition surges from 2007 to 2013, and has
been stable since that time (about 41% of total revenues)
• The State (Commonwealth) appropriation was 28.6% of total revenues in 2007, and is now
down to 21.7% of revenues
• The level of the Commonwealth appropriation is lower in 2017 than it was in 2007, and has
still not recovered; the burden is being placed on students and their families
• However, from 2016 to 2017, the two main revenue sources increased
o Increase in tuition revenue of $16.7 million
o Increase in the commonwealth appropriation of $10.8 million
A graph of tuition vs. the commonwealth appropriation is very revealing:
Tuition Commonwealth Appropriation
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
13
Change in Tuition Revenue and Commonwealth Appropriation for PASSHE System
Tuition Revenue Commonwealth Appropriation

350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
-50,000
-100,000
2007 to 2012 2012 to 2017 2007 to 2017
• The appropriation declined from 2007 to 2012, and increased slightly from 2012 to 2017
• Overall, the total of these two combined items increased over $100 million from 2012 to
2017, and almost $300 million from 2007 to 2017
Appropriation for PA compared to other states

The Grapevine Institute at Illinois State University compiles data on the state appropriation. Below
are statistics for how PA compares to other states on the following metrics:
• 2017 State appropriation for all of higher education per capita
• % change in the state appropriation from 2012 to 2017
Appropriation per Capita 2017 Level

PA Ranks (of 50 states) 40
PA Appropriation per Capita $132

U.S. Average per Capita $259
PA 2017 Spending 1.693 Billion

PA deficit per capita ($127)
PA 2017 population 12.784 million
Additional Dollars Needed to get
PA to U.S. Average $1.6 BILLION
1-Year Change 5-Year Change

Changes in Appropriation 2016 to 2017 2012 to 2017
PA 2.8% 3.3%
US Average 3.4% 16.4%
PA Rank (of 50) 26 40
14
The other major revenue item is auxiliaries, which includes housing, dining, student union and
bookstore, parking, etc. With PASSHE and Kutztown, there is a separate accounting entity for
housing, which we will examine in detail for Kutztown. Below are the total auxiliary revenues and
expenses for the PASSHE System on an annual basis:
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Auxiliary Revenue 248,851 262,914 280,002 294,239 319,005 327,139 332,890 331,431 324,007 323,358 327,781
Auxiliary Expense 193,912 201,434 214,554 220,244 231,147 235,488 243,320 251,781 255,742 253,786 258,970
Auxiliary Profit 54,939 61,480 65,448 73,995 87,858 91,651 89,570 79,650 68,265 69,572 68,811
Auxiliary Margin (Profit as
a % of Revenue) 22% 23% 23% 25% 28% 28% 27% 24% 21% 22% 21%
Comparing Kutztown to the system in terms of the two main revenue sources as a percent of total
revenue from 2007 to 2016. The similarities between the changes for KU and the System are
apparent; more to tuition and less from the Commonwealth over time:
Percent of Total Revenues:

2007 2016
45% 41%
39%
40%
33% 33%
35%
29%
30% 26%
25% 21%
20%
20%
15%
10%
5%
0%
KU Tuition Appropriation to KU PASSHE Tuition Approrpriaiton all
PASSHE
Several other factors to consider:

• Discount rate on tuition for all of PASSHE:
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tuition Gross 715,251 752,713 793,443 866,663 933,153 1,010,294 1,015,386 1,029,150 1,050,135 1,065,416 1,086,337
Allowance 148,989 158,483 155,509 199,297 209,663 223,877 211,187 219,840 233,562 226,381 230,636
Tuition Net 566,262 594,230 637,934 667,366 723,490 786,417 804,199 809,310 816,573 839,035 855,701
Discount rate 20.8% 21.1% 19.6% 23.0% 22.5% 22.2% 20.8% 21.4% 22.2% 21.2% 21.2%
• The discount rate is defined as: Allowance as a percent of Gross tuition (sticker price)
• The rate has barely moved in the last several years, so any claim that additional financial aid
is a factor is not supported by the evidence
15
Tuition price changes
Below is a table of the tuition that is reported for the System:
Tuition (10 year history)

Most Common, Full-time, In-State, Undergraduate Tuition Rate
Year Tuition $ increase % increase
2008-09 $ 5,358 $181 3.5%
2009-10 $ 5,554 $196 3.7%
2010-11 $ 5,804 $250 4.5%
2011-12 $ 6,240 $436 7.5%
2012-13 $ 6,428 $188 3.0%
2013-14 $ 6,622 $194 3.0%
2014-15 $ 6,820 $198 3.0%
2015-16 $ 7,060 $240 3.5%
2016-17 $ 7,238 $176 2.5%
2017-18 $ 7,492 $254 3.5%
Kutztown has identical tuition to the amounts above; below is a table of detail for Kutztown in
terms of tuition, fees, room and board:
Kutztown 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Tuition $5,038 $5,177 $5,358 $5,554 $5,804 $6,240 $6,428 $6,622 $6,820 $7,060 $7,238 $7,492
Fees $1,581 $1,696 $1,768 $1,843 $1,928 $2,119 $2,168 $2,197 $2,279 $2,351 $2,380 $2,495
Tuition + Fees $6,619 $6,873 $7,126 $7,397 $7,732 $8,359 $8,596 $8,819 $9,099 $9,411 $9,618 $9,987
Room and Board $6,628 $6,960 $7,330 $7,698 $8,094 $8,536 $8,490 $8,370 $8,430 $9,070 $9,438 $10,282
Total Cost $13,247 $13,833 $14,456 $15,095 $15,826 $16,895 $17,086 $17,189 $17,529 $18,481 $19,056 $20,269
Out of State Tuition $12,598 $12,944 $13,396 $13,886 $14,510 $15,600 $16,070 $16,556 $17,050 $17,650 $18,096 $18,730
Ratio of Out-of-
State to In-State 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50
Changes 2007 to 08 2008 to 09 2009 to 10 2010 to 11 2011 to 12 2012 to 13 2013 to 14 2014 to 15 2015 to 16 2016 to 17 2017 to 18
Tuition 2.8% 3.5% 3.7% 4.5% 7.5% 3.0% 3.0% 3.0% 3.5% 2.5% 3.5%
Fees 7.3% 4.2% 4.2% 4.6% 9.9% 2.3% 1.3% 3.7% 3.2% 1.2% 4.8%
Tuition + Fees 3.8% 3.7% 3.8% 4.5% 8.1% 2.8% 2.6% 3.2% 3.4% 2.2% 3.8%
Room and Board 5.0% 5.3% 5.0% 5.1% 5.5% -0.5% -1.4% 0.7% 7.6% 4.1% 8.9%
Total Cost 4.4% 4.5% 4.4% 4.8% 6.8% 1.1% 0.6% 2.0% 5.4% 3.1% 6.4%
Enrollment changes for the entire system

Enrollment 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
UG 94,913 95,704 96,954 100,361 102,974 102,900 100,350 98,396 95,804 92,818 89,802 86,971
Grad 14,175 14,724 15,643 16,574 16,539 15,324 14,121 13,632 13,802 14,308 14,977 15,330
Total Headcount 109,088 110,428 112,597 116,935 119,513 118,224 114,471 112,028 109,606 107,126 104,779 102,301
Full Time 91,156 92,159 93,591 97,556 100,486 100,459 97,823 95,494 92,788 89,845 86,905 84,098
Part Time 17,932 18,269 19,006 19,379 19,027 17,765 16,648 16,534 16,818 17,281 17,874 18,203
Total Headcount 109,088 110,428 112,597 116,935 119,513 118,224 114,471 112,028 109,606 107,126 104,779 102,301
FTE UG 91,546 92,195 92,733 97,212 98,452 96,512 94,213 92,457 89,478 86,622 83,611 80,788
FTE Grad 11,127 11,372 11,259 12,673 12,826 8,754 8,210 7,801 7,916 8,207 8,606 8,825
Total FTE 102,673 103,567 103,992 109,885 111,278 105,266 102,423 100,258 97,394 94,829 92,217 89,613
2007 to 08 2008 to 09 2009 to 10 2010 to 11 2011 to 12 2012 to 13 2013 to 14 2014 to 15 2015 to 16 2016 to 17 2017 to 18
Total Headcount 1.2% 2.0% 3.9% 2.2% -1.1% -3.2% -2.1% -2.2% -2.3% -2.2% -2.4%
Total FTE 0.9% 0.4% 5.7% 1.3% -5.4% -2.7% -2.1% -2.9% -2.6% -2.8% -2.8%
We have changes in tuition price, plus changes in enrollment.

Together, those changes lead to changes in tuition revenue. Below are those changes for the last 10
years for the System (we will report this for Kutztown as well)
16
Changes in tuition revenue, price, and enrollment for the PASSHE System:
Tuition Revenue Tuition and Fees Price FTE Enrollment
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
2007 to 2008 to 2009 to 2010 to 2011 to 2012 to 2013 to 2014 to 2015 to 2016 to 2017 to
08 09 10 11 12 13 14 15 16 17 18
• What is most important about this graph is that for the last six years (2012 to 2017),
enrollment has declined. However, in each of those years, tuition revenue has increased.
• This is due to an increase in tuition price, as well as stable discount rates and different mixes
of students (in vs. out of state, undergrad vs. grad)
Going forward, though there is not a direct mapping between the number of high school students in
the Commonwealth and PASSHE enrollment, the numbers are stable, per the graph below, per the
PA Dept. of Education:
Lastly, in the 2017 audited statements, the PASSHE administration states:

“The tuition rate increase, coupled with the increase in state appropriations, will provide almost all of the
additional funds the universities need to balance their budgets . . . The universities already have reduced
expenditures by a combined nearly $325 million over the last dozen years in order to balance their
budgets and to help hold down student costs.”
Two notes from this statement:
• The administration admits that increases in revenues are solid and will cover costs
• The reduced expenditures of $325 million are not supported by the facts:
o 2007 total PASSHE operating expenses $1.62 billion
o 2017 total PASSHE operating expenses $2.18 billion
o This is an increase of $0.56 billion or $560 million; this is not the same as $325 million
reduction in expenses. We will examine the change in expenses for Kutztown below
17
Financial Analysis of Kutztown University Separately
Ratios for Kutztown
Sources: Kutztown University separate financial statements. For most public systems, individual campus
financial information is embedded in the audited financial statements of the System. This is not true for
PASSHE, as the PASSHE audited financial statements only contain system-wide information (analyzed above).
However, I had the financial statements for Kutztown for 2009, 2013, 2016, and 2017. For the other years
prior to 2017, I used IPEDS (Integrated Postsecondary Education Data System) of the U.S. Dept. of Education.
KU Balance Sheet
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Assets 269,922,177 305,876,367 328,105,068 344,338,604 348,895,509 368,369,386 380,616,644 376,682,815 378,365,001 377,850,847 367,663,167
Total Liabilities 141,323,426 163,777,855 179,109,769 184,091,171 172,992,193 177,967,541 173,887,241 166,106,364 164,541,945 160,373,290 156,915,775
Total Net Assets 128,598,751 142,098,512 148,995,299 160,247,433 175,903,316 190,401,845 206,729,403 210,576,451 213,823,056 217,477,557 210,747,392
Balance Sheet graphically:
Total Assets Total Liabilities Total Net Assets
400,000,000
350,000,000
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Asset Breakdown for KU

Current Assets Capital Assets Other Assets
400,000,000
350,000,000
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• Current assets are mostly cash, but the level of cash by itself is not that revealing. The cash flows on an
annual basis are what matters more, which we will examine below
• There has not been a building boom at KU; there was an increase in capital assets (buildings) in 2008 and
2009, but hardly any significant assets have been added over the last 8 years
18
Reserve Analysis for KU
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Invested in Capital Assets 77,255,128 82,756,799 85,563,517 91,460,227 90,971,589 93,683,664 106,767,945 111,869,624 115,499,600 118,562,155 122,550,138
Restricted Non-Expendable 10,690 10,690 10,690 10,690 10,690 10,690 0 744,684 698,183 709,507 721,756
Restricted Expendable 5,805,635 (254,906) 6,624,624 10,177,451 11,465,700 16,478,624 13,453,438 11,580,443 7,736,442 985,008 1,412,850
Unrestricted 45,527,298 59,585,929 56,796,468 58,599,065 73,455,337 80,228,867 86,508,020 86,381,700 89,888,831 97,220,887 86,062,648
Total Net Assets 128,598,751 142,098,512 148,995,299 160,247,433 175,903,316 190,401,845 206,729,403 210,576,451 213,823,056 217,477,557 210,747,392
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Unrestricted 45,527,298 59,585,929 56,796,468 58,599,065 73,455,337 80,228,867 86,508,020 86,381,700 89,888,831 97,220,887 86,062,648
Restricted Expendable 5,805,635 (254,906) 6,624,624 10,177,451 11,465,700 16,478,624 13,453,438 11,580,443 7,736,442 985,008 1,412,850
Solid Level 34,666,265 37,676,944 40,263,951 41,040,378 41,875,666 42,003,894 42,376,876 43,722,078 44,503,766 45,964,061 46,847,682
Total Reserves 51,332,933 59,331,023 63,421,092 68,776,516 84,921,037 96,707,491 99,961,458 97,962,143 97,625,273 98,205,895 87,475,498
• Of the net assets of $210.747 million in 2017, only $87.475 million represent true reserves. This
does not mean that there is $87 million of cash sitting in the president’s office; it does represent
a certain level of financial freedom and flexibility. We will next compare the level of reserves to
total expenses, and the be able to make conclusions about the overall financial health of
Kutztown University
• The growth in reserves can be seen in the graph below
KU Reserves
Unrestricted Restricted Expendable Solid Level

110,000,000
100,000,000
90,000,000
80,000,000
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• A solid level of reserves is 25% of total expenses

• Most of the reserves are unrestricted; the administration will claim that the $87 million of
unrestricted reserves are spoken for; however, if any amounts were tied up in a no-way-you-
can-get-out-of-it contract, the external auditors would put those amounts in the restricted
expendable category.
• The restricted expendable amounts were about $13 million in 2012 and 2013, and have now
declined. The $13 million was mostly related to capital projects; as the capital projects were
completed, the amounts came out of the restricted expendable category and moved into the
invested in capital assets category. We see this in the chart at the top of the page
19
As we saw with the PASSHE System analysis, there are two ratios for reserves that tell us about the size
of these reserves and how they relate to the overall financial condition of the institution:
Primary Reserve ratio, which equals total reserves as a percent of total expenses
Viability ratio, which equals total reserves as a percent of total debt
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Reserves 51,332,933 59,331,023 63,421,092 68,776,516 84,921,037 96,707,491 99,961,458 97,962,143 97,625,273 98,205,895 87,475,498
Total Expenses 138,665,059 150,707,776 161,055,805 164,161,510 167,502,665 160,444,404 162,096,253 174,888,310 171,245,973 178,110,875 181,948,745
Primary Reserve Ratio 37% 39% 39% 42% 51% 60% 62% 56% 57% 55% 48%
• A primary reserve ratio of 48% reveals that Kutztown has 5.8 months of expenses in reserves. A
level of 25% or 3 months is considered solid; a level of 50% or 6 months is considered extremely
high
• Even as enrollment has declined, KU has been able to use increases in tuition price and tuition
revenue, along with small increases in the state appropriation, to remain in a very solid position
with regards to reserves. As we will see, the enrollment decline slowed down for Fall 2017
• The primary reserve ratio is the main ratio to assess the overall financial condition of a
university. In fact, the State of Ohio uses a series of three Moody’s ratios to assess financial
health (the Fichtenbaum-Bunsis method uses 4 ratios, as we have seen), and for Moody’s, the
primary reserve ratio gets 50% of the weight towards its final ratio score
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Reserves 51,332,933 59,331,023 63,421,092 68,776,516 84,921,037 96,707,491 99,961,458 97,962,143 97,625,273 98,205,895 87,475,498
Total Debt 118,561,886 137,326,989 152,289,135 149,126,320 149,685,344 121,333,979 117,633,722 144,450,135 138,532,887 134,462,289 128,357,348
Viability Ratio 43% 43% 42% 46% 57% 80% 85% 68% 70% 73% 68%
• A viability ratio of 68% is actually less impressive than a 48% primary reserve ratio. For the
viability ratio, a level of 100% is considered solid, and the 68% level is just average.
• This indicates that KU has a large amount of debt; however, the debt is that of the PASSHE
System, as KU does not make the principle and interest payments. The System makes those
payments
• KU has about 12% of the total bonds payable of the system; the other part of debt besides
bonds are leases (about $102 million of bonds and $32 million of leases for KU)
20
Annual Performance ratios: Net Asset and Cash Flow Ratios
There are two ratios utilized to ascertain how a university is performing in terms of annual performance:
the net income ratio and the cash flow ratio.
The net asset ratio = the change in net assets / total revenues
The change in net assets = total revenues – total expenses
Revenues and expenses are determined using the accrual method of accounting:
• Revenues count when they are earned, even if cash is not received.
• Expenses count when a cost is incurred, even if cash is not paid.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Revenues 150,450,020 159,624,387 162,724,739 170,609,397 176,094,022 175,730,338 179,504,109 172,924,867 170,672,438 171,875,636 171,073,304
Total Expenses 138,665,059 150,707,776 161,055,805 164,161,510 167,502,665 168,015,575 169,507,503 174,888,310 178,015,064 183,856,245 187,390,726
Change in Net Assets 11,784,961 8,916,611 1,668,934 6,447,887 8,591,357 7,714,763 9,996,606 (1,963,443) (7,342,626) (11,980,609) (16,317,422)
Net Asset Ratio 7.8% 5.6% 1.0% 3.8% 4.9% 4.4% 5.6% -1.1% -4.3% -7.0% -9.5%
• As we saw with the System, this ratio is negative for the last several years.
• We will examine revenues and expenses to see why things have changed, but what is more
important are the cash flows. The table above reports expenses using the accrual method, so
$17.9 million of non-cash depreciation expense is included with total expenses; if the non-cash
depreciation expense is excluded, then the change in net assets becomes positive. And we will
see that the cash flows in all years are positive
Operating Cash Flow Ratio for KU

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Operating Cash Flows 19,914,857 17,677,101 29,329,779 18,110,235 21,652,660 20,155,599 27,717,145 14,448,860 13,064,102 6,665,644 6,163,314
Total Revenues 150,450,020 159,624,387 162,724,739 170,609,397 176,256,975 175,730,338 179,504,109 172,924,867 170,672,438 171,875,636 171,073,304
Cash Flow Ratio 13.2% 11.1% 18.0% 10.6% 12.3% 11.5% 15.4% 8.4% 7.7% 3.9% 3.6%
• The cash flow ratio is defined as operating cash flows divided by total revenues
• Operating cash flows consider all the cash in for tuition, state appropriation, grants, contracts
and auxiliaries, less all the cash out to pay employees, pay for supplies, vendors, student aid and
interest. Note that Moody’s does not subtract out interest in their cash flow ratio; we do so
because we believe that interest costs are annual operating costs that should be considered
• A level of 3% is considered solid for this ratio; a ratio of 5% is considered very high
21
There was a significant decline in the ratio from 2015 to 2016. Below is an examination of what occurred
in 2017, 2016 vs. 2015:
$ Change $ Change
2015 to 2016 to
2015 2016 2017 2016 2017
Tuition Revenue 66,005,139 66,749,419 64,818,614 744,280 (1,930,805)
State Appropriation 32,933,334 34,313,599 35,631,702 1,380,265 1,318,103
Grants and Contracts 24,559,986 23,396,711 22,634,170 (1,163,275) (762,541)
Auxiliary Enterprise Changes 40,888,469 40,313,673 39,742,761 (574,796) (570,912)
Payments to Employees (102,089,039) (102,980,442) (106,519,924) (891,403) (3,539,482)
Payments to Suppliers
for Goods and Services (38,397,053) (45,095,617) (43,989,430) (6,698,564) 1,106,187
Student Aid (6,170,529) (6,125,198) (5,914,716) 45,331 210,482
Interest Payments (8,823,793) (7,316,067) (5,811,663) 1,507,726 1,504,404
All Other Items 4,157,588 3,409,566 5,571,800 (748,022) 2,162,234
Operating Cash Flows 13,064,102 6,665,644 6,163,314 (6,398,458) (502,330)
• From 2015 to 2016, the two main inflows of cash, tuition and the state, have solid increases in
both years
• From 2016 to 2017, tuition revenue declined, but the state appropriation increase covered most
of the cash decline from tuition
• The largest cash outflow, payments to employees, increased by only $891,402 from 2015 to 2016,
which is an increase of less than 1%; the increase from 2016 to 201 was $3.5 million, a 3.4%
increase
• The main reason for the decline from 2015 to 2016 is an increase of $6.7 million in payments to
suppliers for goods and services. The audited financial statements for KU do not give any reason
behind this change, but it is quite a change from 2015; in 2012 and 2013, payments to suppliers
were $36.9 million and $38.4 million respectively. The payments for supplies declined by $1.1
million from 2016 to 2017; the amount is positive (in black) in the table above because a decline
in a cash outflow is good or positive for cash flows
22
Ratio Scores for KU
There are 4 ratios we used to define the financial health of public institutions, and they are represented
below. Each ratio is given a weigh in the composite score:
• 40.0% for primary reserve ratio
• 22.5% for viability ratio
• 25.0% for cash flow ratio
• 12.5% for net asset ratio
Level of Ratio 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Primary Reserve 37% 39% 39% 42% 51% 60% 62% 56% 57% 55% 48%
Viability 43% 43% 42% 46% 57% 80% 85% 68% 70% 73% 68%
Net Asset 7.8% 5.6% 1.0% 3.8% 4.9% 4.4% 5.6% -1.1% -4.3% -7.0% -9.5%
Cash Flow 13.2% 11.1% 18.0% 10.6% 12.2% 11.5% 15.4% 8.4% 7.7% 3.9% 3.6%
Score out of 5.0

Primary Reserve 3.98 4.07 4.08 4.18 4.53 4.80 4.86 2.70 4.69 4.64 4.42
Viability 1.94 1.94 1.89 2.04 2.39 3.00 3.13 4.74 2.76 2.83 2.70
Net Asset 5.00 4.79 2.51 3.89 4.44 4.20 4.78 5.00 0.64 0.11 0.00
Cash Flow 5.00 5.00 5.00 5.00 5.00 5.00 5.00 1.27 5.00 3.94 3.80
Composite Fichtenbaum-
Bunsis Score for KU 3.85 3.87 3.57 3.82 4.10 4.36 4.49 3.90 3.81 3.52 3.36
PASSHE Score 4.36 4.18 3.77 4.15 4.29 4.50 4.19 4.07 3.91 4.20 3.96
Ratio scores graphically:

6.00
5.00 Maximum
4.00 Very Good
PASSHE System
3.00
Kutztown
2.00
Solid
1.00 OK
Trouble
0.00
• The ratios for KU mirror those for the system, with a decline in 2016 and 2017
• Per above, the decline in 2016 is due to the cash flow ratio, which was driven by a large increase
in cash spent for supplies in 2016; the decline in 2017 was driven by the enrollment decline
• As we will see, for 2018, we will see:
o Smaller enrollment decline
o Solid increase in the state appropriation
o Increase in tuition price
o This should lead to stronger cash flows and reserves for 2018, and it is very likely that
2018 will be better financially for KU than 2016 and 2017. The specifics of these three
items will be reported below
23
Component units for Kutztown:
Kutztown University Student Services, Inc. (KUSSI) and the Kutztown Foundation
KUSSI is a legally separate entity from Kutztown University. The financial information is not included
with the university’s finances above. However, though it is stated that the University does not control
the resources, KUSSI exists solely for the benefit of KU and its students. The resources can only be used
to benefit KU or its students.
What activities are covered by KUSSI?

Student bookstore, student housing, vending, student fees, and other financial services.
For almost every public university, these items are included in the main financial statements of the
university.
To claim that any resources here cannot be spent for anything but KUSSI activities is not accurate; the
statement in the audited financial statements: “the resources can only be used to benefit the University
and its students” makes clear that the university has discretion over how these resources are spent and
allocated. Any claim of firm walls or legal restrictions are not accurate; these are self-imposed
restrictions. If the university wanted to spend these resources on faculty salaries, they could. This claim
will be disputed by the administration, but the quote in the financial statements is clear. It may be the
practice to keep everything separate, but what is obvious is this: KUSSI is part of Kutztown
KUSSI Balance Sheet 2009 2010 2011 2012 2013 2015 2016 2017
Investments 2,992,862 3,420,274 3,719,356 3,750,631 3,754,627 3,456,943 3,389,664 3,453,067
Capital Assets 574,527 471,231 387,927 344,830 316,198 1,126,918 1,140,406 2,069,989
Other Assets 3,374,986 3,461,083 3,610,690 3,972,854 4,039,684 3,988,928 4,330,734 3,025,682
Total Assets 6,942,375 7,352,588 7,717,973 8,068,315 8,110,509 8,572,789 8,860,804 8,548,738
Total Liabilities 567,402 451,055 463,600 692,081 583,413 590,972 576,902 559,046
Unrestricted Net Assets 6,374,973 6,901,533 7,254,373 7,376,234 7,527,096 7,981,817 8,283,902 7,989,692
Liabilities + Net Assets 6,942,375 7,352,588 7,717,973 8,068,315 8,110,509 8,572,789 8,860,804 8,548,738
KUSSI Revenues and Expenses 2009 2010 2011 2012 2013 2015 2016 2017
Sales and Services 6,279,585 6,088,356 6,136,724 5,386,603 5,971,378 5,772,032 5,700,326 4,823,685
Student Fees 1,981,404 2,089,179 2,196,014 2,181,734 2,210,564 2,061,916 2,050,183 1,962,831
Other Revenues 328,497 379,300 317,734 446,038 242,452 183,238 167,952 136,347
Total Revenues 8,589,486 8,556,835 8,650,472 8,014,375 8,424,394 8,017,186 7,918,461 6,922,863
University Store 5,471,767 5,191,639 5,383,922 4,736,532 5,332,260 5,116,357 4,883,084 4,295,836
Student Activities/Programs 1,358,026 1,428,558 1,479,288 1,567,379 1,537,796 1,434,480 1,373,714 1,389,624
Management 829,110 792,304 833,457 938,237 859,792 881,940 839,637 1,032,836
Other Expenses 559,768 617,774 600,965 650,366 543,683 549,185 520,026 498,777
Total Expenses 8,218,671 8,030,275 8,297,632 7,892,514 8,273,531 7,981,962 7,616,461 7,217,073
Change in Net Assets 370,815 526,560 352,840 121,861 150,863 35,224 302,000 (294,210)
• KUSSI has $8.548 million of assets at the end of 2017; this includes $3.453 million of
investments. These investments were created because KUSSI earns a surplus nearly every year,
and the surplus is invested in stocks and bonds
• There are now $2.0 million of capital assets (buildings, equipment). In 2015, about $800,000 was
added; in 2017, about $900,000 of capital assets were added. The money likely came from prior
surpluses
• In terms of revenues, KUSSI gets about $5 million from “sales and services.” Another $2 million
24
or so comes from student fees. Again, with most universities, student fees are reported with
the main university
• In terms of expenses, there is some money spent on “programs.” 2017 is very interesting; this is
the only year that there was a deficit, and it was partially driven by the $1 million decline in
revenues (likely associated with an enrollment decline). However, the one expense item that
increased was management; this item increased by almost $200,000, at the same time revenues
were declining by $1 million. This change in management expenses is curious, to say the least
• Bottom line results for KUSSI:
o KUSSI has $8 million of unrestricted reserves at the end of 2017. These reserves should
be added to the university’s reserves to get a sense of the real financial freedom and
flexibility that KU has. This does not suggest all $8 million should be spent; however,
having another $8 million of reserves is nice to have
o In every year but 2017, KUSSI made a small profit.
KUSSI Information from IRS Form 990 – W-2 Compensation
2014 2015 2016

Executive Director $141,260 $139,728 $139,318
25
KU Foundation
The Foundation is the fundraising arm of KU, and the funds here are restricted if donors put restrictions
on money contributed to the Foundation. Again, the resources are directed and controlled by the
university, but the resources are in part restricted by what the donors say the money can be used for.
For some public universities, Foundations are reported in separate statements; others include them in
the main statements.
Foundation Balance Sheet 2009 2010 2011 2012 2013 2015 2016 2017
Due from University 33,353,168 31,496,094 29,633,486 39,503,589 38,325,026 34,190,398 32,218,942 30,138,916
Capital Assets 13,549,933 14,757,441 14,520,113 13,881,536 13,393,468 12,549,983 12,120,974 11,753,625
Investments 0 0 0 16,203,881 18,695,183 23,199,120 24,003,526 27,471,787
Other Assets 15,565,933 17,056,331 19,578,874 4,575,066 3,861,648 3,742,799 3,891,954 5,812,534
Total Assets 62,469,034 63,309,866 63,732,473 74,164,072 74,275,325 73,682,300 72,235,396 75,176,862
Long term debt 43,525,158 43,528,561 42,128,177 42,062,948 41,902,832 38,570,742 36,721,462 34,253,076
Due to University 1,741,502 1,356,584 1,025,294 889,098 4,874,006 1,842,634 1,203,447 14,932
Other Liabilities 5,208,762 6,498,330 5,293,161 18,714,935 15,223,990 13,257,630 13,546,909 11,254,883
Total Liabiltiies 50,475,422 51,383,475 48,446,632 61,666,981 62,000,828 53,671,006 51,471,818 45,522,891
Total Net Assets 11,993,612 11,926,391 15,285,841 12,497,091 12,274,497 20,011,294 20,763,578 29,653,971
Liabilities + Net Assets 62,469,034 63,309,866 63,732,473 74,164,072 74,275,325 73,682,300 72,235,396 75,176,862
• The investments seemed to move from other assets in 2011 to investments in 2012
• The net assets here are restricted, and cannot be spent as they are mostly temporarily or
permanently restricted
• The debt is money that the Foundation borrowed: for a 45-bed dorm, two office buildings, a
parking lot, construction and improvements for a 1,039-bed Golden Bear Village Complex (this
was reported in the IRS 990)
• The due from university, due to university, and long-term debt reveal that the KU Foundation is
definitely linked with Kutztown University.
• We can consider the $27.47 million as the “endowment.” This is confirmed by what is reported
to IPEDS for the endowment
Foundation Income Statement 2009 2010 2011 2012 2013 2015 2016 2017
Contributions 2,330,984 3,937,507 2,703,572 3,058,124 2,748,235 2,797,615 2,523,518 4,965,452
Sales and Services 525,000 380,000 380,000 424,000 1,990,500 1,990,500 1,990,500 1,990,501
Rental Income 3,491,080 3,666,929 4,155,825 4,109,409 5,099,375 4,817,503 4,668,892 4,643,864
Investment Income (1,742,933) 986,029 2,110,364 119,747 952,590 214,792 171,543 2,730,523
Change in value of interest
rate swaps 0 0 0 (2,846,317) 1,442,132 413,507 (857,929) 2,077,251
Other revenues (losses) (962,295) (661,977) 511,893 637,866 1,213,520 1,622,886 1,202,176 1,255,276
Total Revenues 3,641,836 8,308,488 9,861,654 5,502,829 13,446,352 11,856,803 9,698,700 17,662,867
Scholarships and grants 2,665,060 2,115,742 560,573 627,377 685,917 783,459 828,190 978,336
Housing 3,945,887 3,915,033 4,054,719 5,119,567 4,346,100 4,081,422 4,005,963 3,705,297
Management 596,067 844,268 697,004 851,376 808,811 892,378 840,668 797,988
Fundraising 1,303,249 1,500,666 1,189,908 537,974 774,451 811,634 1,067,196 944,803
Other Programs 0 0 1,255,308 1,155,285 6,105,175 2,192,530 2,173,376 2,291,096
Other Expenses and Losses 0 0 0 0 948,493 38,791 31,023 54,954
Total Expenses 8,510,263 8,375,709 6,502,204 8,291,579 13,668,947 8,800,214 8,946,416 8,772,474
Change in Net Assets (4,868,427) (67,221) 3,359,450 (2,788,750) (222,595) 3,056,589 752,284 8,890,393
• There are some very interesting and curious items here
26
• Overall, contributions have not been large, though they almost doubled for 2017
• Rental income is likely associated with housing
• An interest rate swap is a bet on the direction of interest rates; even if the Foundation was
swapping from variable to fixed payments for debt, an organization only gets involved in these
swaps if they feel very good about themselves financially. It is very odd and rare for a public
university to be involved with interest rate swaps. The conservative play is to borrow fixed in
the first place, and not borrow variable and swap into fixed
• The expense for “other programs” is the 2nd largest expense; the audited statements for KU do
not reveal the nature of these other programs
• The revenue for sales and services is the exact same amount for the last several years
(1,990,500). This may be some sort of annual contract with the university
• Even though the change in net assets was positive $8.89 million in 2017, this does not indicate
that these amounts can be spent freely; it is nice that there were additional contributions and a
gain on the interest rate swap, but that is as far as it goes
Information from the IRS 990: W-2 Compensation of Top Officers

2014 2015 2016
Executive Director $49,038 $153,493 $155,252
CFO $121,000 $125,050 $135,470
2014 to 2015 2015 to 2016

$$ Change % Change $$ Change % Change
Executive Director $1,759 1.1%
CFO $4,050 3.3% $10,420 8.3%
• The $49,038 salary for the Exec Director in 2014 is likely for a partial year, so the changes were
not reported
• We can compare these dollar and percentage changes to faculty salary changes – and they are
much higher on both fronts than what the faculty received
Information from the IRS 990 – Top Five Independent Contractors

Firm Type 2014 2015 2016
3 Village Road Suite 200 Property Mgmt Services $391,242
MRA Realty Property Mgmt Services $363,578 $371,125
Hazleton Painting Painting $196,065 $241,775 $211,745
Dual Temp Maintenance Contract $131,365 $163,194 $166,038
Simplex Grinnell Fire Safety $139,367
Advanced Cleaning Solutions Cleaning for Student Housing $129,682
Committed Cleaning Svc Cleaning $125,617
Sherer Building Contracting Building Repairs $147,773 $110,343
Hamilton 9999 Associates Rent $113,784
27
Kutztown Revenue Analysis
Distribution per audited financial statements:

Audited Statements 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tuition and Fees 49,662,442 54,324,499 57,961,781 59,364,679 62,734,737 66,308,794 67,210,686 66,577,108 66,125,597 66,864,700 64,649,753
State Operating 39,542,772 41,617,293 41,746,416 38,486,766 37,977,801 34,862,527 33,787,934 33,105,442 32,933,334 34,313,599 35,631,702
Commonwealth On-Behalf 0 0 0 0 0 0 0 0 611,584 717,502 960,276
State Capital 1,384,484 952,698 908,217 136,632 0 667,124 1,956,931 1,500,776 1,069,730 1,217,855 1,277,334
Federal AARA Appropriation 0 0 0 5,701,689 3,380,577 0 0 0 0 0 0
Grants and Contracts 18,411,975 18,731,748 17,618,530 21,212,497 22,377,546 23,072,088 22,618,690 23,427,878 23,841,939 23,412,166 22,646,687
Sales of Education Depts 0 0 3,428,681 3,418,350 4,115,850 3,289,596 2,551,398 2,785,600 2,235,310 2,134,957 2,428,220
Auxiliary Enterprises 31,899,149 33,906,499 38,044,266 39,583,522 43,267,019 44,132,238 44,856,851 42,055,783 40,928,946 40,385,002 39,691,815
Investment Income 4,970,684 3,626,886 2,192,208 1,925,954 1,673,828 1,455,777 1,283,640 1,934,376 1,208,678 1,371,008 1,511,223
Other Revenues 4,578,514 6,464,764 824,640 781,765 566,665 1,942,194 5,237,979 1,537,904 1,717,320 1,458,847 2,276,294
Total Revenue 150,450,020 159,624,387 162,724,739 170,611,854 176,094,023 175,730,338 179,504,109 172,924,867 170,672,438 171,875,636 171,073,304
To further analyze this raw data, we will:

• Look at the percentage distribution
• Examine tuition and fees revenue in detail
• Examine the Commonwealth appropriation in detail
Kutztown 2017 Revenue Distribution (Main revenue items)
Tuition and Fees

4%
Total State
13%
Appropriation
38%
Auxiliary Enterprises
23%
Grants and Contracts
22%
Other
Kutztown Revenue Distribution Over Time

39% 39% 39%
40% 38% 37% 38%
36% 36%
34% 35%
35% 33%
Tuition and Fees
30% 27% 27% 26% 26%
Total State
23%
25% 22% Appropriation
21%
20% 20% 20% 20%
20% Auxiliary
Enterprises
15% Grants and
Contracts
10%
• Total state appropriation = operating + on-behalf (related to fringes) + capital appropriation

• The distribution has several different components that are significant, which is favorable; we will
examine the two main revenue items in detail below
28
Kutztown Enrollment (Source: Kutztown University Fact Books):
Kutztown Enrollment
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Undergrad 9,342 9,461 9,551 9,764 9,847 9,487 9,139 8,832 8,589 8,312 7,765 7,560
Grad 851 834 842 870 860 796 665 681 629 688 748 769
Total Headcount 10,193 10,295 10,393 10,634 10,707 10,283 9,804 9,513 9,218 9,000 8,513 8,329
Full Time 8,569 8,691 8,797 9,093 9,203 9,117 8,891 8,548 8,319 8,096 7,566 7,346
Part Time 1,624 1,604 1,596 1,541 1,504 1,166 913 965 899 904 947 983
Total Headcount 10,193 10,295 10,393 10,634 10,707 10,283 9,804 9,513 9,218 9,000 8,513 8,329
FTE UG 8,515 8,677 8,823 9,091 9,150 9,012 8,745 8,404 8,159 7,946 7,415 7,182
FTE Grad 532 524 527 578 570 427 365 379 358 394 411 422
Total FTE 9,047 9,201 9,351 9,669 9,720 9,440 9,109 8,783 8,517 8,340 7,827 7,604
Headcount Enrollment Graphically:

Undergrad Grad
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Administration View of Headcount Enrollment:

Undergrad Grad
12,000
11,500
11,000
10,500
10,000
9,500
9,000
8,500
8,000
7,500
7,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
By changing the scale on the left, you get a very different view of enrollment;
29
Below are the annual number and percentage changes in headcount enrollment
(very similar results with FTE)
Number Changes 08 09 10 11 12 13 14 15 16 17 18
Undergrad 119 90 213 83 (360) (348) (307) (243) (277) (547) (205)
Grad (17) 8 28 (10) (64) (131) 16 (52) 59 60 21
Total Headcount 102 98 241 73 (424) (479) (291) (295) (218) (487) (184)
% Changes 08 09 10 11 12 13 14 15 16 17 18
Undergrad 1.3% 1.0% 2.2% 0.9% -3.7% -3.7% -3.4% -2.8% -3.2% -6.6% -2.6%
Grad -2.0% 1.0% 3.3% -1.1% -7.4% -16.5% 2.4% -7.6% 9.4% 8.7% 2.8%
Total Headcount 1.0% 1.0% 2.3% 0.7% -4.0% -4.7% -3.0% -3.1% -2.4% -5.4% -2.2%
Annual Number Changes in Total Enrollment Graphically: (Since undergrad enrollment is 91% of total
enrollment, these graphs are for total enrollment only)
KU Total Headcount
300
200
100
0
(100)
(200)
(300)
(400)
(500)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
to 08 to 09 to 10 to 11 to 12 to 13 to 14 to 15 to 16 to 17 to 18
• Enrollment has declined for the last seven fiscal years

• The number enrollment decline for Fall 2016 to Fall 2017 (fiscal 2017 to fiscal 2018) is the
smallest decline in the last seven years
Long-Term Number Changes in Total Headcount Enrollment Graphically

KU Total Headcount
0
(200)
(400)
(600)
(800)
(1,000)
(1,200)
(1,400)
(1,600)
(1,800)
(2,000)
2007 to 2013 2013 to 2018 2007 to 2018
30
Annual Percentage Changes in Total Enrollment Graphically
% Changes in Total KU Headcount Enrollment

3% 2.3%
2% 1.0% 1.0% 0.7%
1%
0%
-1%
-2%
-3% -2.4% -2.2%
-4% -3.0% -3.1%
-5% -4.0%
-4.7% -5.4%
-6%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Kutztown Percentage Changes vs. Rest of PASSHE Percentage Changes in Total Enrollment:
On an annual basis, Kutztown is now better than the rest of PASSHE for 2018
Rest of PASSHE Kutztown
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Long-Term % Changes in Headcount Enrollment: Kutztown vs. Rest of PASSHE

Rest of PASSHE Kutztown
8% 6%
4%
0%
-4%
-4%
-5%
-8%
-12% -10%
-16% -18%
-15%
-20%
2007 to 2013 2013 to 2018 2007 to 2018
31
Total Kutztown Headcount Enrollment by College (comparing Fall 2012 to Fall 2017 per fact-books):
Fall Fall # %
Headcount 2012 2017 Change Change
CLAS 3,633 3,007 (626) -17%
Business 1,955 1,723 (232) -12%
Education 1,784 1,275 (509) -29%
VPA 1,283 1,475 192 15%
Other 1,113 778 (335) -30%
Total 9,768 8,258 (1,510) -15%
Last two years of enrollment changes – all the colleges showed significant improvement for the most
recent year compared to two years ago (except for the “other” category)
Fall 2015 to Fall 2016 Fall 2016 to Fall 2017
10% 8%
8% 6%
6%
4%
2% 1%
0%
0%
-2%
-4% -2%
-6% -4%
-6% -5%
-8% -6%
-9% -8%
-10% -8%
VPA Education All Business CLAS Other
Colleges
Enrollment by Residence
% of Enrollment: In State
95%
90.9% 90.5% 90.6% 90.4%
89.9% 89.5% 89.1%
88.8% 88.8% 88.5% 88.4% 88.1%
90%
85%
80%
75%
70%
• In Fall 2017 (fiscal 2018), total headcount enrollment was 8,329

• 990 or 11.9% were out-of-state
• In 2007, the percent of students out-of-state was 9.1%
• There is a slight increase in out-of-state student percentage each year
• For tuition price, from 2007 to 2018, out of state tuition is exactly 2.50 times in-state tuition
• In terms of international students, for every year from 2007 to 2018, non-U.S. students are only
1% of total headcount enrollment
32
Tuition Price (Source: Kutztown bond report, December 2017)
Kutztown
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Tuition $5,038 $5,177 $5,358 $5,554 $5,804 $6,240 $6,428 $6,622 $6,820 $7,060 $7,238 $7,492
Fees $1,581 $1,696 $1,768 $1,843 $1,928 $2,119 $2,168 $2,197 $2,279 $2,351 $2,380 $2,495
Tuition + Fees $6,619 $6,873 $7,126 $7,397 $7,732 $8,359 $8,596 $8,819 $9,099 $9,411 $9,618 $9,987
Room and Board $6,628 $6,960 $7,330 $7,698 $8,094 $8,536 $8,490 $8,370 $8,430 $9,070 $9,438 $10,282
Total Cost $13,247 $13,833 $14,456 $15,095 $15,826 $16,895 $17,086 $17,189 $17,529 $18,481 $19,056 $20,269
Out of State Tuition $12,598 $12,944 $13,396 $13,886 $14,510 $15,600 $16,070 $16,556 $17,050 $17,650 $18,096 $18,730
Ratio of Out-of-State
to In-State 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50
% Changes 2007 to 08 2008 to 09 2009 to 10 2010 to 11 2011 to 12 2012 to 13 2013 to 14 2014 to 15 2015 to 16 2016 to 17 2017 to 18
Tuition 2.8% 3.5% 3.7% 4.5% 7.5% 3.0% 3.0% 3.0% 3.5% 2.5% 3.5%
Fees 7.3% 4.2% 4.2% 4.6% 9.9% 2.3% 1.3% 3.7% 3.2% 1.2% 4.8%
Tuition + Fees 3.8% 3.7% 3.8% 4.5% 8.1% 2.8% 2.6% 3.2% 3.4% 2.2% 3.8%
Room and Board 5.0% 5.3% 5.0% 5.1% 5.5% -0.5% -1.4% 0.7% 7.6% 4.1% 8.9%
Total Cost 4.4% 4.5% 4.4% 4.8% 6.8% 1.1% 0.6% 2.0% 5.4% 3.1% 6.4%
• Tuition price is increasing every year, and fees are increasing more than tuition in some years
• The ratio of out of state to in-state is the same each and every year
• Graph of tuition and fees is below – the increases are clear to see
Tuition Fees
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
The other factor to consider is the discount rate; below is the discount rate for all tuition, and the data
comes from the audited financial statements of Kutztown (source is audited financial statements):
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tuition and Fees, Gross 64,643,624 67,686,084 70,376,988 74,970,515 79,831,639 83,563,420 84,194,947 84,166,595 84,378,294 85,309,943 82,579,365
Allowance 14,981,182 13,361,585 12,415,207 15,605,836 17,096,902 17,254,626 16,984,261 17,589,487 18,252,697 18,445,243 17,929,612
Tuition and Fees, Net 49,662,442 54,324,499 57,961,781 59,364,679 62,734,737 66,308,794 67,210,686 66,577,108 66,125,597 66,864,700 64,649,753
KU Discount Rate 23.2% 19.7% 17.6% 20.8% 21.4% 20.6% 20.2% 20.9% 21.6% 21.6% 21.7%
All of PASSHE Discount Rate 20.6% 21.2% 19.8% 23.2% 22.6% 22.3% 20.9% 21.4% 22.3% 21.2% 21.2%
• The discount rate = Allowance as a percent of tuition and fees, gross

• The allowance includes scholarships and allow
• Any claim that increases in scholarships discounts and allowances
• Any claim that increases in these discounts in recent years has hurt KU is not supported by this
evidence; the 2017 discount rate of 21.7% has barely changed since 2010
33
Tuition Revenue
No matter what is happening with enrollment, what matters to the financial situation for Kutztown is
what happens to net tuition revenue. Tuition revenue is like a stew; into the mix goes:
• Enrollment changes
• Tuition price changes
• Mix of student changes (grad/undergrad)
• Discount rate changes
Below is a table and graph of the annual changes in total headcount enrollment, tuition and fees price,
and tuition revenue:
2007 to 08 2008 to 09 2009 to 10 2010 to 11 2011 to 12 2012 to 13 2013 to 14 2014 to 15 2015 to 16 2016 to 17 2017 to 18
HC Enrollment 1.0% 1.0% 2.3% 0.7% -4.0% -4.7% -3.0% -3.1% -2.4% -5.4% -2.2%
Tuition and Fees Price 3.8% 3.7% 3.8% 4.5% 8.1% 2.8% 2.6% 3.2% 3.4% 2.2% 3.8%
Tuition Revenue 9.4% 6.7% 2.4% 5.7% 5.7% 1.4% -0.9% -0.7% 1.1% -3.3%
HC Enrollment Tuition and Fees Price Tuition Revenue

10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• For 2017-2018, the enrollment decline is lower than any year since 2012, and the tuition and fee
price increase is larger than any year since 2012. Therefore, tuition revenue will likely increase
for 2018; if you look at 2015 to 2016, the tuition price and enrollment changes were similar as to
2017 to 2018, and from 2015 to 2016, bottom line tuition revenue increased
• Besides the tuition price increase, the mix of students has become more favorable, with more
graduate students, who typically do not get as much as a discount off of the sticker price of
tuition as undergraduate students
• Bottom line: the largest revenue source has likely recovered for 2018, and there will likely be an
increase in tuition revenue. We will next examine the 2nd largest revenue source, the
Commonwealth appropriation
34
Commonwealth Appropriation
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
State Operating $39,542,772 $41,617,293 $41,746,416 $38,486,766 $37,977,801 $34,862,527 $33,787,934 $33,105,442 $32,933,334 $34,313,599 35,631,702
Commonwealth On-Behalf $0 $0 $0 $0 $0 $0 $0 $0 $611,584 $717,502 960,276
State Capital $1,384,484 $952,698 $908,217 $136,632 $0 $667,124 $1,956,931 $1,500,776 $1,069,730 $1,217,855 1,277,334
Federal AARA Appropriation $0 $0 $0 $5,701,689 $3,380,577 $0 $0 $0 $0 $0 0
Total Appropriation $40,927,256 $42,569,991 $42,654,633 $44,325,087 $41,358,378 $35,529,651 $35,744,865 $34,606,218 $34,614,648 $36,248,956 37,869,312
State Operating Total Appropriation

$50,000,000
$45,000,000
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• The state operating appropriation is broken down between base funding and performance
funding. As we will see, performance funding is approximately 10% of the total operational
appropriation, and is not a major factor in the changes in the appropriation over time
• On-behalf payments are payments made to the PSERS System on behalf of KU by the
Commonwealth
• ARRA stands for the American Recovery and Reinvestment Act of 2009, and is generally known
as the Federal Stimulus plan
• The level of the appropriation in 2017 is still below the level in 2011
The dollar changes in the operating and total appropriation were as follows:
2007 to 08 2008 to 09 2009 to 10 2010 to 11 2011 to 12 2012 to 13 2013 to 14 2014 to 15 2015 to 16 2016 to 17
State Operating $2,074,521 $129,123 ($3,259,650) ($508,965) ($3,115,274) ($1,074,593) ($682,492) ($172,108) $1,380,265 $1,318,103
Total Appropriation $1,642,735 $84,642 $1,670,454 ($2,966,709) ($5,828,727) $215,214 ($1,138,647) $8,430 $1,634,308 $1,620,356

$2,000,000
$1,000,000
$0
-$1,000,000
-$2,000,000
-$3,000,000
-$4,000,000
-$5,000,000
-$6,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
to 08 to 09 to 10 to 11 to 12 to 13 to 14 to 15 to 16 to 17
35
Percentage Changes in the Appropriation
2007 to 08 2008 to 09 2009 to 10 2010 to 11 2011 to 12 2012 to 13 2013 to 14 2014 to 15 2015 to 16 2016 to 17
State Operating 5.2% 0.3% -7.8% -1.3% -8.2% -3.1% -2.0% -0.5% 4.2% 3.8%
Total Appropriation 4.0% 0.2% 3.9% -6.7% -14.1% 0.6% -3.2% 0.0% 4.7% 4.5%
9%
6%
3%
0%
-3%
-6%
-9%
-12%
-15%
2007 to 2008 to 2009 to 2010 to 2011 to 2012 to 2013 to 2014 to 2015 to 2016 to
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• The declines up to 2014 were significant, but there have been increases for the last few years
• The difference between the operating and total in 2009 to 2012 is due to the federal stimulus
• We do not know the 2018 precise appropriation for Kutztown; However, the PASSHE
appropriation increased 2% from 2017 to 2018, so it was assumed that the Kutztown
appropriation would also increase 2%
Appropriation per FTE Student
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
State Operating $39,542,772 $41,617,293 $41,746,416 $38,486,766 $37,977,801 $34,862,527 $33,787,934 $33,105,442 $32,933,334 $34,313,599 35,631,702
FTE Enrollment 9,047 9,201 9,351 9,669 9,720 9,440 9,109 8,783 8,517 8,340 7,827
Appropriaiton per FTE $4,371 $4,523 $4,465 $3,980 $3,907 $3,693 $3,709 $3,769 $3,867 $4,114 $4,553
Adjusted for Inflation $4,371 $4,374 $4,334 $3,789 $3,622 $3,362 $3,337 $3,348 $3,437 $3,636 $3,980
• The inflation adjustment was made using the CPI-U index for Philadelphia-Wilmington-Atlantic
City from the Bureau of Labor Statistics
• The changes over time in the appropriation per FTE student graphically is below:
Operating Appropriation per FTE Student

$5,000
$4,500
Nominal
$4,000
$3,500
Adjusted for
Inflation
$3,000
$2,500
36
A note on Performance Funding
The Commonwealth allocates a percentage of the total operating appropriation based on certain
metrics. Below is a table of what Kutztown received, versus all of PASSH
2012 2013 2014 2015 2016 2017

Base Appropriation 31,770,603 30,989,223 30,351,621 30,085,114 31,312,395 31,849,822
Performance Funding 3,091,924 2,798,711 2,753,821 2,848,220 3,001,204 3,781,880
Total Operating Appropriation 34,862,527 33,787,934 33,105,442 32,933,334 34,313,599 35,631,702
Percent of Total Operating
Appropriation that is
Performance Funding 8.9% 8.3% 8.3% 8.6% 8.7% 10.6%
Percent for All of PASSHE 8.7% 8.9% 9.0% 9.1% 8.9% 8.8%
• In all but 2017, performance funding for KU was less than 10% of the total operating
appropriation
• For all of PASSHE, performance funding is just under 9% of the total
• In 2012 and 2017, KU received a larger share due to performance funding; in 2013 to 2016, KU
received a smaller share due to performance funding. Taking these 6 years in total, KU would
have received $75,000 more out of a total of $204 million of appropriation over these six years.
This is less than ½ of 1 percent
• Conclusion: Performance funding has not had a significant effect on the operating appropriation
for Kutztown
• The factors used in performance funding:
o Degrees conferred
o Pell and non-Pell recipient graduation rates
o Underrepresented minority and rest of student graduation rates
o % of Pell recipients who are freshmen (and underrepresented minorities)
o % of Low income PA high school graduates
o % of Underrepresented minority faculty
o % of Female faculty
37
A note on budgets and pessimism – Commonwealth operating appropriation
2017 Budget Document 2016 2017

Budget 33,551,745 33,301,397
Actual 34,313,599 35,631,702
$ Difference 761,854 2,330,305
% Difference 2.3% 7.0%
2018 Budget Document 2017 2018

Budget 34,895,865 34,895,865
Actual 35,631,702 36,344,336
$ Difference 735,837 1,448,471
% Difference 2.1% 4.2%
For 2018, PASSHE went up 2%
• In the 2017 budget (created before the 2016 actual results come out in the fall of 2016), the KU
administration predicted that the 2016 operating appropriation would be $33,3551,745; it
turned out to be $761,854 higher than that. The prediction for 2017 was over $2 million too
low. This represents incredible PESSIMISM in budgeting.
• The same is true for the 2018 budget document; the KU administration was very pessimistic in
predicting what the Commonwealth appropriation would be in the future
• We do not know the 2018 precise appropriation for Kutztown; However, the PASSHE
appropriation increased 2% from 2017 to 2018, so it was assumed that the Kutztown
appropriation would also increase 2%
38
Expense and Priority Analysis
Dollar distribution of expenses (Sources: Audited statements, IPEDS, Kutztown Fact Book)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Instruction 49,486,933 51,670,060 54,578,843 57,302,774 59,070,967 59,545,420 58,262,385 59,327,576 61,386,805 64,739,127 65,045,665
Research 295,396 269,200 365,161 459,135 515,233 488,467 444,425 385,286 401,935 422,453 568,727
Public Service 2,816,885 2,890,456 2,921,807 2,458,511 2,594,842 2,759,637 2,634,830 3,015,283 3,005,864 3,014,145 2,994,291
Academic Support 11,711,325 12,413,336 13,852,514 12,791,319 11,160,741 10,057,288 9,924,935 9,241,164 10,173,835 10,691,359 10,866,724
Student Services 10,306,448 12,037,421 12,696,996 13,358,732 13,804,001 13,790,702 13,971,143 14,666,940 15,703,334 15,859,407 16,194,686
Institutional Support 18,071,820 18,982,266 18,661,786 19,198,652 18,852,766 19,120,616 20,256,795 21,004,571 20,033,684 23,780,155 22,480,226
Plant 10,053,108 11,023,639 11,923,277 11,482,753 11,906,444 11,427,044 12,234,553 16,699,012 13,057,135 13,756,242 13,486,115
Depreciation 8,129,896 8,760,490 10,818,156 11,662,348 12,898,350 13,558,827 15,380,404 16,412,303 16,720,785 17,410,446 17,946,530
Student Aid 1,841,021 3,563,803 3,283,604 4,202,526 4,504,002 5,419,920 5,533,134 5,920,222 6,170,529 6,122,215 5,900,066
Auxiliary 20,476,413 22,988,590 25,838,071 24,787,756 25,575,381 24,276,483 23,453,649 20,620,275 24,592,067 22,315,326 26,465,715
Total Operating Expenses 133,189,245 144,599,261 154,940,215 157,704,506 160,882,727 160,444,404 162,096,253 167,292,632 171,245,973 178,110,875 181,948,745
Percent Distribution (each item reported as a percent of total expenses)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Instruction 37.2% 35.7% 35.2% 36.3% 36.7% 37.1% 35.9% 35.5% 35.8% 36.3% 35.7%
Research 0.2% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.3%
Public Service 2.1% 2.0% 1.9% 1.6% 1.6% 1.7% 1.6% 1.8% 1.8% 1.7% 1.6%
Academic Support 8.8% 8.6% 8.9% 8.1% 6.9% 6.3% 6.1% 5.5% 5.9% 6.0% 6.0%
Student Services 7.7% 8.3% 8.2% 8.5% 8.6% 8.6% 8.6% 8.8% 9.2% 8.9% 8.9%
Institutional Support 13.6% 13.1% 12.0% 12.2% 11.7% 11.9% 12.5% 12.6% 11.7% 13.4% 12.4%
Plant 7.5% 7.6% 7.7% 7.3% 7.4% 7.1% 7.5% 10.0% 7.6% 7.7% 7.4%
Depreciation 6.1% 6.1% 7.0% 7.4% 8.0% 8.5% 9.5% 9.8% 9.8% 9.8% 9.9%
Student Aid 1.4% 2.5% 2.1% 2.7% 2.8% 3.4% 3.4% 3.5% 3.6% 3.4% 3.2%
Auxiliary 15.4% 15.9% 16.7% 15.7% 15.9% 15.1% 14.5% 12.3% 14.4% 12.5% 14.5%
Total Operating Expenses 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
2017 Expense Distribution Graphically
2017 Kutztown Expense Distirubtion
Instruction
Research
15% Public Service
3% Academic Support
36%
10% Student Services
Institutional Support
7%
0% Plant
12% 6% 2%
9% Depreciation
Student Aid
Auxiliary
39
What do the categories represent?
• Instruction does not include support staff; it is just people who teach. However, other costs
besides salaries and benefits are included in the audited statements and the fact books; we will
break down instruction by the different sources, and we will examine the absurdly high benefit
rates that Kutztown is reporting for all of their compensation
• Despite their names, academic support and student services have significant administrative
elements to them. In fact, academic support includes deans, associate deans, and the library.
• Institutional support is pure upper-level administration, and includes president, provost, and vice-
presidents
• Auxiliaries is housing, dining, student union, bookstore, and athletics. However, for Kutztown,
housing is included in the component unit KUSSI
• We will focus on two categories: Instruction and institutional support
Inferences from the percentage distribution:

• Instruction is barely more than 1/3rd of total expenses
• In general, a lower percentage of total expenses is devoted to instruction over time
• The distribution is fairly stable over the years
An Aside on Data Discrepancies

There are three different data sources, and total expenses are different in each source.
Below is a reconciliation for 2016 (last year we have IPEDS) and 2017.
What do we learn? That the manner in which expenses are reported in the Factbook (which is internally
created) is different than the audited statements and the amounts the KU administration reports to the
federal government (IPEDS).
Total Expenses 2016 2017
Audited Statements 178,110,875 181,948,745
Fact Book 202,344,121 205,094,108
IPEDS 183,884,149
Audited Statements 178,110,875

Interest Expense 5,773,273
Total 183,884,148
IPEDS 183,884,149
Fact Book 202,344,121 205,094,108

Tuition Discount included
in expenses with fact
book, reduction in
income per audit (18,445,243) (17,929,612)
Auxiliary Expenses are
larger in Factbook than
audited statements (5,357,832) (4,729,415)
Plant Expenses larger in
Factbook than on audited
statements (430,170) (486,336)
Adjusted Total 178,110,876 181,948,745
Total per Audit 178,110,875 181,948,745
40
Instruction Expense Detail per IPEDS
IPEDS 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Salaries 33,468,380 35,162,369 36,188,007 38,185,953 39,053,801 37,505,552 38,217,382 37,748,303 38,822,040 38,369,892 NO
Fringes 12,789,627 13,050,994 14,121,809 15,812,957 17,270,542 17,525,891 17,846,889 19,322,009 19,656,695 0 IPEDS
Plant 0 0 0 6,232,822 6,635,234 6,433,571 6,756,884 7,356,465 7,199,038 0 DATA
Depreciation 0 0 0 5,126,579 5,790,798 6,208,664 6,949,297 7,398,226 7,568,185 0 YET
Interest 0 0 0 2,838,394 2,972,064 3,001,399 3,258,703 3,423,928 2,852,618 0
All Other 3,228,926 3,456,697 4,269,027 3,303,865 2,746,624 4,513,977 2,198,114 2,257,264 2,505,614 44,542,241
Total per IPEDS 49,486,933 51,670,060 54,578,843 71,500,570 74,469,063 75,189,054 75,227,269 77,506,195 78,604,190 82,912,133
• Instruction per IPEDS has had three different processes since 2007; these are imposed by IPEDS.
• Through 2009, it was salaries + fringes + all other (supplies, consultants?); from 2010, instruction
had plant, depreciation, and interest allocated to it; for 2016, what was reported included only
two categories. The 2017 IPEDS data will not be due until April of 2018
• We will first examine how the IPEDS data maps into the audited financial statements, and
examine the abnormally high benefit rates associated with this information
Mapping IPEDS to audited statements:

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Salaries 33,468,380 35,162,369 36,188,007 38,185,953 39,053,801 37,505,552 38,217,382 37,748,303 38,822,040 38,369,892 40,204,960
Fringes 12,789,627 13,050,994 14,121,809 15,812,957 17,270,542 17,525,891 17,846,889 19,322,009 19,656,695 20,910,199 20,809,551
All Other 3,228,926 3,456,697 4,269,027 3,303,865 2,746,624 4,513,977 2,198,114 2,257,264 2,505,614 5,459,036 4,031,154
Total 49,486,933 51,670,060 54,578,843 57,302,775 59,070,967 59,545,420 58,262,385 59,327,576 60,984,349 64,739,127 65,045,665
Difference with audit 0 0 0 (1) 0 0 0 0 402,456 0
• Other than in 2015, if we take salaries + fringes + all other, what is in IPEDS matches what is on
the audited statements
• For 2016 and 2017, the data comes from the excel files (these were sent to me by the faculty)
that have detail supporting the auditing statements
An Examination of the Alarmingly High Benefits Rates at Kutztown
A benefit rate is defined as fringes (benefits) as a percent of salaries

Per the AAUP Compensation survey, the benefit rate for all universities is approximately 31%.
Below is the benefit rate for instructional salaries at Kutztown:
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Salaries 33,468,380 35,162,369 36,188,007 38,185,953 39,053,801 37,505,552 38,217,382 37,748,303 38,822,040 38,369,892 40,204,960
Fringes 12,789,627 13,050,994 14,121,809 15,812,957 17,270,542 17,525,891 17,846,889 19,322,009 19,656,695 20,910,199 20,809,551
Benefit Rate per IPEDS
and KU documents 38% 37% 39% 41% 44% 47% 47% 51% 51% 54% 52%
Benefit Rate per AAUP 28% 28% 29% 26% 25% 27% not reported 18% 20% not reported not reported
• The benefit rates above are absurdly high, and are simply not realistic. Note how the gap
between IPEDS and KU documents is from what Kutztown submits to the AAUP
• It is disappointing that the Kutztown administration did not submit any data to the AAUP
Compensation Survey in 2016 or 2017; this situation should change
• Still, for 2007 to 2015, how can the benefit rate the KU administration submitted to the AAUP
survey is enormously lower than the benefit rate per IPEDS and other KU internal documents.
This just does not make sense
41
• The benefit rate for all Kutztown employees for 2015 to 2017 are as follows:
2015 2016 2017

Total KU Salaries 69,969,006 69,366,406 72,404,767
Total KU Benefits 38,575,626 41,945,566 42,579,539
Benefit Rate for all KU
employees per above 55% 60% 59%
Where does this leave us?

With a benefit rate of 51%/54%/52% for instruction, and 55%/60%/59% for all employees.
If we take out instruction employees, the benefit rates for non-instruction employees are patently
ridiculous:
2015 2016 2017
Non-Instruction Salaries 31,146,966 30,996,514 32,199,807
Non-Instruction Benefits 18,918,931 21,035,367 21,769,988
Non-Instruction Benefit
Rate 61% 68% 68%
Some examination of the audited statements reveals where some of this absurdity comes from.
2015 2016 2017
Total Salaries + Benefits 108,544,632 111,311,972 114,984,306

Cash paid for employees
per Cash flow statement 102,089,039 102,980,442 106,519,924
Discrepancy (6,455,593) (8,331,530) (8,464,382)

What is going on here?
• The Cash flow statement of the audited statements reveals the CASH PAID for all employees.
IPEDS and the audited statements report salaries and benefits on an accrual basis
• Salaries cannot be manipulated; cash paid is cash paid.
• The benefit rates are estimated for the audited statements (though they should not be), and
what we see above is that the audited statements, IPEDS (and therefore budgets) are being
over-estimated by a significant amount. The cash paid for salaries and benefits was $106.51
million for all employees in 2017 at Kutztown; the expense recorded in the financial statements
was $114.98 million
Discrepancy (6,455,593) (8,331,530) (8,464,382)
2015 2016 2017
Reported Benefits 38,575,626 41,945,566 42,579,539
Less: Discrepancy Above (6,455,593) (8,331,530) (8,464,382)
Adjusted Benefits 32,120,033 33,614,036 34,115,157
Adjusted Benefit Rate 46% 48% 47%
Benefit Rate for all KU

employees per above 55% 60% 59%
42
Therefore, the benefit rate adjusting for this one item is much lower; the reported benefit rate of 59%
for 2017 becomes 47%. The 47% is still very high compared to most institutions, but at least we see that
the padding of benefit expenses in the audited statements (when compared to cash paid) is at least
partially responsible for the high benefit rates.
In addition, the KU administration claims that the administration has to pay 34% of payroll into the ADP,
SERS and PSERS systems. These rates are likely much higher than the cash actually paid, which we
examine below (we did examine cash paid for the PASSHE system as a whole earlier in this document):
2015 2016 2017

PSERS 472,464 576,041 725,320
SERS 4,535,705 5,380,267 6,684,378
ARP (DC plan) 3,517,516 3,436,733 3,568,644
Total Cash Paid for Pensions 8,525,685 9,393,041 10,978,342
OPEB cash paid 3,244,812 3,316,293 3,258,024
Total Cash Paid for Pensions
and Retiree Health 11,770,497 12,709,334 14,236,366
Cash paid for pensions and
retiree health as a % of Salaries 17.0% 18.3% 19.7%
• The cash paid for pensions AND retiree health totaled 19.7% in 2017; however, the Kutztown
administration is using a 34% rate as it prepares its budgets
• This is a main source of the over-statement of benefit rates that we saw earlier; in addition, it
fits with the budget pessimism that is practiced by the Kutztown administration that we
examined earlier in respect to the Commonwealth appropriation.
43
IPEDS spending metrics
The table below reports spending on instruction salaries and benefits when compared to the rest of
Kutztown:
Inputs 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Instruction Salaries 33,468,380 35,162,369 36,188,007 38,185,953 39,053,801 37,505,552 38,217,382 37,748,303 38,822,040 38,369,892 40,204,960
Instruction Benefits 12,789,627 13,050,994 14,121,809 15,812,957 17,270,542 17,525,891 17,846,889 19,322,009 19,656,695 20,910,199 20,809,551
Instruction Salaries + Benefits 46,258,007 48,213,363 50,309,816 53,998,910 56,324,343 55,031,443 56,064,271 57,070,312 58,478,735 59,280,091 61,014,511
Total KU Salaries 62,770,977 65,614,118 69,057,769 71,836,691 70,205,627 67,670,404 67,983,245 69,623,398 69,969,006 69,366,406 72,404,767
Total KU Benefits 27,237,479 26,540,836 30,355,692 33,064,902 34,185,190 34,201,670 34,558,679 37,290,227 38,575,626 41,945,566 42,579,539
Total KU Salaries + Benefits 90,008,456 92,154,954 99,413,461 104,901,593 104,390,817 101,872,074 102,541,924 106,913,625 108,544,632 111,311,972 114,984,306
Total KU Expenses 133,189,245 144,599,261 154,940,215 157,704,506 160,882,727 160,444,404 162,096,253 167,292,632 171,245,973 178,110,875 181,948,745
Instruction Salaries / Total KU

Salaries 53.3% 53.6% 52.4% 53.2% 55.6% 55.4% 56.2% 54.2% 55.5% 55.3% 55.5%
Instruction Salaries + Benefits
/ Total KU Salaries + Benefits 51.4% 52.3% 50.6% 51.5% 54.0% 54.0% 54.7% 53.4% 53.9% 53.3% 53.1%
Instruction Salaries + Benefits
as % of Total KU Expenses 34.7% 33.3% 32.5% 34.2% 35.0% 34.3% 34.6% 34.1% 34.1% 33.3% 33.5%
Total KU Salaries + Benefits as
a % of Total KU Expenses 67.6% 63.7% 64.2% 66.5% 64.9% 63.5% 63.3% 63.9% 63.4% 62.5% 63.2%
Inferences:
• For all three categories, the spending on instruction has declined in percentage terms from 2013
to 2017
• Slightly more than ½ of total salaries (55.5%) are spent on instruction
• Only 33.5% of total expenses are spent on instructional salaries and benefits
• This is a more relevant metric of the administration’s commitment to the core academic mission
than examining total expenses; here, there is no other costs but personnel. Within personnel,
due to the absurdly high benefit rates, the salary metric (blue or first metric)
• The last row shows that for the last six years, total personnel expenses at KU are 63.2% of total
expenses
Institutional Support Detail (upper-level administration costs)

Institutional Support 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Inst Support Salaries 5,778,449 5,975,828 6,194,662 6,533,032 6,216,533 6,137,834 5,879,743 6,833,269 7,049,701 7,141,674 7,467,751
Inst Support Benefits 3,650,762 3,669,342 4,249,569 4,617,583 4,555,846 4,619,371 4,403,601 4,462,621 4,167,061 5,328,546 5,612,115
Inst Support Salaries + Benefits 9,429,211 9,645,170 10,444,231 11,150,615 10,772,379 10,757,205 10,283,344 11,295,890 11,216,762 12,470,220 13,079,866
Total KU Salaries 62,770,977 65,614,118 69,057,769 71,836,691 70,205,627 67,670,404 67,983,245 69,623,398 69,969,006 69,366,406 72,404,767
Total KU Benefits 27,237,479 26,540,836 30,355,692 33,064,902 34,185,190 34,201,670 34,558,679 37,290,227 38,575,626 41,945,566 42,579,539
Total KU Salaries + Benefits 90,008,456 92,154,954 99,413,461 104,901,593 104,390,817 101,872,074 102,541,924 106,913,625 108,544,632 111,311,972 114,984,306
Total KU Expenses 133,189,245 144,599,261 154,940,215 157,704,506 160,882,727 160,444,404 162,096,253 167,292,632 171,245,973 178,110,875 181,948,745
Inst Support Salaries / Total
KU Salaries 9.2% 9.1% 9.0% 9.1% 8.9% 9.1% 8.6% 9.8% 10.1% 10.3% 10.3%
Inst Support Salaries +
Benefits / Total KU Salaries +
Benefits 10.5% 10.5% 10.5% 10.6% 10.3% 10.6% 10.0% 10.6% 10.3% 11.2% 11.4%
• In general, the personnel costs for upper-level administrators is going up, versus the decline in
these costs for instruction
• Below is a graph comparing the salary expenses of instruction vs. institutional support for the
last five years
44
Percentage Changes in Instruction Salaries vs. Institutional Support Salaries
(Sources: IPEDS and KU excel files)
Instruction Salaries Institutional Support Salaries

35%
29%
30% 27%
25% 22%
20%
20%
15% 12%
10% 6% 7%
5%
5%
0%
2007 to 2012 2012 to 2017 2013 to 2017 2007 to 2017
• From 2007 to 2012, instruction salaries went up faster than upper-level admin salaries;
however, from 2012 to 2017, or from 2013 to 2017, or from 2007 to 2017, admin salaries
increased significantly more than instruction salaries
• Given admins have much higher salary levels, the percentage increases in salaries for admins is
even more pronounced on an individual basis – we will examine admin salaries below.
• It is very difficult to justify admin salaries going up more than instruction salaries, given the
budget hysteria and cuts that have been pronounced by the administration
Kutztown vs. Peers:
PASSHE Peer IPEDS Peer

Kutztown Average Average
Instruction Salaries / Total Salaries 55% 55% 54%
Inst Support Salaries / Total Salaries 10% 13% 13%
IPEDS peers are 32 peers created by an algorithm used by IPEDS to find similar institutions:
Arkansas Tech University Morehead State University Stockton University
Austin Peay State University Murray State University SUNY College at Brockport
Bloomsburg University of Pennsylvania North Carolina Central University SUNY College at Oswego
California State University-Bakersfield Northwestern State University of Louisiana The College of New Jersey
California State University-Stanislaus Saginaw Valley State University University of Southern Indiana
California University of Pennsylvania Salem State University University of Wisconsin-Platteville
CUNY Lehman College Salisbury University University of Wisconsin-Stout
Eastern Illinois University Slippery Rock University of Pennsylvania West Texas A & M University
Fort Hays State University Sonoma State University Western Carolina University
Indiana University-Purdue University-Fort Wayne Southern Connecticut State University William Paterson University of New Jersey
Millersville University of Pennsylvania State University of New York at New Paltz
45
Number of faculty and Other Employees (Source: Kutztown Fact-books)
Number of Faculty:
Fall 09 Fall 10 Fall 11 Fall 12 Fall 13 Fall 14 Fall 15 Fall 16 Fall 17
Tenure 243 251 253 267 273 297 298 290 287
Tenure-Track 182 167 137 118 103 81 75 82 68
T/TT 425 418 390 385 376 378 373 372 355
NTT 115 89 97 106 97 79 99 98 115
Total 540 507 487 491 473 457 472 470 470

Full 105 108 104 104 96 97 100 107 114
Associate 116 116 123 132 139 153 155 156 144
Assistant 213 203 190 174 167 154 149 141 125
Instructor 106 80 70 81 71 53 68 66 87
Total 540 507 487 491 473 457 472 470 470
• There is a significant decline in the hiring of new assistant professors
• This is exemplified in the lower number of tenure-track faculty, as well as the lower number of
assistant professors
Graph of Number of Faculty by Rank
Full Associate Assistant Instructor

225
200
175
150
125
100
75
50
This trend is deliberate, and it follows from the quote in the 2017 audited financial statements:
“In July 2017, the National Center for Higher Education Management Systems (NCHEMS) delivered its final
report on the strategic review of the State System . . Future collective bargaining agreements should promote
nimbleness and be financially feasible.”
Nimbelness is code for: reduce the number of tenured faculty as much as possible.
The administration is going to achieve this goal not by laying off faculty (though they will try), but in
simply doing what they have been; not replacing retiring tenured faculty with new tenure-track assistant
professors; they will simply allow attrition to change the nature of the faculty workforce.
46
The fact reports also report the number of staff or non-faculty employees:
Exec/Admin/Mgrl 45 42 40 41 41 42 36 34 33
Professional Non-faculty 212 211 196 196 201 202 203 212 218
Secretarial/Clerical 143 121 114 113 121 119 113 116 117
Tech/Paraprofessionals 26 23 22 23 23 23 20 22 19
Skilled Crafts 38 37 36 34 34 32 28 28 28
Maintenance 142 127 125 121 117 113 108 109 112
Total Staff 606 561 533 528 537 531 508 521 527
Total Faculty 540 507 487 491 473 457 472 470 470
Total Employees 1,146 1,068 1,020 1,019 1,010 988 980 991 997
• The decline in the number of executive/administrative/managerial employees needs to be taken
with a grain of salt. The salary data reported earlier in institutional support revealed that the
salaries spent on upper-level administration increased, which clearly goes against the trend
above; this simply can be re-categorizing people within this framework
• The clear trend above is the decline in the number of secretarial/clerical positions
Graph of the Change in the Number of Employees
Fall 09 to Fall 13 Fall 13 to Fall 17 Fall 09 to Fall 17

80
60
40
20
0
-20
-40
-60
-80
-100
-120
Tenure Tenure T/TT NTT Total Total Staff
Track Faculty
Percentage Change, 2013 to 2017:
% Change Fall 13 to Fall 17
Tenure Track -34%

Assistant Professors -25%
T/TT -6%
Total Staff -2%
Total Faculty -1%
Tenured 5%
NTT 19%
-40% -30% -20% -10% 0% 10% 20% 30%
47
Faculty Salaries (Source: IPEDS; AAUP Compensation Survey)
LEVELS Full Associate Assistant Instructor

2007 $91,078 $72,393 $53,552 $41,065
2008 $93,546 $74,039 $55,150 $41,617
2009 $96,875 $76,639 $57,097 $43,033
2010 $99,924 $79,294 $59,269 $44,538
2011 $103,950 $82,709 $62,856 $46,738
2012 $102,687 $81,698 $60,825 $45,559
2013 $102,510 $80,370 $60,210 $44,748
2014 $105,327 $82,548 $62,991 $45,693
2015 $107,838 $84,735 $64,521 $46,683
2016 $106,065 $83,412 $62,055 $46,683
2017 $108,072 $87,300 $63,693 $48,780
PERCENTAGE CHANGES Full Associate Assistant Instructor

2007 to 2008 2.7% 2.3% 3.0% 1.3%
2008 to 2009 3.6% 3.5% 3.5% 3.4%
2009 to 2010 3.1% 3.5% 3.8% 3.5%
2010 to 2011 4.0% 4.3% 6.1% 4.9%
2011 to 2012 -1.2% -1.2% -3.2% -2.5%
2012 to 2013 -0.2% -1.6% -1.0% -1.8%
2013 to 2014 2.7% 2.7% 4.6% 2.1%
2014 to 2015 2.4% 2.6% 2.4% 2.2%
2015 to 2016 -1.6% -1.6% -3.8% 0.0%
2016 to 2017 1.9% 4.7% 2.6% 4.5%
10-Year Average 1.7% 1.9% 1.8% 1.8%
Percentage Change in Faculty Salaries Over Time vs. Inflation (inflation per Bureau of Labor Statistics)
Full Associate Assistant Instructor Inflation

24%
21%
21% 19% 19% 19%
18%
14%
15% 14%
13% 13%
11%
12% 10%
9% 7% 7%
5% 5%
6% 4%
3%
0%
2007 to 2012 2012 to 2017 2007 to 2017
Inferences from faculty salaries:

• Faculty salary increases are not even averaging 2% per year
48
• Faculty salaries are barely beating inflation over the last decade
• The annual raises are generally below the contractual raises negotiated in the APSCUF contract.
Why is this the case?
o Every year, some faculty members do not return. They retire, take jobs at other
universities, are terminated, die, or become administrators
o The faculty who do not return are generally (not in every case) higher paid and more
senior faculty. How are these faculty replaced?
▪ If a tenure-track faculty member is hired, the new faculty member will make a
lower salary
▪ If a non-tenure-track faculty member is hired, the salary will be much lower, and
those who remain in the pool will have lower salaries (on average)
▪ If a part-time faculty member is hired, there will be lower averages of those who
remain
▪ If there is no replacement – fewer sections are offered to students and/or class
sizes increase – then there will again be lower averages of those who remain
▪ In each and every case, the administration is saving money
• This salary savings is sometimes budgeted, and sometimes not – the Kutztown budget
documents included $2,000,000 for these salary savings in some cases and zero in other. It is
typically another way that budgets over-state or are pessimistic; when the budget is created, it
assumes that every faculty member will return. This is never the case, and if the savings are not
estimated and budgeted, budgeted salary expenditures will be larger than actual. This is
another reason why we do not use budgets to assess the financial health of an institution
49
Cost of a 1% Raise for the Entire Faculty
The details of a cost of a 1% raise are as follows:

Total Salaries for 2016-17 $33,673,565
2% raise $673,471
Total Salaries for 2017-18 34,347,036
1% of above $343,470
Benefits (29.15%) $100,122
Total $443,592
• The salaries are the total for full time salaries reported to IPEDS; the 2% raise for 2017-18 is
based on the raise reported in the APSCUF contract
• The benefit rate is certainly not the absurdly high 55% rate used by the Kutztown
administration; when faculty receive a raise, there is no consideration of the cost of healthcare.
If faculty get a raise, they do not go out and go to the doctor. The 29.15% consists of:
o 20.50% for all pension costs
o 7.65% for social security and Medicare
o 1.00% for other benefits (workers comp; life insurance; unemployment insurance, etc.)
• Note that total instructional salaries for 2016-17 were $40.2 million. The difference between
the $40.2 million of total instruction salaries and the $33.7 million above is $6.5 million, and
represents the amount paid to part-time faculty
• Consider that total expenses for Kutztown are approximately $181 million; a 1% raise for the
entire faculty is not even ½ of 1 percent of total expenses (it is 0.2% of total expenses)
• The graph below puts a 2% raise for the entire faculty in context:
$9,000,000 8,464,382
$7,989,692
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
1,721,253 1,448,471
$2,000,000 $887,184
$1,000,000
$0
2017 Over- KUSSI Unrestricted 2% of KU 2018 Under- Cost of a 2% raise
estimation of Reserves Unrestricted estimation of of the entire
benefits Reserves appropriation in faculty
KU budget
• This does not suggest that reserves should be spent, or that any excess should be spent
• This does suggest that the cost of a 2% raise is easily affordable for KU, and that a much larger
raise can be easily covered
• The K administration will likely claim that KUSSI is legally off limits, and that they are not over-
estimating benefits or under-estimating the appropriation
50
Administration Salaries
Sources: http://lancasteronline.com/news/list-of-salaries-at-pennsylvania-s-state-owned-universities/article_86dea8d2-9930-5ae3-8440-
d7d4b3c484b6.html; http://www.pennlive.com/politics/index.ssf/2017/02/one_in_14_state_government_emp.html
Position 2013 Salary 2016 Salary $ Change % Change

University President $218,956 $244,248 $25,292 12%
VP Admin & Finance $178,048 $211,661 $33,613 19%
Provost & VP Academic Affairs $207,568 $195,856 ($11,712) -6%
Dean College of Business $166,800 $173,487 $6,687 4%
Vice Provost & Dean Grad Studies $145,665 $164,974 $19,309 13%
Dean Visual & Performing Arts $140,515 $159,141 $18,626 13%
Assoc VP for Equity & Compliance $131,622 $155,629 $24,007 18%
Asst VP Acad Fin Mgmt $117,527 $142,419 $24,892 21%
Assoc Vice Provost & Dean of Students $112,525 $140,185 $27,660 25%
Assoc VP Communications, Mrkting&Ext Aff $118,965 $138,684 $19,719 17%
Dir Facilities Project Svcs $101,470 $132,275 $30,805 30%
Exec Dir of Human Resources $114,561 $132,269 $17,708 15%
Asst VP Admin & Finance $134,550 $131,949 ($2,601) -2%
Senior Director, Budget & Business Svcs $99,862 $131,949 $32,087 32%
Asst Vice Provost for Info Tech $103,258 $129,883 $26,625 26%
Dean College of Liberal Arts $141,000 $128,665 ($12,335) -9%
Director SBDC $116,811 $128,531 $11,720 10%
Asst Vice Provost $99,903 $110,978 $11,075 11%
Average of Top 18 Admins $136,089 $152,932 $16,843 12%
Full Professor $102,510 $106,065 $3,555 3%

Associate Professor $80,370 $83,412 $3,042 4%
Assistant Professor $60,210 $62,055 $1,845 3%
Instructor $44,748 $46,683 $1,935 4%
• For the administrative salaries, they were included if there was information for both years in the
same position; given some of the 2016 salaries may be partial years (several declines), I kept the
positions, which will bias the averages and changes downward.
• Admins will claim that admin salaries go up when a new person is hired, as it costs to attract
talent. That very dubious assertion is not associated with replacement of faculty
• Below is a graph comparing the dollar changes for the top 18 admins vs. the faculty
• It is very alarming that both the percentage changes and dollar changes in salaries is higher for
the top administrators than for the faculty
Dollar Changes from 2013 to 2016

$18,000 $16,843
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$3,555 $3,042
$4,000
$1,845 $1,935
$2,000
$0
Average of Top Full Professor Associate Assistant Instructor
18 Admins Professor Professor
51
Budget Presentations
Over the last year, the Kutztown administration has made two presentations on the “budget.”
First, the budget is not the same as the financial situation at Kutztown. To fully assess the financial
situation at KU, please see this analysis, which relies on actual results. These results are reported in the
audited financial statements, IPEDS, the fact books, common data sets and the excel files(supplied and
created by the administration) supporting the audited statements
7/21/2017 presentation:
• There are budget gaps and shortfalls – totally self-created and imposed. These gaps are not
audited by an outside, independent auditor. They are created by the administration
• All of the problems are due to compensation and benefit increases; this is the document that
claims retirement costs are 34% of payroll, and the cash costs for benefits are MUCH less than
claimed in this document
• There is a slide on cost avoidance; the claim that because of us, the admin, costs have been
reduced. However, admin salaries have gone up much faster than faculty salaries
• On page 6, they report that the appropriation is $50 million lower – but lower than what was
requested. This is a questionable comparison; the appropriation is actually $9 million higher for
2018 than 2017
5/18/2017 presentation – “It’s Good to be Golden”

• Overall, this document is all doom and gloom
• There is a claimed imbalance between revenue and expenses. This negates the fact that there is
a POSITIVE operating cash flow surplus each and every year
• The document claims that there is increased competition for college-bound and transfer
students. This is not news. All that matters are what is going on with tuition revenue
• The document alludes to the concept of “deferred maintenance.” Deferred maintenance is
code for: we would rather spend money on buildings than people
• They refer to retention, but the resources should be allocated to retention rather than increases
in salaries of top administrators
• The presentation makes reference to declining support of the Commonwealth for Higher
Education; however, the appropriation has been increasing for the last several years
52
Degrees Conferred, Graduation rates and Pell rates
Degrees Conferred 2012 2013 2014 2015 2016 2017

Bachelors 1,817 1,795 1,794 1,952 1,909 1,775
Masters 296 231 238 252 255 214
Total 2,113 2,026 2,032 2,204 2,164 1,989
Bachelors Masters
2,500
2,000
1,500
1,000
500
0
2012 2013 2014 2015 2016 2017
Graduation Rates
Cohort Entering 4 Years 5 Years 6 Years
Fall 2005 1,908 617 357 54
Fall 2006 1,930 616 379 60
Fall 2007 1,889 647 325 68
Fall 2008 1,823 690 283 43
Fall 2009 1,986 690 315 70
Fall 2010 2,010 677 377 48
Cohort In 4 Years In 5 Years In 6 Years 6-Year Rate

Fall 2005 32% 19% 3% 54%
Fall 2006 32% 20% 3% 55%
Fall 2007 34% 17% 4% 55%
Fall 2008 38% 16% 2% 56%
Fall 2009 35% 16% 4% 54%
Fall 2010 34% 19% 2% 55%
Retention Rates:
Fall 11 Back Fall 12 71%
• The graduation rates are stable over time
• Retention: 27% of students who begin in year 1 do not come back for year 2; for the other
PASSHE institutions, the average retention rate is 74.5%, and the median rate is 74%
53
Graduation and Pell Rates of PASSHE Institutions, per IPEDS, 2016
Institution Pell 6-Year Grad

Slippery Rock 31% 67%
West Chester 25% 67%
Bloomsburg 32% 65%
Millersville 32% 64%
California 39% 57%
East Stroudsburg 35% 56%
Kutztown 34% 56%
Shippensburg 31% 55%
Mansfield 42% 54%
Indiana 37% 53%
Clarion 39% 49%
Edinboro 45% 49%
Lock Haven 39% 47%
Cheyney 74% 26%
Peer Average 39% 55%

Correlation between Pell and Grad Rates -0.92
• Kutztown’s Pell rate is slightly below peer average (34% vs. 39%)
• Kutztown’s graduation rate is on par with peers
• The negative correlation between the Pell rate and the graduation rate is significant – the more
Pell students, the lower the graduation rate
54

Analysis of The Financial Situation of Kutztown University, by Howard Bunsis

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Analysis of the Financial Situation of Kutztown University

Howard Bunsis, Professor of Accounting, Eastern Michigan University

In Thousands, for 2016 System KU KU as % of System

Total Expenses $2,089,867 $183,856 8.8%

Tuition Revenue $839,035 $66,865 8.0%

Fall 2017 Enrollment:

Full Time 86,905 7,346 8.5%

FTE Undergrad 83,611 7,153 8.6%

% In State 90% 88%

Analysis of Net Assets and Reserves

First, almost all of the reserves are unrestricted

To determine if reserves are large, we have to put context upon them.

What does this mean?

Consider: The PASSHE System has $1.3 billion of reserves.

Below is the viability

Annual Performance ratios: Net Asset and Cash Flow Ratios

The cash flow ratio measures annual performance on a cash basis.

Another way to consider cash flows from operations is:

Graphic representation of the composite score

US Public University Ratings US Private University Ratings

The Financial & Strategic Outlook for Private Colleges 5

Specifics on the bond ratings for PASSHE:

Bond ratings of other institutions in Pennsylvania:

The System has three different pension plans for employees:

• Public School Employees Retirees System (PSERS)

A graph of tuition vs. the commonwealth appropriation is very revealing:

Tuition Commonwealth Appropriation

Tuition Revenue Commonwealth Appropriation

Appropriation for PA compared to other states

Appropriation per Capita 2017 Level

PA Appropriation per Capita $132

PA 2017 Spending 1.693 Billion

1-Year Change 5-Year Change

PA Rank (of 50) 26 40

Percent of Total Revenues:

Several other factors to consider:

Tuition (10 year history)

Enrollment changes for the entire system

We have changes in tuition price, plus changes in enrollment.

Lastly, in the 2017 audited statements, the PASSHE administration states:

Balance Sheet graphically:

Total Assets Total Liabilities Total Net Assets

Asset Breakdown for KU

Unrestricted Restricted Expendable Solid Level

• A solid level of reserves is 25% of total expenses

Operating Cash Flow Ratio for KU

Score out of 5.0

Ratio scores graphically:

What activities are covered by KUSSI?

KUSSI Information from IRS Form 990 – W-2 Compensation

2014 2015 2016

• There are some very interesting and curious items here

Information from the IRS 990: W-2 Compensation of Top Officers

2014 to 2015 2015 to 2016

Information from the IRS 990 – Top Five Independent Contractors

Distribution per audited financial statements:

To further analyze this raw data, we will:

Kutztown 2017 Revenue Distribution (Main revenue items)

Tuition and Fees

Kutztown Revenue Distribution Over Time

• Total state appropriation = operating + on-behalf (related to fringes) + capital appropriation

Headcount Enrollment Graphically:

Administration View of Headcount Enrollment: