Strong Balance Sheet, Decreasing Debt Liability, Growing Enterprise
Monday June 18, 2018
This week, our Board of Trustees will consider the University of Kentucky’s $3.9 billion operating and capital budget proposal.
As a part of that budget, we will discuss with the Board:
- Two years of tuition and mandatory fees increases—2.5 percent for 2018-19 and 2.4 percent for 2019-20—would represent the lowest successive rate increases in more than 30 years;
- In fall 2018, UK will be among a small number of universities in the country to not have an athletics fee; and
- As a result of UK’s efforts to constrain tuition and mandatory fee costs, in-state students attending the university from families with a median income of less than $20,000 annually in 2017-18 have seen their net out-of-pocket cost for tuition and mandatory fees decrease over the last two years.
You can read more details about the budget, which is focused on student success, here.
As Kentucky’s flagship, land-grant university, we are continually thinking through how to creatively leverage our assets and manage the resources we receive from the Commonwealth of Kentucky. Our prudent investment strategy and strong financial management empower us to do just that.
The ability to direct our financial future has never been more important, as we continue to make progress on our ambitious goals outlined in our Strategic Plan: gains in retention and graduation at the undergraduate and graduate level; broader diversity and inclusivity in our community; expansion of research and care; and initiatives that positively impact every corner of our Commonwealth. These objectives are fueled, in part, by our ability to create and build infrastructure – research labs, classrooms, living spaces, and health care facilities – that supports success across our campus, and increasingly, through our own means: private partnerships, philanthropy, and prudent financial management.
That’s why we are pleased to report to our Board of Trustees that the university’s debt service—the amount of money allotted each year to pay off debt on capital investments—is 2.8 percent of our operating expense budget.
Why is this significant?
First: our debt as a percentage of our budget continues to decrease. The result is two-fold. First, our academic, research, and health care enterprise is expanding as we meet an ever-expanding and increasingly complex set of needs for Kentucky and those we serve. Second, we are paying down debt even as we have invested, and this elevates, even further, our strong financial standing.
Second: Together, a strong balance sheet, a decreasing debt liability, and a growing enterprise underscore the institution’s strong credit ratings. In 2015, Standard & Poor’s, one of the country’s major credit ratings agencies, upgraded the University of Kentucky’s credit rating from AA- to AA, while many institutions across the country faced challenging financial circumstances and, in some cases, a downgrade in ratings. In particular, S&P cited our low debt ratio, along with growth in enrollment, revenue diversity aided by a strong health care system, and overall financial performance as positive considerations in our rating. This is the power of our investment. This is the result of innovative and entrepreneurial thinking and smart investments in the important priorities that propel the university forward.
As Kentucky’s indispensable institution, we invest in the lives of our students and advance our state and beyond. The foundation for everything we do is strengthened by the dedication and commitment that we see across this campus every day from our faculty and staff.
This proposed budget reflects your outstanding work. Thank you for your role in shaping our university, our students, and the Commonwealth we serve.
Have a great week.
Eric N. Monday