SECTION IX. FINANCIAL RESOURCES RISD appears to meet all NASAD standards and guidelines for finances (NASAD Handbook, 2005-2006, If. C, p. 49). RISD is a financially stable institution as demonstrated by the steady growth in total net assets during the past several years. Between fiscal year 2003 and 2005 total net assets grew by nearly $50 million (from $257.4 million to $306.8 million). More than two thirds of net assets at the end of fiscal year 2005 were unrestricted ($211.7 million) with $187.5 million of the unrestricted net assets designated for the endowment. RISD's balance sheet changed dramatically during fiscal year 2004 with issuance of a significant amount of new debt with debt outstanding growing from $61.3 million to $153.5 million in that year. At the end of fiscal year 2005, total outstanding debt amounted to $153.4 million. The issuance of new debt was in support of the institution's major capital initiatives including a new graduate center, a new 500 bed dormitory and a relocated and expanded library. It is anticipated that debt service will grow from the current level of about 3% to about 8.5% of the RISD budget within the next three years based on already issued debt. Current plans call for issuance of additional debt in the near future. RISD's use of debt is part of its over-all long term financial strategy that includes designation of internal funds for the endowment with the expectation that gradually increasing endowment income will cover debt service. The operating budget for fiscal year 2005 was balanced through the use of approximately $1 million in one time funds. Current projections suggest a modest positive variance to budget for fiscal year 2006 (including about $1.5 million of one time funds and savings). RISD has undertaken a multi year initiative lo attain a structurally balanced budget by fiscal year 20013. RISD has defined "structural balance" as the generation, on an ongoing basis, of more revenue than required at sustainable levels of student charges to cover all operating expenses, including compensation sufficient to attract and keep outstanding employees, to provide financial aid to meet the need of admitted students, and to sustain a capital program that provides equipment and annual renovation, renewal, and modernization of facilities at a level sufficient to avoid backlogs. Under the leadership of a recently appointed Executive Vice President for Finance and Administration, RISD is taking steps to further integrate the annual and multi-year budget planning within its overall planning activities. One of the major assumptions of the fiscal year 2007 operating budget is an increase of 20 foundation (first year students) from fiscal year 2006 (from 400 to 420). The projected tuition increase from fiscal year 2006 to fiscal year 2007 is 5.9% though increases in room, board and fees bring the total increase about 7.5%. Total tuition, room, board and fees for incoming first year students in the fall of 2006 are expected to be just under $41,000. Though the budget contains no increase in the budgeted tuition discount rate (currently 16.9%) demand for a RISD education remains high and RISD officials are optimistic that the new enrollment target will be met. In future years, RISD plans to limit tuition growth rates to a level of 1.5% above the Consumer Price Index (CPI). The plan to attain a structurally balanced budget was presented to the Board of Trustees as part of the context for adoption of the Fiscal Year 2007 budget. The same presentation has also been presented to the RISD faculty and staff.
Final Report
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