A4860

An Act concerning the fiscal performance of four-year public institutions of higher education, and making an appropriation.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. The Secretary of Higher Education, in collaboration with the New Jersey Presidents’ Council, shall contract with a third party to implement a comprehensive study regarding the fiscal performance of four-year public institutions of higher education in the State. The purpose of the study shall be to analyze the fiscal performance of each four-year public institution of higher education and to identify public funding strategies that will improve their performance.

With respect to each four-year public institution of higher education in the State, the study shall:

(1) perform a general assessment of the fiscal performance of the institution;

(2) review the minutes and any reports, recommendations, or resolutions of the institution’s audit committee established pursuant to section 3 of P.L.2009, c.308 (C.18A:3B-48);

(3) review any report prepared in the prior fiscal year by the internal auditor appointed by the institution pursuant to section 4 of P.L.2009, c.308 (C.18A:3B-49) and the independent outside auditor retained by the institution pursuant to section 5 of P.L.2009, c.308 (C.18A:3B-50);

(4) examine the net income, primary reserve, and net operating revenues ratios of the institution;

(5) review the institution’s credit ratings, as applicable, from Moody’s, Standard & Poor’s, and Fitch;

(6) review the financial and monitoring metrics collected by the United States Department of Education for the institution, including the financial responsibility composite score;

(7) evaluate the condition and adequacy of the institution’s infrastructure and capital maintenance;

(8) evaluate the acceptance rate and enrollment rate trends of the institution in the most recent ten-year period with a sensitivity analysis showing how changes in enrollment would impact the overall fiscal performance of the institution;

(9) determine the competitive strengths and weaknesses of the institution and identify opportunities for improving the institution’s desirability to future in-State applicants;

(10) provide measures of the effectiveness of the institution’s administration;

(11) provide a detailed expenditure analysis of how State allocations to the institution were expended in the most recent fiscal year, broken down by type of allocation;

(12) analyze the overall institution budget, and identify overall expenditures for the budget categories of instruction, research, public service, administration, operations and maintenance, auxiliary student supports, and athletics;

(13) identify the institution’s core strategic identities and identify how public investment can be used to reinforce and maximize those identities;

(14) offer recommendations on how to improve the institution’s financial stability and efficiency, along with institution-specific public funding strategies that best support institution goals and objectives;

(15) identify if the institution has improvements to make to align themselves with fiscal best practices ; and

(16) make recommendations to improve the fiscal practices of the institution in response to the findings of the study.

b. As used in this section:

“Net operating revenues ratio” means the ratio of the income or loss of unrestricted operating revenues to total unrestricted operating revenues.

“Primary reserve ratio” means the ratio of expendable net assets to total expenses.

“Return on net assets ratio” means the ratio of the change in net assets to the beginning net assets.

“Viability ratio” means the ratio of expendable net assets to long-term debt.

c. The Secretary of Higher Education, in collaboration with the New Jersey Presidents’ Council, shall report the findings and conclusions of the study, as well as any recommendations issued pursuant to paragraph (16) of subsection a. of this section, to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), within 12 months of the effective date of this act.

2. There is appropriated from the General Fund to the Office of the Secretary of Higher Education the sum of $300,000 to effectuate the provisions of this act.

3. This act shall take effect immediately and shall expire upon the submission of the report by the Secretary of Higher Education pursuant to subsection c. of section 1 of this act.

STATEMENT

This bill directs the Secretary of Higher Education, in collaboration with the New Jersey Presidents’ Council, to contract with a third party to implement a comprehensive study regarding the fiscal performance of four-year public institutions of higher education in the State. The purpose of the study will be to analyze the fiscal performance of each four-year public institution of higher education and to identify any public funding strategies that will improve their performance. The bill also appropriates $300,000 from the General Fund to the Office of the Secretary of Higher Education to effectuate the bill’s purposes.

Under the bill, for each four-year public institution of higher education in the State, the study will:

(1) perform a general assessment of the fiscal performance of the institution;

(2) review the minutes and any reports, recommendations, or resolutions of the institution’s audit committee;

(3) review any report prepared in the prior fiscal year by the internal auditor appointed by the institution and the independent outside auditor retained by the institution;

(4) examine the net income, primary reserve, and net operating revenues ratios of the institution;

(5) review the institution’s credit ratings, as applicable, from Moody’s, Standard & Poor’s, and Fitch;

(6) review the financial and monitoring metrics collected by the United States Department of Education for the institution, including the financial responsibility composite score;

(7) evaluate the condition and adequacy of the institution’s infrastructure and capital maintenance;

(8) evaluate the acceptance rate and enrollment rate trends of the institution in the most recent ten-year period;

(9) determine the strengths and weaknesses of the institution and identify opportunities for improving the institution’s desirability to future in-State applicants;

(10) provide measures of the effectiveness of the institution’s administration;

(11) provide a detailed expenditure analysis of how State allocations to the institution were expended in the most recent fiscal year, broken down by type of allocation;

(12) analyze the overall institution budget, and identify overall expenditures for various budget categories;

(13) identify the institution’s core strategic identities and identify how public investment can be used to reinforce and maximize those identities;

(15) identify if the institution has improvements to make to align themselves with fiscal best practices; and

(16) make recommendations to improve the fiscal practices of the institution in response to the findings of the study.

The bill directs the Secretary of Higher Education, in collaboration with the New Jersey Presidents’ Council, to report the findings and conclusions of the study to the Governor and to the Legislature within 12 months of the bill’s effective date.