Todd Lee Assistant Chancellor Budget & Planning April 2011 Budget Office

2 University budgeting is not a single process. It consists of a number of processes that have evolved separately and which occur with varying degrees of coordination. Key Concept to Take Away Budget Office

3 Discussion Topics Permanent budget vs. General Ledger Campus “budget” UC funding from the State UCOP allocations to the campus Campus allocations Current situation Budget Office

4 PermanentOperating Budget Reflects “funding” assumed to be available on an ongoing basis As of July 1, 2010 = $469 million 63% from General Funds 71% of general fund budget related to salaries and benefits 59% of total budget associated with salaries and benefits 95% of instruction budget from general funds

General Ledger Includes permanent budget plus: –Carry-Forward from previous years –Allocations made after July 1 –Contract and Grant awards –Current year gifts –Distributions from endowments At year-end UCEN & AS added 5

Perm Budget vs. G.L. Permanent Budget –Result of incremental budget approach –Represents base level of recurring resources to cover costs of salaries and supplies General Ledger (Temporary Budget) –Permanent Budget, one-time allocations, and carry-forward from previous year 6

Perm. Budget vs. G.L. 7

Perm Budget vs. General Ledger 8 Difference reflects use of carry-forward, one- time funds, and growth in student fees and non-budgeted funds such as contracts & grants. Increased expenditures mostly related to research, financial aid and auxiliary services.

FY Operating Expenses 9 Expenditure information reported in approximately 95,000 Account-Fund-Sub- Object Codes Includes all fund sources Top 3 Categories account for 77% of total expenses Savings produced in categories have different impacts on campus budget due to source of funding

10 State Budget Schedule

11 State Funding Process UC Internal Budget Consultation Regents Budget Governor’s Budget Proposal Budget Reviews Governor’s May Revision Budget Bill Allocations from UCOP Budget Office

12 Budget by Fund Category Budget Office

13 Campus Allocation Decisions Based on: –Funding formulas –Campus consultation –Campus priorities –Fund source restrictions –Control point decisions Budget Office

14 FUND SOURCE CATEGORY #1 Core Funds –State General Funds –UC General Funds –Mandatory Student Fees –Indirect Cost Recovery (Overhead) –Other State Budget Office

FUND SOURCE CATEGORY #2 Non-Core Budgeted Funds –Sales and Services Revenue –Auxiliary Revenue –Student Fees (Campus Approved) 15

FUND SOURCE CATEGORY #3 Extramural Funds –State & Local Contracts & Grants –Federal Contracts & Grants –Private Gifts and Endowments 16

17 State General - Fixed Costs Provided to campus as a “block allocation” Used to fund salary increases, changes in benefit costs, and price increases on non-salary budgets Salary funding provided directly to departments based on approved increases Budget Office

18 State General - Fixed Costs Price increase funding distributed to four areas: –Library –Purchased Utilities –Graduate Block Grant (Financial Aid) –Control Points Control point distribution based on formula that takes into account support expenditures Budget Office

19 State General - Workload Primary allocation is for enrollment growth (Also receive funding for new space and financial aid.) Enrollment growth first used to fund faculty and T.A. needs: –1 faculty FTE per 18.7 student FTE –1 T.A. per 44.0 undergraduate FTE –These allocations take up approximately 55-65% of the allocation Budget Office

20 State General - Workload Remaining 35-45% distributed as support –Designated campus priorities such as Instructional support Library support Graduate student support Faculty recruitment Academic advising Budget Office

21 State General - Workload –Designated campus priorities Public safety Systems development Research support Space initiatives –Undesignated control point allocations Formula distribution Based on number of faculty, staff, & students per control point Budget Office

Workload Allocations – Step 1 22

Workload Allocations – Step 2 23

Workload Allocations – Step 3 24

Workload Allocations – Step 4 25

Workload Allocations – Step 5 26

27 State General - Program Growth & Initiatives Typically distributed to designated areas for specific purposes. For example: –Library allocation goes to library –Instructional equipment allocations goes to EVC for distribution to colleges and then to academic departments –Ongoing building maintenance allocation goes to facilities maintenance for general maintenance projects Budget Office

28 Student Fees - Four Types Mandatory Systemwide Fees Extension & Summer Quarter Course Material Fees Lock-In Fees Each fee type has a different review and approval process

29 Student Fees Systemwide Fees - Registration and Educational Fees –Fee levels established by Regents –Revenues change based on fee levels and number of students –Campus retains all student services (registration) fees –Beginning in FY Tuition (Ed Fee) Revenue remains at campus, after financial aid adjustment. Budget Office

Mandatory Student Fees 30 Fee levels established by Regents

31 Student Fee Levels Resident Undergraduates

32 Other Fee Programs Extension (self-supporting program) establishes their own fee structure to cover program Summer Session charges a per unit fee based on academic year systemwide fees $ per unit plus $ campus based fee Budget Office

33 Student Fees Course Material Fees –For “materials and services for special supplemental educational experiences” –Reviewed by: Appropriate Provost/Dean College Executive Committee Income and Recharge Committee Student Fee Advisory Committee Executive Vice Chancellor & Chancellor Budget Office

34 Student Fees Student Lock-In Fees –Approved by students in general election –Examples includes: Facility Debt - (Ucen, ReCen) Departmental Operating Expenses - UCC, Disabled Students, Multicultural Center Programs - Bicycle System, ICA Scholarships, MTD Bus Passes –Current UG = $1,384; Grad = $ Budget Office

35 Indirect Cost Recovery Overhead on federal and private contact and grants Amount depends on indirect cost rate and grant activity Complicated distribution formula with portion shared with State Portion becomes part of General Fund with remainder becoming unique fund sources Budget Office

36 Indirect Cost Recovery Portion of campus allocation already permanently budgeted Portion goes to research control points by formula taking into account actual research activity Remainder typically used to support campus development program (new space) Budget Office

ICR Allocation Example 37

38 Gifts and Endowments Permanent budget includes annual payout on Regents’ endowments Increases occur during the year due to current year gifts and transfers from the Foundation Any given year $40 to $80 million in gifts distributed for current use, capital projects, and endowments Budget Office

39 Gifts & Endowments December 2009 endowment value of approximately $174 million (Foundation $99.3 million, Regents $74.7 million) Annual payout of of approximately 4.75% ($8.3 million) Most gifts (both endowment and current have use restrictions; only about $1.8 million on annual gifts are unrestricted

40 Income User charges for campus provided services Fees established by departments with campus review Examples include: –Student housing –Parking –Residential Communication Services Budget Office

41 Other State Funding for special state programs Primarily financial aid and lottery funds Lottery funds designated for instructional programs such as: –Instructional Use of Computers –Instructional Equipment Replacement –Arts and Humanities Budget Office

42 Budget Cuts - Context Approximately $116 million net reduction in state funding for our campus over the last decade. Student tuition, for the first time, surpasses the state contribution to education Level of state funding equal to FY when the university was serving 73,000 fewer students.

43 Current Campus Situation Looking at $39.6 million in cuts Another $26.7 in unfunded expenses Recent memo from Chancellor Yang outlined the current campus budget situation.

The Process Coordinating Committee on Budget Strategy Planning Principles Budget Review Topics Budget Cut Targets 44

45 Campus Planning CCBS - Coordinating Committee on Budget Strategy –Originally created in January 2003 to help guide the cuts earlier this decade. –Reactivated in March 2008 –Includes Administrators, Academic Senate, Faculty, Staff, and Students –Develop strategies designed to protect academic quality and student access while facing the challenge of budget reductions.

46 Coordinating Committee on Budget Strategy Develop principles and priorities to guide budget reduction process Protect academic quality and student access Achieve short term budget reductions Establish framework for long term stability Interact with groups and committees to develop and share information, and provide opportunity for feedback Budget Office

47 Planning Principles Strategic Solutions –Budget reductions should be implemented strategically, not across the board, in a manner that will maintain focus on the campus academic mission. Priorities –The campus should attempt to minimize the impact of cuts on higher priority programs and services

48 Revenue Considerations –Decisions about cost reductions need to consider the impact on revenue generation, as well as long- term capital and operating cost impacts. Recruitment and Retention –Strategies should protect our ability to recruit, develop, and retain a diverse and highly qualified faculty, staff, and student body Planning Principles Budget Office

49 Planning Principles Strategic Investments –Strategic investments will continue to be made. These investments may require slightly larger budget cuts. Efficiencies –Current processes and procedures should be streamlined to eliminate any duplicated or unnecessary services.

50 Draft Planning Principles Staffing Layoffs –Every effort should be made to avoid layoffs or furloughs by taking advantage of normal attrition, planned retirements, and voluntary reductions. Self-Supporting Departments –Recharge and income generating units are not exempt from the budget reduction process.

51 CCBS Discussion Topics Revenue Generation and Redistribution –Indirect Cost Recovery –Non-State Funded Administrative Support –Service Agreements –Recharges –Payroll Assessments Are programs covering their “fair share” of overhead and direct costs?

52 CCBS Discussion Topics Base Budget –Fund categories subject to discussion –Exclusions for budget cuts Regents Actions –Increases in student fees –START Program –TRIP Program (expanded investment opportunities)

Funding Shortfall State budget reductions = $39.6 Unfunded expenses = $26.7 Unfunded expenses include: –Salary increases –Health benefit increases –Retirement contributions –Instructional support for over-enrollment 53

Actions Taken UCOP Actions –Student Fee Increases – July 1, 2009 and mid-year impacting both FY and FY –Another 8% for FY Campus Revenue Generation Strategies – Taxes Use of Carry-Forward and Reserve Funds Over-enrollment funding 54

55 Budget Cut Targets Number of exclusions for cuts, include: –Sub 0 - Filled Ladder Rank Positions –Student Financial Aid –Academic Preparation Program –Purchased Utilities –Salary and Benefit Provisions

56 Temporary Actions Use carry-forward funds START program Salary savings from vacant positions Reduce travel and training Defer equipment purchases Reduce student help

57 Permanent Actions Reduction in staff –Eliminate existing unfilled positions –Do not replace future vacant positions resulting from normal attrition –Layoffs Service & Program consolidation Reduction in services provided

58 Campus Budget Issues Graduate Student Support Faculty Recruitment Sub 0 Annual Shortfall Purchased Utilities Deferred Maintenance Technology Investments

59 Budget Issues Con’t Outreach/Academic Prepartation Equipment Replacement Classroom Renovation Departmental Support Budgets Benefit Cost Increases Salary Increases THIS IS ONLY A PARTIAL LIST

60 AREAS OF CONCERN Increases in mandatory costs Funding of collective bargaining agreements Restart of employer/employee contributions to UC Retirement Plan Ability to fund UC Capital Projects Financial Aid

61 FY Outlook Depends on Governor’s May Revision

62 Questions? Budget Office

63 Budget Office Contacts Todd Lee Arliene Shelor Liz Avila Alan Williams

64 Appendix: Budget Programs Fee for Services Turnover Savings Staffing Budget Office

65 Fee for Service (Income and Recharge) Recharge is defined as the assessment (charge) by one campus account for goods or services, based on an identifiable unit of measure, furnished to another campus account. Income is defined as revenue generated by campus departments or units from sales to non-university clientele Budget Office

66 Establishment of Income or Recharge Account Based on meeting the following criteria –Specifically identifiable good or service –Demand exists for the service by more than one university or non-university user –Significant volume of activity in both dollar amount and number of transactions –Service will be provided on regular and continuing basis –Services are unique –Funding is not part of the permanent departmental budget Budget Office

67 Turnover Savings What happens to turnover savings? –Returned to a central account for reallocation to the following areas: Budgetary Savings (fair share based on July 1 balance) Staff laterals Staff merits Staff resources Budget Office

68 Turnover Savings –“Staff Resource” allocations provided annually to control points –Based on area’s “contribution” to turnover savings –Uses of “staff resources” funding includes: Reclassifications Above grades hires Retention FTE increases Budget Office

69 Staffing What purpose does staffing serve? –Provides departments a way to determine if approved salary funding has been received –Basis for annual salary funding for merits and range adjustments provided by state –Necessary to determine turnover savings which helps to fund salary increases Budget Office

70 Staffing –Can be used as a budgetary planning tool by departments as it provides accurate record of employee salaries and provision account –Meets UC reporting requirement with the State of California Budget Office

71 Staffing What transactions affect staffing? –New employee hires or transfers –Position reclassification –Terminations or transfers –Salary increases - range, merit, etc. –Change in employee fund source –Change in employee FTE Budget Office