Oct. 12, 2007
By Katie Quaranta
As the new academic year continues to unfold, so does a budget planning process that is in many ways different from its predecessors. Entering into the mix is a proposed five-year academic action plan, a long-term capital plan and the evolving University System of Ohio -- guaranteed to make some palpable funding differences in public universities, but to what degree and when?
Reconciling the opportunities and challenges of this budget environment will be the responsibility of a wide-ranging group of university constituents. Vice President for Finance and Administration Bill Decatur gives Outlook an overview of what that will entail.
Q: Who was and will be involved going forward in helping to shape the fiscal 2009 budget and the five-year financial plan?
Decatur: Primary responsibility for developing recommendations on the budget and the five-year financial plan rests with the Budget Planning Council (BPC). In addition, this will be the second year of the Student General Fee Advisory Committee, which will provide recommendations for portioning out general fees. A second committee -- the Student Fee Committee -- will recommend how student fees will be allocated: lab fees, tech fees and other course-specific and mandatory service fees. This fall, the university will conduct a process that gives planning units, primarily the colleges, an opportunity to propose adding student fees, eliminating fees and making adjustments. The Student Fee Committee will review those proposals. In the past, fees could be requested any time of the year. We're changing that so it feeds into the whole budget process. Finally, the Facilities Fee Committee will make recommendations about fees collected for the use of space at the university. We envision all these committees working under the BPC, which will ultimately incorporate their recommendations into its overall budget deliberations.
Q: Who is on the BPC and what decisions is it authorized to make?
Decatur: It's co-chaired by Executive Vice President and Provost Kathy Krendl and me. Every key stakeholder group has representation on BPC. There's representation from Faculty Senate, Administrative Senate, Classified Senate, college deans and student government. Its charge is to deliver annual operating budget recommendations to the president and review the five-year financial plan.
Q: How will the BPC work together with the Five-Year Academic Action Plan Committee?
Decatur: That is a very important linkage. The five-year financial plan is driven directly by the strategic priorities of the five-year academic plan. Any changes in the academic plan must be reflected in the financial plan, and vice-versa, because the academic plan and the financial realities ultimately inform each other.
The BPC is already in the process of vetting the five-year financial plan and looking at all of our key budgetary assumptions. On the revenue side, those assumptions deal with university tuition and fees, state support, and potential sources of new revenue. On the expense side they deal with compensation, health care cost increases, utility cost increases, scholarships -- plus strategic investments from the five-year academic plan.
The Five-Year Academic Action Plan Committee, also composed of representatives of staff, faculty, students and administrators -- a number of whom are also on BPC -- is engaged in gathering comments on the objectives, strategies and outcomes of the draft plan. The recommendations of both groups will be transmitted by Dr. Krendl to President McDavis. The leadership of the university is committed to aligning the financial and academic plans. They don't make sense if they're not interwoven.
Q: At the September Board of Trustee's meeting you reported on an early projected fiscal 2009 reallocation and revenue enhancement target of $7.5 million connected to the Five-Year Financial Plan. Can you discuss the nature of that target?
Decatur: One of the key issues on the revenue side is the fact that the state budget imposed a zero-percent increase in tuition and general fee, with only a 9.5 percent increase in state funding. That only provides a little more than a 3 percent overall increase in revenue -- or just enough to keep up with inflation.
On the expense side, clearly we have inflationary costs, but in addition there are a number of strategic initiatives in the five-year plan that we would like to try to fund to make progress on the university's academic mission.
I know that given the tight budget climate of the past few years the possibility of reallocation connected to the Five-Year Academic Action Plan raises concerns. But any conversations about reallocation at this juncture are premature.
BPC will make recommendations on how to proceed after the vetting of the plan is complete. The goal here is to use the decisions made around the Five-Year Academic Plan to enhance our academic mission in strategic ways drawn from the work that was done on Vision OHIO.
Q: Is there any possibility that revenues alone could close any gap that emerges?
Decatur: We are certainly going to examine that -- it would be the best-case scenario. We must also make sure that our revenue budget is realistic and achievable.
Q: How does this year's fiscal 2009 budget planning process fit in with the five-year financial planning process?
Decatur: They are happening concurrently, with one informing the other -- and they both tie into the five-year academic action plan also. It's all interrelated.
Q: What are your main goals for the fiscal 2009 budget?
Decatur: The main goal is to work with all our key stakeholder groups to maintain the linkage between the five-year financial plan and the five-year academic action plan, and to hopefully reach consensus on key budget issues related to those plans, such as long-term enrollment management and establishing reserves to improve our net asset position.
Q: Are your projections conservative?
Decatur: Yes, I think they are. We did that intentionally when we put the first draft together. That's what BPC is going to be examining: whether we want to adjust the revenue or expense assumptions.
Q: How much flexibility is built into the budget to allow for the unexpected?
Decatur: Not as much as I would like. We have a half a million dollar enrollment reserve in the budget, which means we have some cushion if any of our enrollment targets fall short (new first-year students, transfers, student retention, etc.) The executive vice president and provost has a strategic academic reserve of a couple million dollars, but that's for funding academic initiatives and ensuring we have adequate instructional capacity. In fact, she has fully committed her reserves already for this fiscal year.
Q: How does the five-year financial plan fit in with the 10-year capital plan, introduced last spring?
Decatur: The 10-year capital plan has a couple of tie-ins to the five-year financial plan. When any new space comes online, this leads to adjustments in the five-year financial plan to provide for increased operating costs. Also, the 10-year capital plan does not include any additional long-term debt, which is reflected in the decreased amount of debt each year of the five-year plan; we are paying off our debt at about $10 million per year and are going to take a very disciplined approach to any future use of debt. Those are the most explicit ties between those two.
Q: How is the university's financial position compared to, say, five or 10 years ago?
Decatur: It's been a difficult period. We have gone through budget cuts and reallocations just about every year for a decade. Until this biennium budget, state funding has been flat or declining this whole decade, so the result is tuition rates have been going up faster than inflation, which puts a greater burden on our students and families for paying for the costs of education.
Q: How will the proposed University System of Ohio influence budget decision-making?
Decatur: We don't know yet; it's too early. (Ohio Board of Regents Chancellor) Eric Fingerhut has said he'll first concentrate on the framework of the new university system. The process of developing that is well under way, with funding implications following on the heels of that. Stay tuned.
Q: Where do you think state funding is headed?
Decatur: The state's economic forecasts beyond this biennium are projecting essentially flat state revenues overall. Anything can change, but those are the current projections. If those hold true, I think we are going to continue to face the same kind of challenges that we have been. How do we keep tuition down and affordable for our students yet provide resources to cover inflationary increases in wages and salaries, rising health care costs and our strategic investments?
What we're hearing from Columbus, and I think is going to hold true, is that state leaders expect all higher education institutions to keep finding ways to cut our costs and collaborate with our sister institutions in an effort to keep tuition increases down. That environment is going to keep the pressure on us to find better ways to do the business we do.