Todd LeeAssistant ChancellorBudget & Planning

April 2011

Budget Office

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• 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

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Discussion Topics• Permanent budget vs. General Ledger

• Campus “budget”

• UC funding from the State

• UCOP allocations to the campus

• Campus allocations

• Current situation

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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

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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

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Perm. Budget vs. G.L.

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Perm Budget vs. General Ledger

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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 2008-09 Operating Expenses

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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

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State Budget Schedule

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State Funding Process• UC Internal Budget Consultation

• Regents Budget

• Governor’s Budget Proposal

• Budget Reviews

• Governor’s May Revision

• Budget Bill

• Allocations from UCOP

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Budget by Fund Category

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Campus Allocation Decisions

• Based on:– Funding formulas– Campus consultation– Campus priorities– Fund source restrictions– Control point decisions

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FUND SOURCE CATEGORY #1

• Core Funds – State General Funds– UC General Funds– Mandatory Student Fees– Indirect Cost Recovery (Overhead)– Other State

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FUND SOURCE CATEGORY #2

• Non-Core Budgeted Funds– Sales and Services Revenue– Auxiliary Revenue– Student Fees (Campus Approved)

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FUND SOURCE CATEGORY #3

• Extramural Funds– State & Local Contracts & Grants– Federal Contracts & Grants– Private Gifts and Endowments

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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

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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

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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

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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

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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

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Workload Allocations – Step 1

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Workload Allocations – Step 2

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Workload Allocations – Step 3

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Workload Allocations – Step 4

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Workload Allocations – Step 5

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State General - ProgramGrowth & 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

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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

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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 2011-12 Tuition (Ed Fee) Revenue

remains at campus, after financial aid adjustment.

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Mandatory Student Fees

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• Fee levels established by Regents

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Student Fee LevelsResident Undergraduates

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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

• $247.32 per unit plus $360.02 campus based fee

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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

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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 = $721.74

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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

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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)

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ICR Allocation Example

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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

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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

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Income• User charges for campus provided

services• Fees established by departments with

campus review• Examples include:

– Student housing– Parking– Residential Communication Services

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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

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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 1098-99 when the university was serving 73,000 fewer students.

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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

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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.

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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

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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

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• 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

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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.

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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.

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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?

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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

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Actions Taken• UCOP Actions

– Student Fee Increases – July 1, 2009 and mid-year impacting both FY 2009-10 and FY 2010-11

– Another 8% for FY 2011-12

• Campus• Revenue Generation Strategies – Taxes• Use of Carry-Forward and Reserve Funds• Over-enrollment funding

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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

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Temporary Actions• Use carry-forward funds

• START program

• Salary savings from vacant positions

• Reduce travel and training

• Defer equipment purchases

• Reduce student help

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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

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Campus Budget Issues• Graduate Student Support

• Faculty Recruitment

• Sub 0 Annual Shortfall

• Purchased Utilities

• Deferred Maintenance

• Technology Investments

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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

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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

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FY 2011-12 Outlook• Depends on Governor’s May Revision

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Questions?

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Budget Office Contacts• Todd Lee

– Todd.lee@bap.ucsb.edu 893-2169

• Arliene Shelor– Arliene.shelor@bap.ucsb.edu 893-4052

• Liz Avila– Liz.avila@bap.ucsb.edu 893-3958

• Alan Williams– Alan.williams@bap.ucsb.edu 893-5989

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Appendix: Budget Programs

• Fee for Services

• Turnover Savings

• Staffing

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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

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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

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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

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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

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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

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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

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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

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