UNIVERSITY FINANCIAL PLANNING AND BUDGETING

FUNDAMENTALS

CONTEXT OF VISION-MISSION-STRATEGY

• Vision=University will be a leader and innovator in higher education—strong academic and student life programs with a solid liberal arts and sciences foundation

• Mission=University provides an environment that enables students to reach their highest potential

• Strategic Commitments=Academic Excellence, Diversity, Facilities, Funding, Recruitment and Retention

THE CURRENT STATE(Where are we?)

• Fundraising in light of declining state appropriations

• Dealing with debt coverage associated with strain of construction projects

• Gradually increasing reserve requirements to meet OSRHE standards

• Reestablishing university identity and focus• Continuing development of new and changing

executive team

THE CURRENT STATE(continued)

• Refocusing responsibility and accountability at the School and Department levels

• Maintaining emphasis on realignment and integration of key functional areas

• Continuing implementation of cost controls and operational efficiencies

• Pursuing combinations student recruitment and retention strategies in consideration of changing demographics and course delivery

THE FUTURE STATE(Where do we want to go?)

• Focus on vision-mission-strategic commitments• Balance academic excellence (teaching and

learning) with accreditation initiatives, professional degree programs, and revitalizing liberal arts foundation

• Link budget recovery contingency planning (two fiscal years), unit planning, and annual university plans

THE FUTURE STATE(continued)

• Implement comprehensive review of academic programs and curricula in accordance with State Regents Academic Planning and Resource Allocation (APRA) principles

• Renew development and team building of executive and administrative groups (i.e., statement of primary responsibilities, key performance indicators, values/expectations/guiding principles, restructuring meetings, short-term priorities and plans)

THE TRANSITION STATE(How Can We Get There?)

• Establishing clear priorities: setting challenging goals and high standards; being candid and forthright; stimulating participation and follow up; and focusing on facts and real issues

• Underlying characteristics reflecting team behaviors: rational decision-making; listening for understanding; reevaluating facts, beliefs, and positions; seeking out underlying causes of conflict; placing high value on arriving at sound decisions and taking action

THE TRANSITION STATE(continued)

• Communicating clear direction is essential at this critical point: commitment to rededication and continual improvement

• Administrative perspective of serving the university and key constituencies

• Reconnecting and embracing the office of the Presidency and administrative staff with major constituencies

• Focusing and reinforcing of key themes: investment in people and place; reestablish presence and identity; leadership development; campus engagement; emphasis on university flexibility and adaptation

Multiple-Part Case Series On University and State Budget Situation

1. Case series became “living” documents updated and revised during yearly legislative and budgeting cycles

2. Case discussion and feedback sessions conducted with key constituencies—executive team, administrative council, faculty senate, staff association, and student government association

Examples of Preparation Questions for Individual Discussion Sessions

• Identify 3-4 concerns/issues that you have about our current financial condition or direction?

• What are the major factors and conclusions that you can draw from the case study at this time (both institution and state)?

• What recommendation areas would you have in mind at this time? With what rationale?

OVERALL SUMMARY OF MAJOR THEMES OF CASE DISCUSSIONS• CONCERNS

• Reduced State Appropriations: projections and percent of total revenues

• Uncertain economy for next 18-24 months• Sustain Enrollment: status quo and dollars

• Estimates of Two Fiscal Year Changes: reductions in appropriations, revenues/expenses/reserves• Climate for Tuition and Fee Increases

• Level of Foundation Scholarships: both cash and waivers, projected increases

MAJOR THEMES (continued)• CONCLUSIONS

• Proportion of Rainy Day Funds and Stimulus Funding• Maintaining Enrollment Levels-7 to 9% of base

• Review Tuition Increases-1/2 to 3/4 of State Appropriation Reduction

• Identify Different Revenue Sources-summer school review• Difference in Scholarship Funding

• One Time Equipment Purchase Deferral• Hiring and Travel Freezes• Personnel Furloughs, RIF• Program Reviews--APRA

MAJOR THEMES (continued)• RECOMMENDATIONS

• Scenario Development-two year approach--Optimistic, Likely, Pessimistic Projections

• Closely Monitor Board of Equalization• Forecast Alternative Combinations of Tuition and Enrollment

Increases• Equipment Purchases Delayed• Line Positions Left Open• Deferred Maintenance

• Dollar Impact of Hiring and Travel Freezes• Dollars Generated Through Furloughs and RIF

Timeline for Fiscal Year Budget• October: University submits Fiscal Year (FY) Budget Needs Survey to the

Oklahoma State Regents• November: State Regents Approve Budget• December: Oklahoma State Board of Equalization estimates revenue for FY• January: Chancellor presents Higher Education FY Budget to the Joint House and

Senate Budget Hearing Committee• February: Governor presents State of State address including FY budget; Board of

Equalization certifies revenue available for FY• February-May: Governor and Legislature finalizes budget; OSRHE allocates state

appropriations to institutions• June: University submits FY budget for approval to governing board and OSRHE

FINANCE MODEL DEVELOPED FROM CASE DISCUSSIONS

FINANCE MODEL

CONTEXTREASONS

Dominant Influences

Budget

Major Factors

FINANCE MODEL ELEMENTS

• CONTEXT=Strategic Plan, Annual Plans, State and National Economy

• REASONS=Academic Reputation, Career Preparation, Location, Cost, Price

• MAJOR FACTORS=Enrollment, Budget, Debt, Capital Improvements, Maintenance, Grants, Tuition/Fees—Room and Board, Changes in Operations, Endowment/Scholarships, Faculty and Staff, Departments/Programs

FINANCE MODEL ELEMENTS(continued)

• BUDGET=Revenues/Expenses, Sources/Uses of Funds

• DOMINANT INFLUENCES=Last Year Budget, 1-2 Year Plans

• MODEL IMPACTS=Competitive Advantage, Value Proposition, Price Differential

Critical Importance of Curriculum to Finance and Budgeting

Curriculum Importance

Advising

Transferability

ProgramsScheduling

Meeting StudentNeeds

More Efficient Enrollment Management

Number of Faculty

Faculty Load

Average Class Size

Number of Adjuncts Used

Course Inventory Analysis

Example: We offered 850 different courses from our course inventory for Academic Year ‘XXXX and current course inventory has 1,500 courses

Headcount: Fall XX=4,000/Spring XX=3,500Fall XX=4,000/1,500=2.67 students andFall XX and AY ‘XXXX=4,000/850=4.7

STUDENT CREDIT HOURS AND CAPACITY ANALYSIS

Example:Fall ‘XX=40,000 Student Credit Hours

(SCH)The University is currently at 57%

capacity overall and want to know incremental revenues if 70% is reached (tuition=$165 per credit hour)=40,000/.57=x/.70=49,122; 9,122 x $165=$1,505,130 incremental revs

Education and General ISources&Uses of Funds

Trend Analysis

5 Year Fiscal Year Budget DataBeginning Reserve Balance XXXX Total Sources of Funds XXXX Total Uses of Funds XXXX

Net Sources Over (Under) Uses XXXXEnding Reserve Balance XXXX

Ending Reserve as % of Original Budget X%

State Appropriation Percentage

XX.XX%Tuition & Student Fee Percentage

XX.XX%

Tuition Increase Percentage X.XX% Average 5 Year Tuition Increase X.XX%

State Appropriation and Tuition/Fee5 Year Trend Analysis

Mandatory Cost ProjectionsPayroll, Taxes, RetirementHealth/Life InsuranceUtilities/MaintenanceScholarshipsSalary Increase Annualized

Total Mandatory CostYearly Salary IncreasesPerformance FundingDeferred MaintenanceTechnology Upgrades

Total Increase in Mandatory Cost (X.X%)

Higher Learning Commission 5 Year Ratio Analysis

• Primary Reserves

• Viability

• Return on Net Assets

• Net Operating Revenues

• Composite Financial Index

CONTINGENCY PLANNING5-10-15% Reductions

• Priority Ranking of all programs and positions (academic and non-academic)

• Budget Reduction Impacts—detailed plans for levels of reduction

• Greatest Areas of Need—ranking of programs and allocation/reallocation of funds

• Contingency and Reserve Planning—student credit hours, not filling vacant positions, delay filling new positions, hiring/travel freezes, operating budgets, research, reserves and targets