Operating Budget Allocation Process

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Operating Budget Allocation Process

• College Council
• March 20, 2007

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WARNING!

• The information you are about to see is extremely
  boring! You should not use heavy machinery e.g.
  pencil sharpeners, for up to 4 hours after this
  presentation. Viewer discretion is advised! This
  meeting will NOT be canceled due to weather
  conditions.

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Who Am I?
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Budget Process 30,000 Ft. View

• Governor/Office of Financial Management,
  Legislature, State Board, Presidents

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State of WashingtonBiennial Budget Process

• Currently working on 2007-09 biennial operating
  and capital budgets
• Presidents discuss system budget priorities
• Request for this biennium 269mil over last for
  CTC system (lets look at handout)
• How do presidents determine this list?

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Budget Process Kick-off
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State of Washington Biennial Budget Process

• SBCTC submits operating and capital budget
  requests to Governor
• Fall, even years
• Governor makes biennial budget proposal to
  Legislature
• December, even years
• Supplemental budgets adjust the biennial budget
  (odd years)

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State of WashingtonBiennial Budget Process

• Each chamber of the Legislature writes its own
  budget
• Protocol Chambers take turns going first
• The budget is a law! (with a two-year life)
• Both chambers must agree on everything!
• The Governor signs the budget has power to veto
  subsections
• Legislature appropriates state funds to SBCTC,
  which allocates dollars to colleges

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How are funds allocated to colleges?

• Formulas/models have changed over years
• A little history

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The old days for Budget Allocations

• Motto System solidarity every college for
  themselves
• Separate formulas for CCs and TCs
• CC formula used from 1985 to 1999
• Formula moved funds among colleges every year

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Budget Allocations

• When CC formula was adopted in 1985, tuition
  collected by colleges sent to State
• In 1994 the Legislature changed tuition policy-
  now retained by colleges
• Formula moved funds from high-collection to
  low-collection colleges
• Old formula abandoned in 1999 too complex and
  seemingly unfair

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Current Allocation Method

• It was agreed that the new method would not
  include increases or decreases in enrollment
• Allocation of enrollment growth and reductions
  due to under-enrollment would be governed by the
  biennial enrollment plan and State Board adopted
  enrollment rules
• Current SBCTC rules

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Current Allocation Method

• Formula frozen in 1999
• At that time funding per FTE at the CCs ranged
  from 2,171 to 5,113 per FTE
• WACTC adopted principles for new formula
• Colleges base budgets should be independent
  of other colleges actions/circumstances

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Current Allocation Method

• Colleges base budgets should be predictable
  from one year to the next
• There should be no re-distribution of base
  budgets among colleges
• The method needs to be understandable and involve
  fewer variables

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Current Allocation Method

• The formula would deal only with state general
  funds. No local revenues including tuition, would
  be considered in the allocation of state funding
  Quiz!
• OBC of WACTC worked on new formula from September
  1999 to December of 2000
• WACTC adopted method in concept in December 2000

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Current Allocation Method

• Other new appropriations-compensation increases,
  special programs- to be allocated to
  appropriation bases to be discussed annually at
  WACTC (presidents)
• If new appropriation levels permit, bring up all
  colleges funding with the lowest-funded colleges
  receiving a larger share of funds
• Regression curve (too boring to discuss)

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State of WashingtonGeneral Fund Operating
Budget2005-07 Biennium
Washington State 28.2B
Higher Education 3.1B
Human Services 32.1
CTCs 4.1
WSU 13.9
HECB 12.7
Universities 6.5
WWU 4.0
EWU 3.2
Corrections 5.0
CWU 3.2
U of W 22.6
Other 7.9
TESC 1.8
Bonds 5.0
1.2B
K-12 39.9
CTCs 38.5
CTCs serve almost 60 of higher education
enrollments
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SBCTC State Funds AllocationsState Operating
Budget

• Base Plus approach colleges keep the money
  they have. One-time funds removed, result is
  college base budget.
• New money is added typical new funds include
• Growth enrollment slots
• Compensation increases
• New programs/specified funding
• Most allocated money is unrestricted colleges
  develop local priorities

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Allocation of Growth Enrollments

• Biennial enrollment plan intent is to put
  enrollment growth where it will be needed
• NSCC example
• Funding for growth enrollments set by
  Legislature, sometimes some of that funding is
  set aside for other purposes
• Funding for new program startup
• Aid for low-funded colleges

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Tuition

• Traditionally set by Washington Legislature
• Recent trend to delegate authority to State Board
  to increase CC resident tuition up to legislative
  maximum
• State Board has authority to set CC non-resident
  tuition
• Since 1993, tuition revenues (except building
  fees) are retained by colleges

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Tuition

• Components of Tuition and Fees
• Operating Fees (80)
• Retained locally to help pay general expenses of
  the college
• Building Fees (10)
• Sent to State Treasurer, funds a portion of the
  colleges capital budget
• Service and Activity Fees (10)
• Retained locally used to fund student activities
  such as sports, clubs, childcare, etc.
• Colleges may charge less than maximum
• Students have experienced a doubling of tuition
  over the last ten years

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Compensation Increases

• Legislature controls salary increases
• Increases are delineated in biennial
  appropriations act
• Salary increases are limited to those allowed in
  the appropriations act no other increases may
  be provided by the colleges!

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Typical Types of Compensation Increases

• COLAs limited to set by Legislature
• Faculty Increments limited to funds allowed by
  Legislature, plus turnover savings, sometimes
  COLA
• Part-time Faculty limited by specific
  legislative language

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Comparison of Full-time Faculty Average
SalariesFY2004-05 Washington CTCs average is
89 of Western States
Most recent as of December 11, 2006. To be
updated Jan/Feb 2007.
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Outside Influences on CTC Programs and Budgets

• Major recession and economic recovery
• Significant state budget deficits causing five
  consecutive years of CTC budget cuts
• To partially offset cuts in state funds,
  cumulative 45 increase in student tuition rates
• Student tuition waivers were reviewed and a new
  charge established for basic skills
• Passage of Initiatives

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Conclusions

• Implementation of allocation method has
• Protected college base budgets (except for
  legislative mandated budget cuts)
• Maintained independence of colleges budgets from
  actions of other colleges
• Been easier to understand than former formula
• Used best fit basis to allocate compensation,
  cuts, etc. based on WACTC recommendations to the
  State Board

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Conclusions (contd)

• There is less disparity among the colleges in per
  FTE funding than in 2000
• High cost programs and basic skills have been
  allocated additional funds received from
  legislative appropriations
• While lowest funded districts have received
  enhanced funding for their growth FTES, the
  amount of funding for this purpose has been low
• Enrollment growth funding is where the system has
  flexibility to affect college allocations

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Where Has all the Revenue Gone?(Reductions to
General Fund revenue since 1993)
0
Repeal of 1993 BO Increases
Hi Tech Incentives/Manuf. Equipment Exemption
(500)
Ref 47 Property Tax Reduction
(1,000)
Ref 49 License Tab Reduction
GF Revenue Reductions in Millions
(1,500)
I-728 Lottery State Property Taxes to K-12
I-747 Property Tax Limits
(2,000)
Other
(2,500)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
1995
1996
1997
1994
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District Budget Allocation Process500 ft. view
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District Allocation Process Overview

• Introduction
• Years of Change ( 1993-96)
• The Middle Years (1997-1999)
• Current Process (1997 - present)
• Allocation Considerations

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Introduction

• Prior to the mid-1990s Community College funding
  was determined through a complex formula
  administered by the State Board.
• Only state funding allocated. Tuition sent to
  State Treasurer.
• Seattle District ran State formula to determine
  colleges state allocation with minor adjustments.

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Years of Change - District Approach 1995-96

• Continued to use states tuition estimate as
  district target.
• Adjusted colleges tuition based on actual
  collections.
• At end of year would balance out allocations. In
  total, no one lost.

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District Current Process -1999 to Present
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Current Process - 1999-present

• State Board allocates only state funds to the
  districts.
• Seattle District determines each colleges
  allocation based on total tuition and state
  funding.

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Current Process - 1999-present District Process

• Start with permanent base allocated in prior
  year.
• Includes both state and tuition funding.
• Adjust funding for Legislative changes.
• Apply tuition increase percent to last years
  tuition allocation amount.
• Result is permanent base for current year.

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Permanent Base - FY 2006-07
Initial Allocation (includes state and
tuition) Permanent State Allocation
FTE Central 26,669,126 5,580 North 20,58
9,322 3,795 South 19,436,658
4,316

61,808,914
12,843 Excludes worker retraining and
apprenticeship
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SCCD Colleges Have Own Budget Process
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Norths Process

• Budget Planning Team
• College Council
• Executive Team
• Two bucket approach
• Tie to Strategic Plan
• Financial Reports

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Tuition

• Target vs Allocation
• Process
• Exceptions

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Tuition - Target vs Allocation

• Tuition revenue collection target per college
  does not equal spending amount per college.
• Tuition collected supports other operations -
  District Office and District Wide Accounts

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Tuition Target Process

• Use same approach for past few years.
• Verify that colleges met target in prior year.
• If yes, use target amount from prior year.
• If no, reduce target by shortfall in revenue in
  prior year.
• Increase target by percentage increase in
  tuition.

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Tuition Allocation Process

• Used same approach past few years.
• Allocate tuition amount in permanent base from
  prior year.
• If target not met in prior year, may or may not
  adjust current year tuition allocation. (The
  total permanent base remains the same. Just the
  split between state and tuition would change.)

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Target Vs Allocation

• FY 2005-06
• Target Allocation
• Central 8,587,530 7,266,284
• North 7,031,110 6,240,801
• South 5,058,300 4,270,362
• Total 20,676,940 17,777,447

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Tuition Distribution Examples

• 1. None of the colleges meet their target.
• If during the year, it appears that none of the
  colleges are meeting the target, all budget units
  would have to take a budget cut.
• Target amount is allocation amount for entire
  district.

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Tuition Distribution Examples

• 2. One college (A) misses collection target,
  however, other 2 colleges (B C) over collect.
  Total collections exceed tuition target.
• No allocation reductions will occur.
• In the next years carry forward calculation,
  colleges B C will contribute part of their
  carry forward to college A equal to the deficit,
  then the remaining tuition over target is spread
  to all 3 based on the percent of permanent
  funding.

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Tuition Distribution Examples

• 3. All 3 colleges collect more tuition than the
  target. College B has excess enrollments.
• College B can claim a tuition amount for excess
  enrollment equal to the lower of the amount
  calculated for excess or the amount collected
  over target.
• The balance of all tuition collected over target
  (after deducting for Excess) is distributed to
  the 3 colleges based on percent of permanent
  funding.

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Allocation Considerations

• Do we increase spending authority (allocation)
  for estimates of new enrollments?
• Do we include other factors in determining a
  colleges tuition target? (e.g. student mix
  (FT/PT), collections over target)
• Do we need to build in incentives for collecting
  more tuition?

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Community and Technical Colleges2005-07 Biennium
State Funding

• Operating Budget 1.172 Billion
• FY 2005-06 575.5 Million
• FY 2006-07 596.8 Million
• Adds new enrollments plus miscellaneous
  increased costs

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Washington CC Students pay 38.5 of their
instructional costs in 2005
54.9
Research universities
41.1
42.6
31.5
38.5
Comprehensive institutions
28.8
Community colleges
Full tuition paying student receiving no tuition
discounts
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Community and Technical College Tuition
Increases1991 through 2006
In the last 15 years, tuition and fees have
increased from 822 to 2,571
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What About The General Fund?
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We Are Done!!!

• Thank you very much for your time!
• Questions??