The State and University Budget Outlook

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The State and University Budget Outlook

• January 2008

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Beginnings Definitions and Concepts
The Florida Constitution Governs the Use of State
Monies ARTICLE VII (c)  No money shall be drawn
from the treasury except in pursuance of
appropriation made by law. All money received
by any state agency is required to be deposited
into the treasury, unless specifically exempted
from this requirement. Disbursement from the
treasury are by warrant drawn upon the treasury
by the Chief Financial Officer upon initiative of
the agency authorized to make the expenditure.
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There Are 3 Types of Funds Into Which Monies are
Placed

• The General Revenue Fund
• Discretionary Revenues
• Trust Funds
• Earmarked Revenues
• Budget Stabilization Fund
• Mandated contingency for revenue shortfalls and
  emergencies

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There are 2 Types of Revenues

• Recurring
• the income stream is not time limited in statute
• Non-recurring
• the income stream is time-limited (e.g. lawsuit
  revenues)
• By practice, not statute, only recurring revenues
  are to be used to fund recurring expenditures,
  except
• Article III, SECTION 19.  State Budgeting,
  Planning and Appropriations Processes.--
• (a)  ANNUAL BUDGETING.
• (2)  Unless approved by a three-fifths vote of
  the membership of each house, appropriations made
  for recurring purposes from nonrecurring general
  revenue funds for any fiscal year shall not
  exceed three percent of the total general revenue
  funds estimated to be available at the time such
  appropriation is made.

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There are 2 Types of Expenditures

• Operating
• Categories used to fund the current expenses of
  state government
• Fixed Capital Outlay
• Category used to fund real property (land,
  buildings, including appurtenances, fixtures and
  fixed equipment, structures, etc.)

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State Universities Receive Monies From a Variety
of the FundsFY 2007-08 All State University
Appropriations(Before vetoes, in millions)
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The Operating Budget of FSU has 8 Budget Entities

• Educational and General (EG) 452 m
• College of Medicine (EG) 49 m
• Auxiliary Enterprises 196 m
• Contracts and Grants 212 m
• Student Activity 16 m
• Athletics 42 m
• Campus Concessions (Vending) .5 m
• Financial Aid 122 m

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The Operating Budget Excludes FSUs 8 Direct
Service Organizations (DSOs)

• Ringling Museum
• FSU performing Arts Center Foundation
• Seminole Boosters
• FSU Foundation
• FSU Research Foundation
• FSU Financial Assistance
• FSU International Programs Associations
• FSU Alumni Association

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Restrictions on Funds

• Funds cannot be moved between budget entities
• Use of Fee and Auxiliary monies is limited by law
• Use of DSO monies are limited by law and their
  corporate charters

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E G is the Largest University Funding Entity

• Includes All formulagenerated activities related
  to
• credit instruction that may be applied to toward
  a postsecondary degree or certificate
• non-project research and service performed to
  maintain professional effectiveness
• Individual or project research assigned and
  managed through academic departments
• public service activities that benefit groups of
  individuals in the service areas of the
  universities
• administration for administrative support of
  instruction, research, and public service
• service programs and
• other functional areas include academic
  advising, academic computing support, academic
  curriculum development, and academic personnel
  development.
• The university is required to maintain a reserve
  equivalent to 5 of the total budget
• Balances are retained and invested by the
  university

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E G Includes

• General Revenue
• Lottery Funds
• Student and Other Fees
• Tuition
• Student Fees
• Miscellaneous revenues (registration fees,
  library fines, indirect costs assessed to CG)

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General Revenue is the Largest Source of
University Funding

• The taxes that make up the general revenue fund
  are sensitive to changes in the economy
• The taxes that make up the general revenue fund
  are narrowly concentrated in consumption taxes

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Fixed Capital Cannot be Used For Operating
Expenses

• General Revenue
• Occasionally non-recurring is used
• PECO (Public Education Capital Outlay)
• Result of Bond sales
• Backed by gross receipts and communication
  services taxes

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State Finances

• Both State Revenues and Expenditures are
  Influenced by a Few Factors

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The State Consensus Estimating Process Ties the
Budget Process Together
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Consensus Estimating ConferencesFall 2007
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The Estimate of General Revenue Has Shrunk
Dramatically
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General Revenues usually fall over the Business
Cycle

• Typically revenues fall by 5 or more
• Historically offset by revenue increases, but not
  in the last 15 years
• This decline is faster and further than most
• Almost 8 already
• Further reductions Possible (almost 100 m below
  Nov Est. with 6 more months left in the fiscal
  year)

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General Revenue Tax Collections Can Be Expected
to Grow 5 Per Year But Vary Dramatically Across
the Economic Business Cycle
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In a GR Decline, there is Severe Competition for
Monies Among State Agencies

• There are just a few large GR agencies
• Statutory Requirement regarding educations
  proportionate reduction
• 215.16 (2)  If the state appropriations from the
  General Revenue Fund for the benefit of the
  uniform system of public free schools, state
  institutions of higher learning, and community
  colleges cannot be paid in full during any given
  year, they shall be diminished only in the same
  proportion that appropriations for all other
  purposes from the General Revenue Fund are
  diminished during such year. Additionally, any
  funding reductions to public free schools, state
  institutions of higher learning, and community
  colleges shall be diminished in proportions
  identical to one another. For the purpose of
  implementing this section, general revenue funds
  exclude the administrative budgets of the Board
  of Governors and the Department of Education.

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Universities Compete with a Few Agencies for
General Revenue95 of GR in 15 agencies
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Some Agencies Represent Constituencies that are
Difficult for State Policymakers to Ignore
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Public Schools

• Public School Enrollment is down
• Class Size Amendment costs continue to be
  addressed

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Next Steps in the State Budget Process

• Legislature could reopen the appropriation
  process
• Use non-recurring revenues to off set the cuts
• Implement recurring cuts
• Deploy Budget Stabilization Fund monies
• Implement some revenue solutions
• Combination
• Governor could reduce quarterly releases to the
  universities (state funds are given out every 3
  months not all at once)

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FY 2008-09 Promises to be Difficult( in
millions)
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The Impact on Florida State University
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Reductions in State General Revenue Impact the
University Greatly

• General Revenue is the most significant portion
  of university EG
• EG funding is a significant portion of all
  university recurring revenues
• EG funds most academic and support activities on
  campus

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EGOperating Budget Revenue Sources(2007-08
Beginning of Year)
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College of MedicineEG Operating Budget Revenue
Sources(2007-08 Beginning of Year)
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Most of the Funds of Colleges and Schools are in
Personnel (Salaries for filled/unfilled
positions and OPS)
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FSU Begins Budget Reductions at a Disadvantage

Florida State University 21/1 207
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Source US News and World Report. Population is
262 Best National Universities. There are 164
public and 84 private. This chart includes
selected public universities
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2007-08 University Operating Budget Reductions
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FSU 2007-08 Reductions

• The Legislature (in November) reduced FSUs
  recurring general revenue appropriation as
  follows (in millions)EG (11,1)College of
  Medicine ( 1.5)
• Total (12.5)
• FSU is anticipating a second reduction similar to
  the first a grand total of (25.0 m)EG
  (22.1)College of Medicine ( 2.9)
• Total (25.0)
• There is no assurance at this time of avoiding a
  third reduction. The university has implemented
  reductions of (16.2) and is currently planning
  for another (15.0) a total of (31.2)

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How Do These Compare to the Reductions in
2001-2003?
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FSU Management of the 2001-02 and 2002-03
Reductions

• The University used central funds to make up most
  of the reductions (in millions)
• EG Departments ( 9.4) 37.6College of
  Medicine ( 1.1) 4.4University
  Reserves ( 14.5) 58.0Total (25.0)
  100.0
• Provost reserves provided a portion

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FSU 2001-02 / 2002-03 versus 2007-08 Sample
Reductions

• Sample impact at the department/area level
  (EG) 2007-2008 2007-2008
  2001-02/2002-03 1 2 worst
  case 2007-08 1 2
• AS ( 609,515) (3,166,201) (
  2,936,965) (6,103,166)
• AS (1) ( 1,628,666) Social Sciences
  ( 521,119) ( 751,658) ( 697,154)
  ( 1,448,722) Business (
  533,868) ( 751,649) ( 697,229) (
  1,448,878) FA ( 1,071,494) (
  3,283,221) ( 3,045,513) ( 6,328,734)
• Largest College
• Largest university support area
• (1) In Provosts reserve for allocation to AS
• 2001-02/2002-03 total reductions were within a
  range of 2-3 of department/areas 2001-02
  beginning allocation. 2007-08 reductions are
  generally at 4.0 and 3.71 (of the 2006-07
  allocation)

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What Is Going to Be Done and What Can We Do

• The October reductions
• January actions
• The next 12 months

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2007-2008 FSU Internal Budget Reductions
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What Actions Are Being Planned?

• Allocate a portion (lt 5 m) of the created
  recurring reserve to offset impacts to critical
  services
• Ensure core services are not adversely affected
• Ensure the safety and security of the campus
• Ensure the financial integrity of the university
  is not compromised
• Honor the financial aid commitments already made
  to students
• Ensure library hours are not reduced
• Honor Pathway commitments
• Ensure federal commitments on National High
  Magnetic Field Lab are honored

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What Actions Are Being Planned?

• Allocate portion of non-recurring reserve ( 5
  m) as adjustments to honor employee contractual
  obligations and to phase-out recurring cuts
• Allow use of carry forward reserves to mitigate
  effects
• Cut Back hiring
• Implement EG travel restrictions
• Implement unit reduction plans after adjustments

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What Actions Are Anticipated in the Coming Months?

• Incorporate into the universitys strategic plan
  a recommendation on the restructuring of the
  academic units with an aim towards reducing
  administrative costs
• Develop a plan to eliminate areas of duplication
• Evaluate increasing the number of out-of-state
  students and a collateral change in state policy
• Evaluate restructuring Summer Term B
• Further reduce freshmen enrollment
• Work on other options

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Options Ahead

• 1. Deal with No New State or Tuition Funding
• Lower enrollment to achieve appropriate funding
  per student and/or seek change in
  out-of-state/in-state mix
• 2. Seek New State Funding
• Bring our state student support to the national
  median in funds per student
• 3. Seek New Tuition Funding
• Requires a change in Bright Futures and Pre-paid,
  and increases in undergraduate in-state tuition
• 4. Pursue Change on Fee Restrictions
• -- Requires implementation of technology fee and
  other flexibility
• 5. Seek Dramatic Change in Funding Structure

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Who Can Implement These Changes? Operating
Budget Revenue Control
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Other Tuition-Associated FeesOperating Budget
Revenue Control
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Weve Already Begun Implementing One Part of
Option 1

• After Session, the decision was made to freeze
  enrollment.
• By that time, most admission decisions had
  already been made.
• The majority of the impact was felt by students
  wanting to transfer to FSU. For example, the
  Panama City campus has already experienced a
  dramatic decline in headcount enrollment.
• The effect is offset by the implementation of
  MAPPING. The success of this program has
  increased student retention and shortened their
  time to graduation by increasing the number of
  hours taken each semester.
• Further limitations on the enrollment plan can be
  anticipated.

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10 Year Actual Fall Student Headcount Annual
FTE and Planned Enrollment
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SUS Funding is Not Nationally Competitive
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Work Is Underway on Options 2 - 5

• Revision of Bright Futures and Prepaid College
  Plan is advocated by BOG
• Increase in undergraduate tuition is law
• New technology fee is law
• Strategies to reach national average dollars per
  student are advocated by the BOG
• Allowing other state institutions to charge
  differential tuition is under consideration
• New ways to fund universities modified contract
  plan being advocated by FSU

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Undergraduate Tuition

• Increases in tuition and fees over the last two
  decades are shown in the next slideFloridas
  relative national position is Resident
  3,471 Very Low Non-Resident 16,602 Very
  High Includes Spring 2008 5 increase. (based
  on 30 student credit hours)

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Comparison of Resident UG Tuition for Public
Flagship Universities 2006-07
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Undergraduate Tuition and Fees Percent
Increase1989-90 to 2007-08
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Graduate Tuition

• Increases in tuition and fees over the last two
  decades are shown in the next slideFloridas
  relative national position is Resident
  6,112 Below Median
• Non-Resident 21,266 High to Very High
• (based on 24 student credit hours)

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Graduate Tuition and Fees Percent
Increase1989-90 to 2007-08
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Tuition Revenue Limitations

• Undergraduate tuition is low and likely to remain
  below average
• But new law has a consumer price index (CPI)
  feature for the undergraduate tuition increase if
  the legislature does not act in regular session
• And undergraduate tuition differential fee
  enacted (that exempts students prepaid tuition
  contracts and students already at the university
  as of July 1, 2007)
• With the restriction that the sum of the CPI and
  differential increases cannot exceed 15 in a
  year and has a cap of 40 of tuition at other
  state universities