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Operating Budget Allocation Process

Operating Budget Allocation Process. College Council March 20, 2007. WARNING!.

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Operating Budget Allocation Process

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  1. Operating Budget Allocation Process College Council March 20, 2007

  2. 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.

  3. Who Am I?

  4. Budget Process 30,000 Ft. View • Governor/Office of Financial Management, Legislature, State Board, Presidents

  5. 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 (let’s look at handout) • How do president’s determine this list?

  6. Budget Process Kick-off

  7. 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)

  8. 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

  9. How are funds allocated to colleges? • Formulas/models have changed over years • A “little” history

  10. The “old days” for Budget Allocations • Motto: “System solidarity every college for themselves” • Separate formulas for CC’s and TC’s • CC formula used from 1985 to 1999 • Formula moved funds among colleges every year

  11. 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

  12. 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”

  13. Current Allocation Method • Formula frozen in 1999 • At that time funding per FTE at the CC’s 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

  14. 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

  15. 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

  16. 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)

  17. State of WashingtonGeneral Fund Operating Budget2005-07 Biennium Washington State = $28.2B Higher Education = $3.1B Human Services 32.1% CTC’s 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% CTC’s 38.5% CTCs serve almost 60% of higher education enrollments

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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!

  23. 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

  24. 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.

  25. 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

  26. 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

  27. Conclusions (cont’d) • 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

  28. Where Has all the Revenue Gone?(Reductions to General Fund revenue since 1993) $0 Repeal of 1993 B&O 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 1997 1995 1996 1994

  29. District Budget Allocation Process500 ft. view

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

  31. Introduction • Prior to the mid-1990’s 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.

  32. Years of Change - District Approach 1995-96 • Continued to use state’s tuition estimate as district target. • Adjusted college’s tuition based on actual collections. • At end of year would balance out allocations. In total, no one lost.

  33. District Current Process -1999 to Present

  34. Current Process - 1999-present • State Board allocates only state funds to the districts. • Seattle District determines each college’s allocation based on total tuition and state funding.

  35. 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 year’s tuition allocation amount. Result is permanent base for current year.

  36. Permanent Base - FY 2006-07 Initial Allocation (includes state and tuition) Permanent State Allocation FTE* Central $26,669,126 5,580 North $20,589,322 3,795 South $19,436,6584,31661,808,914 12,843 *Excludes worker retraining and apprenticeship

  37. SCCD Colleges Have Own Budget Process

  38. North’s Process • Budget Planning Team • College Council • Executive Team • “Two bucket” approach • Tie to Strategic Plan • Financial Reports

  39. Tuition • Target vs Allocation • Process • Exceptions

  40. 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

  41. 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.

  42. 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.)

  43. 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

  44. 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.

  45. 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 year’s 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.

  46. 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.

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

  48. 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

  49. 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

  50. 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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