FY12 Spending Plan Process

Finance and Administration Advisory Group

January 18, 2012

Status of FY12 Budget

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8/8/11: Chancellor announced final budget decisions

8/31/11: OBFP uploaded adjusted base budgets excluding any approved spending cuts from 8% reductions scenarios into PeopleSoft (FAST has list of reductions)

9/16/11: OBFP uploaded carry-forwards for ESS and Gifts into PeopleSoft

Next Step: Spending plans

• Loading New Strategic Amounts into FAST & PeopleSoft

• Loading of all other unrestricted carry forwards into FAST & PeopleSoft

• Movement of State Supported Salaries of Fund 11000 onto other funding sources

Why Spending Plans?

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• Spending plans are mechanisms for forecasting spending for our campus. The ability to forecast is especially important during turbulent financial times.

• We begin the budget process many months in advance of start of fiscal year, so we need to update our FY12 spending assumptions based on current information.

• We need an accurate projection of carry-forward spending.

• Spending plans are also accountability tool to help ensure that units have specific plans to live within their FY12 allocations.

• Living within our expense budgets will be particularly important in FY12.• Many departments budget at high-level, and we need to confirm that they have

feasible, detailed plans to live within their FY12 allocations.

Strategy for Balancing the FY12 Budget

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• Our FY12 budget-balancing strategy that relies on both new revenue and expense reductions/reallocations.

ESTIMATED OF SIZE OF FY 12 BUDGET GAP 31.8

Description $Revenue

Add'l Gross Revenue from 7.5% Fee Increase & Enroll 13.4Additional Differential Fee Revenue 1.0Increase in Other Non-Mandatory Fee Revenue 0.5State Funding for Collins Center 0.5Additional Use of UC Revenue 2.5Total Change in Revenue 17.9 55%

Expense Reductions/ReallocationsAbsorb Expense Growth in Base Budget 4.4Vacancy Factor 3.0Use Part of Remaining $4.5M FY10 Budget Reserve 2.5Expense Reductions/Reallocations: Academic Affairs 1.5New Electricity Contract 1.2Expense Reductions/Reallocations: Other VC Areas 0.7Limit Increase in Institutional Financial Aid 0.5Central Expense Reductions/Reallocations 0.6Total Expense Reductions/Reallocations 14.4 45%

Total Gap Closers 32.3 100%

Key Components of FY12 Budget Strategy Involve Managing Expenses

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• Moving $4.4M of expenses to trust funds. • Doing so in effect asks departments to absorb $4.4M of expenses within their base

budgets.• This is long-term change.• Will continue to look at:

• Recent historical spending versus budget by major budget unit• Trust funds with growing fund balances – capable of sustaining additional

expenses long term.• All-funds budgeting - Similar to UMass Amherst & Worcester

• 1st step is to consolidate expenses to CTF• 2nd step is to move $4.4M of trust fund revenue to CTF• 3rd Step possible implementation of the General Operating Fund as currently used

on the Amherst campus• Must achieve $3M savings target from vacancy factor

• Departments cannot use savings from vacancies to fund other positions or for other, non-personnel purposes.

Key Points about FY12 Spending Plan Process

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• We continue to manage the spending plan process through VCs, with meeting(s) with each VC and business staff to discuss:

• FY12 first-quarter spending• FY12 base budget• Opportunities for absorbing expense increases into base budget• Approved cuts from 8% reduction scenarios• Approved new strategic resources, including recommendations of Growth Planning

Committee.

• All-funds process: Spending plans cover all unrestricted funds.• At level of major budget units (e.g., colleges for Academic Affairs, could be

departments in other areas).• At subsidiary code level; account-code level for some departments..

Proposal to Move Salaries off of State Funds PermanentlyIdentify the issue:

• The State Appropriation is less than the State Projected Payroll• Current State Appropriation $69.1 million• Estimated State Payroll $87.6 million• State Payroll to Move off State $18.5 million

Places to move excess State Salaries to:• Tuition Retention Available $ 5.7 million• Remaining Salaries to CTF $12.8 million

Moving the salaries to CTF does not solve the overall problem• There is still a $12.8 million budget gap

• $2.5 million will be funded from reserve• $2.0 - $3.0 million will be funded from vacancy factor savings• $4.0 million will be funded from absorption of growth into base budgets• FY12 current revenue

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Proposal to Move Salaries off of State Funds Permanently

Decision on who to move from State funds:•We typically try and have union (unit) positions on State Funds

With the possibility of State funding future union pay raises •Chose non academic areas before academic areas

Review of State Payroll:•Approximately 1,344 benefitted employees are paid from State funds •The Total Estimated State Payroll is $87,575,000

Paid thru 1-06-12 $44,567,000Encumbrance @ 1-06-12 $43,008,000Total Estimated State Payroll $87,575,000

Proposal to Move Salaries off of State Funds Permanently

Proposal:•Move all Non-Unit Salaries Approximately 184 people for $17.1 million off State •127 people for $12.8 Million would move to CTF including:

– All Non Academic Non Units– The Provost Office Non Units– The Dean’s Offices Non Units– Most Centers & Institutes Non Units

• 53 people for $4.3 Million would move to Tuition Retention including:– A few Centers & Institutes Non Units– All other Academic Non Units

•Some Unit people from Academic areas for $1.4 million would move to Tuition Retention

Preparation for FY13 Budget Process

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• Will also begin working on more long-term financial planning issues discussed with Vice Chancellors budget workgroup and with Implementation Design Team.

• Possible topics range from cell phone policy to support staffing to improving administrative processes.

• Not sure of process yet, but may seek volunteers from F&A to participate.