Boards’ Fiduciary Obligations: Building Budgets while Balancing Priorities,

Needs and Realities

SCHEV Orientation for New Board of Visitors’ Members October 25, 2017

Michael Maul, Associate Director Virginia Department of Planning and Budget (DPB)

2016-2018 Budget: Nongeneral fund vs. General fund

General Fund 38.1% Nongeneral

Funds 61.9%

The General Fund (38.1%) From income and sales taxes paid by citizens and

businesses Can be used for a variety of government programs Governor and General Assembly have the most

discretion

Nongeneral Funds (61.9%) Receipts set aside for specific purposes:

• motor vehicle and gas taxes for transportation programs

• student tuition and fees for higher education • federal grants for specific activities

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General Fund revenues for 2016-2018 Economic trends are important because employment, wage gains, and consumer spending account for 92.1 percent of all general fund revenues: 2016-2018 general fund revenues = $37.8 billion

Data from Chapter 836, 2017 Appropriation Act, does not include transfers or balances.

Individual income tax 69.3 %

Sales & use taxes 18.3%

Corporate income tax 4.6%

Other taxes & revenue 7.8%

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Where the state operating money goes-

General Fund 2016-2018

4

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

39.2% $11.8 B: K-12

$3.9 B: HE

31.1% $9.2 B: Medicaid

12.8% $2.3 B:

Corrections

11.0% $1.9 B: Car Tax

3.8% 1.2% 0.7% 0.2%

Education Health & Human Resources

Other (e.g.,Legis., Judicial,central accounts)

Government (Administration Finance, Technology)

Public Safety, Homeland Security, Vets

Natural Resources

Commerce and Trade/Agriculture

Transportation

Over two-thirds of the General Fund goes to localities and individuals

Aid to individuals 24%

Debt Service 4%

State Programs 28%

Public Education 68%

Car Tax 14%

Local Sheriffs 6%

Other Aid to Localities 13%

Aid to Localities 45%

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6

DPB’s role:

Increases/decreases in available revenues

Efficiency, effectiveness and economy

Continuing need for programs and agencies

Reconcile agency requests with Governor's priorities

Performance

BUDGET IS A ZERO-SUM GAME: COMPETING DEMANDS MUST BE BALANCED

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Budgetary authorization for higher education involves several major programs Educational and General (E&G)

General fund (GF) and nongeneral fund (NGF) sources (tuition and fee revenue)

Student Financial Assistance General fund and nongeneral fund (federal assistance and tuition

revenue) Sponsored Programs (Research)

General fund and nongeneral fund (federal and private grants) Institution specific initiatives

Auxiliary Enterprises Nongeneral fund only (self-supporting activities such as residential

facilities, dining halls, and parking)

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Support for educational and general is a shared cost

Institution GF Share NGF Share

Richard Bland College 65% 35%

Virginia Community College System 63% 37%

Longwood University 62% 38%

Radford University 62% 38%

Christopher Newport University 60% 40%

University of Virginia at Wise 60% 40%

University of Mary Washington 60% 40%

Old Dominion University 56% 44%

Norfolk State University 55% 45%

George Mason University 50% 50%

Virginia Commonwealth University 49% 51%

James Madison University 49% 51%

Virginia State University 48% 52%

Virginia Military Institute 40% 60%

College of William and Mary 40% 60%

Virginia Tech 39% 61%

University of Virginia 35% 65%

Source: SCHEV

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Both E&G support and FTE students have grown since 2000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

Num

ber o

f Stu

dent

s (F

TE)

Billi

ons

E&G FTE

Notes: Data includes E&G appropriation for 17 institutions, VIMS and extension services. FY 2010-11 includes SFSF appropriation.

Average Funding per FTE Student at Four-Year Institutions (in 2016-17 Constant Dollars)

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Tuition increases surpass inflation in good times and bad

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21.5

19.3

10.5

8.2 9.9

6.3 6.5 5.1

13.1

9.7

4.5 5.1

6.7 7.1

4.6 5.4

2.9 2.2 3

3.8

2.6 3.7

1.4 1 2

2.9 1.7 1.6

0.7 0.7 1.8 2

0

5

10

15

20

25

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Average Percent Change in Annual Tuition and E&G Fees vs Inflation

change in tuition and fees (%) Inflation (%)

Observations

Higher education institutions given more latitude than other state agencies in managing their operations Increased coordination and cooperation is happening

between institutions, but even more is needed given limited resources Most cost savings/efficiency actions have been on the

administrative side of institution operations, while the greatest costs are incurred by the academy

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Possible efficiencies to slow cost growth

Academy Minimize duplication/enhance coordination of programs and

courses between institutions Utilize technology for introductory courses Encourage open source textbooks/materials for classes Stop centers that are not self-supporting

Administrative Institutions sharing automated systems Centralize instead of decentralize administrative functions

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Funding challenges include: Variability of state support Diversity between institutions Relying more on tuition and fees (access) Reductions disproportionate to state support Ability to raise tuition

How much is needed; should we limit the increases? Financial need of student population

Are we increasing access? Balancing in-state and out-of-state students Getting high productivity from our investments

Should we link funding to outcomes?