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 (let’s look at handout) How do president’s 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 CC’s and TC’s 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 enrollmentAllocation 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 CC’s

ranged from $2,171 to $5,113 per FTE WACTC adopted principles for new

formulaColleges’ “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)

State of WashingtonGeneral Fund Operating Budget2005-07 Biennium

Human Services32.1%

K-12 39.9%

Bonds5.0%

Other 7.9%

Universities 6.5%

Corrections 5.0%

CTC’s 4.1%

CTC’s 38.5%

U of W22.6%

WSU 13.9%

EWU 3.2%

TESC 1.8% CWU 3.2%

WWU 4.0%

HECB 12.7%

Washington State = $28.2B Higher Education = $3.1B

CTCs serve almost 60% of higher education enrollments

$1.2B

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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

Comparison of Full-time Faculty Average Salaries

FY2004-05 Washington CTCs average is 89% of Western States

$78,390

$56,864

$48,202$53,944 $54,094

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

WA ResearchUniversities

WA RegionalUniversities

WA CTCs National CCAverage

Western StatesCC Average

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 (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

($2,500)

($2,000)

($1,500)

($1,000)

($500)

$0

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007G

F R

even

ue

Red

uct

ion

s in

Mil

lion

s Where Has all the Revenue Gone?

(Reductions to General Fund revenue since 1993)

Other

I-747 – Property Tax Limits

I-728 – Lottery & State Property Taxes to K-12

Ref 49 – License Tab Reduction

Ref 47 – Property Tax Reduction

Hi Tech Incentives/Manuf. & Equipment Exemption

Repeal of 1993 B&O Increases

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District Budget Allocation Process500 ft. view

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District Allocation Process Overview

IntroductionYears of Change ( 1993-96)

The Middle Years (1997-1999)

Current Process (1997 - present)

Allocation Considerations

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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.

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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.

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 college’s allocation based on total tuition and state funding.

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Current Process - 1999-presentDistrict 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.

Permanent Base - FY 2006-07

Initial Allocation(includes state and tuition)

Permanent StateAllocation FTE*

Central $26,669,126 5,580North $20,589,322 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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North’s Process

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

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Tuition

Target vs AllocationProcessExceptions

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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 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.

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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 college’s 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

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Washington CC Students* pay 38.5% of their instructional costs in 2005

Research universities

Comprehensive institutions

Community colleges

41.1%

31.5%

28.8%

*Full tuition paying student receiving no tuition discounts

54.9%

42.6%

38.5%

Community and Technical College Tuition Increases

1991 through 2006

0%2%4%6%8%

10%12%14%16%

1990

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Change in Tuition

In the last 15 years, tuition and fees have increased from $822 to $2,571

State General Fund Changes

59% 58% 57% 55%59%

0%

FY 2000 FY 2001 FY 2002 FY 2003 FY 2004

Sh

are

of T

otal

Fu

nd

s

State General Fund

What About The General Fund?

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We Are Done!!!

Thank you very much for your time!

Questions??