Monday Matters
In my Monday Matters column of 7 July 2003, I discussed the new budgeting system and how value-centered management (VCM) influenced the way we established the system. To briefly review, each department and office within the College was asked to create their own budget based upon a total budget allocation. These budgets were then entered into an internal web-based accounting system so that department heads can easily view total expenditures and balances. In a later version of this system that we will release soon, the system will show an itemization of expenditures so that you can see exactly where the totals come from.
What I want to show you this week is the "big picture." Each department
head has access to his or her budget, but how does this budget fit into the context
of the total College budget? I will try to answer that question in this column.
I consider this timely for two reasons. First, although the new fiscal year officially
began July 1, it takes some time for accounts to be settled and books to be closed
for the previous fiscal year before we can actually see our official numbers for
the new fiscal year. Another reason this information is timely is because we have
just been asked to make another budget cut and a budget sequester in preparation
for a future budget cut. It may be easier to understand the implications of a budget
cut if you can first obtain a picture of our total budget.
The Cost of Doing Business
To help with this discussion, I will refer to two PDF documents that I have put on the College web. The first of these is the College budget summary. You can obtain this document at
http://www.ed.sc.edu/do_seaman/budgetsummary.pdf
Not surprisingly, the budget is broken into two main categories: operating budget and income sources. Below I have provided a brief line-by-line description of each line within each category.
Operating Budget
Service Assessment: This is what the University charges us for services that they provide. These services are numerous and extensive, but include central administration, grounds and maintenance, custodial services, and technology services.
Budget Allocations: This is the total of allocations to the College departments. I discuss these allocations in more depth in the next section.
GA Tuition Credits: This is the money that we have set aside to pay tuition credits for our graduate assistants. "A Fund" tuition credits represent recurring dollars that we can use to support graduate assistants that are paid from our regular budgets. Grant-related tuition credits are drawn from a one-time money source and will pay tuition credits for students that are hired with grant funds. These dollars will not be available after this year, so we must ask external funding agencies for tuition money when we submit funding proposals.
Summer School Expenses: This is our estimate of how much it cost to offer summer courses this year.
Income Sources
Tuition Revenue: This is the University's estimate of how much tuition revenue we will generate during the upcoming academic year. You will recall from previous columns that we now generate and keep our own tuition revenue. Our budget could be dramatically affected when this number goes up or down.
Summer Revenue: This is our estimate of the gross revenue we earned by offering summer courses this year.
State Appropriation: State funds continue to be an important component of public university budgets. This is the portion of State funds that are allocated to the College by the University.
State Below-the-Line Appropriation: This is money that the State provides for the African American Professors Program.
Grant GA Tuition Credits Allocation: These are the one-time monies provided by the University to pay for tuition credits for grant-related graduate assistants.
Carry Forward: This is the amount of money from our budget that we did not spend last year. Although you may think that this indicates that the College is in good fiscal shape because there was money left at the end of last year, consider that we had to use this money to balance the budget this year, just as we did last year. That is, each year we generate revenue from grants, contracts, the Extended Graduate Campus, and other income sources. We have had to set aside approximately $750,000 of that money just to be able to balance the budget the following year. If these sources of revenue dried up, we would be in big trouble. Similarly, now that much of our revenue is being allocated directly to departments, the "College reserve" will not be nearly as large as it has been in the past. This means that it is up to departments to save money so that they can balance their budgets in future years, just as the College has done in the past.
Salary Reimbursement: We start this at zero and then use salary savings from grants and contracts to build a reserve that we can use to balance the budget. My hope is to begin working on budgets that we can balance without the use of a reserve so that salary savings will translate into College enhancements.
Extended Graduate Campus Revenue: This works the same as salary reimbursement, but the source of revenue is income generated through the EGC.
Other Revenue: The sources of these revenue can vary, with the primary source being
money contributed to the College foundation.
Where have all the Dollars Gone?
In the listing above I stated that the "budget allocations" line represents the total allocations to College departments. You can see the amount of these allocations in the second document, located at
http://www.ed.sc.edu/do_seaman/allocations.pdf
The document is self explanatory, but it might be useful for me to explain how we arrive at some of these allocation numbers. For starters you should know that salaries and fringe benefits consume 85% of the total allocation. This means that our ability to make decisions about priorities is mostly confined to making big programmatic decisions (i.e. what programs and offices should the College maintain?). Once these decisions are made there is very little wiggle room. Providing for faculty and staff positions and basic office expenses consumes almost all of the money we have to allocate.
The list of departments includes a number of revenue generation offices. That is, even though these offices receive an initial allocation, there is an expectation that this money will be returned to the College, and then some. Thus, the office appears as an expense at the beginning of the fiscal year, but these expenses will be offset in the income column as the year progresses. Revenue producing offices include the Conference Office, the Development Office, the Policy Center, and the Office of Program Evaluation.
Also on the list are two offices that were established and are supported by State legislation. This year the African American Professors Program is being funded by a below-the-line allocation of $178,805. Similarly, a State proviso stipulates that the School Improvement Council be funded at a level of at least $100,000. These two offices are part of the overall College budget, but the College receives additional funding to offset the expense.
This year we initiated a formula to calculate funding for academic departments. The formula is a sum of three components: salary and fringe, baseline instructional funding (e.g. adjunct faculty funds), and faculty support. For faculty support, we multiplied the number of faculty members in the department by $5,625. This method of calculating departmental funding based on the number of faculty members in the department is consistent with our goal of "no professor left behind." Keep in mind, however, that this is not a professional fund allocation for each professor. (Oh that it could be!) Rather, this is the formula for calculating department funding that includes such administrative costs as copying, office supplies, and phone expenses.
I hate to end with the bad news, but here goes. This nice balanced budget must now be reworked to comply with the recent financial mandate we received from the Provost. First, we must cut the budget by 3.5%. Next, we must sequester 5% of the remaining budget in preparation for further cuts this year. How are we going to do this? We are hoping that some conservative estimates of our carry forward funds and summer revenue will indeed turn out to be conservative enough that the 3.5% cut can be covered by the difference between our estimates and the real numbers. As for the 5% sequester and future cut, that is far more difficult. This will be a major topic of discussion in an upcoming Administrative Council meeting. To keep abreast of any decisions that are made, check the Administrative Council Minutes, College news items, and future editions of Monday Matters. All of these are available on the College web.
Next week I will be taking a few days off for a mini vacation, so there will be
no Monday Matters column. I hope that you take the time to check out the
column on August 18. Also, although I still have much information to share with
you so that this column is planned for the next month or more, I would welcome any
questions you might have that are of general interest. My intent is to make this
weekly information page as useful as possible. Feel free to suggest ways that I
can do this.
Until next week,
Mike