University Budget Process Fiscal Year 2018

Transcription

1 University Budget Process Fiscal Year 2018

2 University Council Three Takeaways from Today 1. We have a two-part budget process. 1. University Budget Process 1. High level basic assumptions to build overall budget 2. Now through November 2. Unit Level Budget Process 1. Unit decisions on departmental budgets 2. Begins in January 2. We need feedback on basic assumptions. 1. Revenue 1. Size (enrollment) 2. Tuition 2. Expense 1. Discount 2. Pay plan 3. Other costs 3. Revenue and expense must balance 3. We are building next year s budget with a $3.2 million deficit. 1. We need feedback on how we should distribute the cut between major units: 1. CLA 2. Law 3. AGSM 4. Academic & Student Affairs 5. University Services 6. President s Office 7. General University 2. Some questions to prompt the discussion in your areas: 1. What are your priorities? 2. What would you cut, and what are the consequences? 3. Should we over-cut to create a reinvestment pool? 4. What, if anything, should be held harmless? 2

3 Our Budget Philosophy Established last year ( ) Written document shared and posted Takeaways from the Budget Philosophy Decentralized budgeting and financial management Accountability at a very high level 3

4 Why are we starting FY18 with a $3.2 million deficit? 1. Definitions*: 1. One-time Funds: Funds that cannot be expected to recur, or that have a limited duration. Examples include carry-forward and indirect cost recovery. 2. Recurring Funds: Funds backed by operating revenue that can be reasonably expected to recur. 3. Recurring Costs: Expenses that support the operation and can be expected to be ongoing. 4. Structural Deficit: When recurring funds are not sufficient to cover recurring costs. 2. We have used one-time funds in the form of carry-forward to cover our structural deficit. This is not sustainable. *Willamette University Financial Terms, page 2 4

5 Why are we starting FY18 with a $3.2 million deficit? 2016 Budget Actual Variance Annualized Headcount 1,914 1,880 (34) Missed CLA headcount budget. Gross Tution 85,571,700 84,056,868 (1,514,832) Less tuition due to fewer students. Financial Aid (42,805,387) (42,414,677) 390,710 Less financial aid expense due to fewer students. Net Tuition 42,766,313 41,642,191 (1,124,122) Covered by not spending contingency. Did not reduce expense budget Budget Forecast Variance Annualized Headcount 1,866 1,827 (40) Reduced CLA headcount budget, but still missed. Gross Tution 86,400,000 84,563,939 (1,836,061) Less tuition due to fewer students. Financial Aid (43,707,890) (43,812,223) (104,333) Higher financial aid expense due to higher discount rate for FTF. Net Tuition 42,692,110 40,751,716 (1,940,394) Prior year deficit - (1,124,122) (1,124,122) Did not reduce expense budget, deficit carries forward. Available Resources 42,692,110 39,627,594 (3,064,516) 2018 Base Forecast Variance Annualized Headcount 1,827 1,821 (6) Base is 2017 year end forecast. Smaller base = fewer returning for 2018 Gross Tution 84,563,939 84,303,177 (260,762) Less tuition due to fewer students. Financial Aid (43,812,223) (43,677,123) 135,100 Less financial aid expense due to fewer students. Net Tuition 40,751,716 40,626,054 (125,662) Prior year deficit (3,064,516) (3,064,516) 2016 & 2017 deficits. Available Resources 40,751,716 37,561,538 (3,190,178) 5

6 Our Budget Process Next Year s Environment Five Year Environment Iterative 5 Assumptions: 1. Size 2. Tuition 3. Discount 4. Pay plan 5. Other costs Priority Order Invest/Divest Decisions on assumptions and priorities Performance Requirements Unit Process* *Unit responsibility to develop and execute a process. Units are: CLA, AGSM, Law, AA, EUC, Campus Life Advancement, US, President, General Adopted Budget 6

7 Our Budget Process with Timeline July - August Next Year s Environment Five Year Environment September - October Iterative 5 Assumptions: 1. Size 2. Tuition 3. Discount 4. Pay plan 5. Other costs Priority Order Invest/Divest October Board Meeting Decisions on assumptions and priorities November - February Performance Requirements Unit Process March Adopted Budget 7

8 Budget Discussions Student Budget Advisory Committee 9/8/16 10/11/16 11/8/16 12/8/16 CLA Faculty Meeting 9/13/16 Campus Life Council 9/14/16 AGSM Faculty Meeting 11/11/16 CLA Budget Advisory Council 9/22/16 Resources Website 9/16 Unit Fiscal Officers Jennifer Chambers - CLA & Academic Affairs Norman Williams Law Susan Chiapella - AGSM Jennifer Lawrence - Campus Life Kristeen Jennings Advancement Mary Carlisle Enrollment & University Communications Dan Valles University Services 8

9 Our Environment 9

10 Next Year s Environment Tuition Set by December to meet new Early FAFSA 1% change in CLA tuition $470 per student $400,000 net tuition Price Sensitivity Anecdotal evidence One market comparison: Undergraduate Tuition Discount Funded vs Unfunded Funded discount is paid for from the endowment or current donations. Unfunded discount is foregone revenue. Reduced endowment distribution can cause slight increase in unfunded discount. FY16 Unfunded CLA Budget = 44.9% / Actual = 45.1% FY17 Unfunded CLA Budget = 45.3% 1% change in CLA unfunded discount rate $850,000 Reed College 51,850 Whitman 47,490 Willamette University 46,900 Lewis & Clark 46,534 Puget Sound 46,310 University of Portland 41,844 Seattle University 40,500 Pacific University 39,858 Whitworth 39,600 Gonzaga 38,980 Linfield 38,300 10

11 Next Year s Environment Compensation 1% increase for salaries and wages $475,000 Minimum wage $9.75 to $97,000 Healthcare is bounded -5% to 15% 1% increase in healthcare premiums $60,000 Fundraising Operating budget is currently supported by 1.25M in unrestricted annual giving. Contractual & other obligations Institutional memberships, software licenses & library subscriptions consistently increase annually. Some Utilities can be held back with conservation. Natural gas price increases are forecast for Food cost is expected to increase. Risk management Continued compliance costs Potential expenses to be prioritized Chief Diversity Office + staff CLA structural deficit/funding faculty positions/increasing faculty support resources Creating permanent general fund funding for Willamette Academy Increase budget contingency Strategy for funding a campaign Zena programing/facility funding Improving resources related to risk management Athletics facility funding Increase Funding for Admissions Other? 11

12 Some scenarios Independent scenarios Base scenario assumes: Tuition, fee and discount starts at FY17 forecast and adds expected FY18 loss Housing revenue returns to $1M higher than FY17 forecast. Board bill adjusted accordingly. AGSM & Law maintain contribution level. Base 1% CLA Headcount Decrease 3.5% CLA Tuition Increase 1% Unfunded Discount Rate Increase 3.5% Salary Increase 1% Other Cost Increase Resources Tuition & Fees 109, , , , , ,778 Student Aid - Unfunded (44,551) (44,115) (46,080) (45,649) (44,551) (44,551) Net Tuition and Fees 65,227 64,821 66,649 64,129 65,227 65,227 Endowment 3,611 3,611 3,611 3,611 3,611 3,611 Federal Work Study Annual Giving 1,251 1,251 1,251 1,251 1,251 1,251 Room & Board 15,737 15,737 15,737 15,737 15,737 15,737 Auxiliary Investment Income Other Resources Total 87,762 87,355 89,184 86,664 87,762 87,762 Expense Salaries 45,331 45,331 45,331 45,331 46,849 45,331 Benefits & Payroll Taxes 15,721 15,721 15,721 15,721 15,888 15,721 Salaries & Benefits 61,052 61,052 61,052 61,052 62,737 61,052 Materials & Services 23,126 23,126 23,126 23,126 23,126 23,357 Contingency 1,124 1,124 1,124 1,124 1,124 1,124 Infrastructure 2,284 2,284 2,284 2,284 2,284 2,284 Debt Service 3,863 3,863 3,863 3,863 3,863 3,863 Expense Total 91,449 91,449 91,449 91,449 93,134 91,681 Net Excess / (Deficit) (3,688) (4,094) (2,266) (4,785) (5,373) (3,919) Variance (406) 1,422 (1,098) (1,685) (231) 12

13 Five Year Environment Enrollment New enrollment will continue to see pressure from declining pool of high school graduates. Retention will continue to be the piece where all can have the biggest impact. Tuition & discount Increasingly, the choice to attend WU is based on the financial aid package Students and families continue towards price sensitivity and more sophistication in their understanding of higher education. Compensation Maintain competitiveness and retain talent. Minimum wage law 5-6% each year for the next six years. FSLA minimums will adjust. Healthcare costs show no signs of stabilizing. Continual testing of the market for carriers. Fund raising & the endowment We are still on track to a 4.5% endowment spend. We should not rely on the campaign to increase resources in this 5 year window. Contractual & other obligations Costs for memberships, subscriptions, licenses, etc. are continually increasing. 13