State Budget Update UNC System Finance Conference March 13, Adam Brueggemann & Mark Bondo Office of State Budget and Management March 13, 2017

Transcription

1 State Budget Update UNC System Finance Conference March 13, 2017 Adam Brueggemann & Mark Bondo March 13, 2017

2 Topics of Discussion About OSBM Update on Budget Process Revenue Update Governor s Recommended Budget New Carryforward Procedures Overview of Capital Budget Allotments Transfers Connect NC Bond Update and Procedures Repairs and Renovations Recent Law Changes Upcoming Topics Governor s Recommended Capital Budget 2

3 Role of OSBM Budget Development Forecast and monitor state revenues. Review and make objective recommendations on budget requests from agencies and universities. Prepare Governor s Recommended Budget & Present to General Assembly Monitor budget and finance issues during legislative session. Budget Execution Certify and revise the budget during the fiscal year. Provide ongoing fiscal advice to the Governor and State Budget Director. Manage funds throughout fiscal year to ensure balanced budget. Publish the State Budget Manual Advise agencies on complying with budget policies. 3

4 Role of OSBM OSBM & Governor Governor appoints the State Budget Director who leads OSBM. OSBM provides non-partisan fiscal advice to the Governor and Budget Director. Provides administrative continuity and institutional knowledge of prior budgets and policy decisions. OSBM develops the Governor s Recommended Budget consistent with the Governor s goals and agenda. OSBM executes the budget as enacted by the General Assembly, interpreted by the Governor, and in compliance with State law. 4

5 OSBM Organizational Chart Charles Perusse State Budget Director OSBM Business Office Nels Roseland Deputy Director Kristin Walker Deputy Director JPS, NER, Gen Gov Health & Human Services Education Management Economic & Demographic Analysis Statewide & Infrastructure, IT Audit 5

6 Education Analyst Assignments Vacant Lead UNC Analyst UNCGA, UNCCH, NC A&T, ECSU Jennifer Neisner Lead K-12 Analyst Bryan Conrad Lead NCCCS Analyst ECU, FSU, NCCU, NCSU, UNCA, UNCP, WCU James Robinson ASU, UNCC, UNCG, UNCW, WSSU, UNCSA, NCSSM Assists with K-12 6

7 Long Session Process Budget Instructions August Worksheet I Due Oct 31 Build the Base Budget Worksheet II Due Oct 31 Expansion Reduction, Capital (WKIII) IT Base Budget Completed in Jan Governor s Budget Developed Dec - Feb Feb Updated Enrollment Data Finalize Availability Governor s Budget Presented Legislative Budget Process Certification Short Session Released Mar 2 Subcommittee Mar 7 Mar - Jul Senate 1st House 2nd Conference Typically Jul Aug New budget into IBIS Dec 2017 Instructions for Adjusting Biennial Budget 7

8 Budget Update

9 Budget Update Consensus General Fund revenue forecast with Fiscal Research Division of the General Assembly Anticipates continued moderate economic growth Maturing economic expansion Faster growth in average wages than earlier in the economic recovery (tighter labor market) FY year over year growth: 2.2% Baseline growth, excluding tax changes: 5.7% FY year over year growth: 4.3% Baseline growth, excluding tax changes: 5.3%

10 Demographic Projections North Carolina is 9 th most populous state 10.3 million people by July 1, 2017 Growing about 290 people per day Adding population the size of Fayetteville in the next two years

11 Population Migration Net migration is a major component of population growth in NC Accounts for 65% of total population growth over the biennium

12 Governor s Budget General Fund Appropriations = $23.5 billion Education budget is: 69% K-12, 22% university system 9% community colleges Medicaid is more than two thirds of Health & Human Services budget Justice & Public Safety is: 74% Public Safety (law enforcement & corrections) 24% Judicial 2% Justice General Government and Natural & Economic Resources are a combined 5% of appropriations

13 Governor s Budget for UNC 4.8% increase in net appropriation from base budget in % increase in net appropriation from base budget in

14 Governor s Budget for UNC Make North Carolina a Top 10 Educated State by 2025 Increase pre-kindergarten enrollment for 4-year-olds from 22% to 55%. Improve high school graduation rate from 85.6% to 91%. Increase the percentage of adults (over 25) with higher education degree (associates or higher) from 38.7% to 55%. 14

15 Governor s Budget for UNC Items that Increase Capacity Fully-Funds Enrollment Growth - $47M/$95M for additional 4,088 FTE in and 9,262 FTE by Fully-Funds NC Tuition Promise - $51M Faculty Recruitment and Retention- Additional $3M to attract and retain nationally recognized faculty. Invests in HBCUs Support for ECSU Aviation program and student success center; NC A&T Doctoral Program. 15

16 Governor s Budget for UNC Items that Improve Graduation Rates Competitive Grants to Improve Graduation- New $3M grant program to fund and scale programs that improve graduation rates. Modernize Data Systems- Invests $12M for improved data integration, Finish in Four, and Know Before You Go. 16

17 Governor s Budget for UNC Support Teaching and Research Faculty Recruitment and Retention- Additional $3M to attract and retain nationally recognized faculty. NC Best and Brightest New forgivable loan program to encourage high-achieving students to become teachers in NC public schools. Expands Research Opportunities Initiative Additional $2M Increases UNC Cancer Research Fund Additional $4M 17

18 New Carryforward Procedures SL , Section 6.7 Required OSBM and OSC to conduct carryforward pilot. Reviewed carry forward practices in other states. Conducted pilot to improve transparency, accounting accuracy, and compliance with GASB Universities implemented changes to unearned tuition revenue. All state agencies implemented process to eliminate backdating checks. Universities given one-year exemption Process to eliminate backdating checks by using cash reserve will be implemented for Universities. 18

19 New Carryforward Procedures Universities transfer carryforward to OSC Reserve. Statutory and Unearned Revenue carryforward transferred back to agencies and universities. Encumbrance carryforward (state agencies only), requires documentation of liquidation before carryforward funds are transferred back to agency. OSBM closeout memo specific to universities will outline procedures and new accounts used. 19

20 Overview of Capital Budget Staff: Thomas Cheek Assistant State Budget Officer Mark Bondo Capital Team Lead Monica Scott (Covers Appalachian State, East Carolina, and North Carolina Central) Andrew Shaw Jim Lora (Part Time/Special Projects) 20

21 Overview of Capital Budget Capital Budget includes: Acquisition and Disposition of Real Property Assets Financing of the Acquisition and Disposition of Real Property Assets Policy Surrounding the Acquisition, Disposition, and Financing of Real Property Assets 21

22 Topics of Interests - Allotments OSBM recently issued guidance surrounding the policy for handling allotments of capital projects: General Fund Projects (including Repair and Renovations) need at least TWO allotments One allotment for planning Once Planning is nearing completion, a second allotment for construction Exceptions allowed (Land Purchase, Projects Not Requiring Planning, etc) Receipt Support Projects, including University Self Liquidating Projects only need ONE allotment 22

23 Topics of Interest - Transfers There are primarily two types of transfers: Transfers within a budget code Transfers between budget codes 23

24 Transfers within a Budget Code Steps 1. Unallot any funds to be transferred 2. Submit a Budget Revision (Type 11 or 12) reduce the fund code giving the money and to increase the fund code receiving the money 3. Allot the funds in the fund code that received the money Helpful Tip: Include any relevant information in the Justification Box that will help your analyst understand the transaction and if it legal requirements for funds 24

25 Transfers to Another Budget Code Steps: 1. Unallot any Funds to be transferred 2. Perform a Type 14 Revision to move funds into a Transfer Expense Account (Transfer Accounts Should be Specific to the Budget Code) 3. Allot the Transfer Account Funds 4. Perform a Budget Revision in the Fund Code receiving the money to increase requirements and receipts (Transfer Account Receipt Code should be specific to Budget Code giving money) Why is this important? General Funds have restrictions and must be tracked Transfers must be netted out in CAFR 25

26 Topics of Interest Connect NC Update Connect NC Bond Program, passed in 2016, funds $1,065,000,000 in University Capital Projects As of March 10 th, 0.9% expended (University Only) Projected vs. Actual Cash Flow 400,000, ,000, ,000, ,000, ,000, ,000, ,000,000 Projected Actual 50,000,000 - FY FY FY FY FY FY FY

27 Topics of Interest Connect NC Update Special Guidance for Connect NC Connect NC Bond Act restricted the use of the Escalation Reserve Escalation Reserve is used to inflate a project to mid-point of construction to account for inflation related impacts Funds related to escalation must be held in a reserve account and can only be used for: Inflation Unforeseen Events CANNOT be used for change orders to embellish the project 27

28 Repairs and Renovations Repairs and Renovations: Set Up of Funds: Each separate project (Renovate Bondo Hall) or class of projects (Roof Replacement) can have a fund Repairs and Renovations Funds cannot be allocated to a lump sum Fund Repairs and Renovations cannot be spent on projects: That do not meet G.S. 143C-4-3 project classes (i.e. planning only not allowed) Must meet G.S. 143C-4-3 General Fund supported facilities (no auxiliaries except for dorm fire safety fire sprinklers) 28

29 Topics of Interest Recent Law Changes Law Changes in the General Assembly All UNC requests for new capital projects must be planned with UNC funds prior to requesting State funds (Sec or S.L ) Annual Campus Debt Affordability Study (Sec of S.L due date amended in Sec of S.L ) Repairs and Renovations allocation to campuses must take into account documented decencies (FCAP) and negatively weight availability of external funds (Sec of S.L and Sec of S.L ) 29

30 Topics of Interest Recent Law Changes Enhance Oversight on Certain Capital Projects (Sec of S.L ) Requires that leases of State property over 30 years have General Assembly Approval Universities exempt for dormitory projects Millennial Campus lease Statutes cover Millennial Campuses 30

31 Topics of Interest Recent Law Changes Limit the Ability of State Entities to Enter to Debt or Debt Like Arrangements Sec 37.8 of S.L limited the ability of State Entities to enter into debt or debt like arrangements over $5 million without prior approval by the General Assembly What is Prior Approval? Self Liquidating Bill Guaranteed Energy Savings Contracts Public Private Partnerships (State Agency) Mortgage Backed Securities (Housing Finance Agency) Etc 31

32 Topics of Interest Upcoming Topics Site visits to Campuses (Completed NC State) Offering Training Classes to Agencies and Universities Creating Quick Reference Guides for Transactions (Allotments Done) Working to Close Budget and Fund Codes No Longer in Use Close Out 32

33 Governor s Recommended Budget Governor s Recommended Budget for Capital (UNC): $50 Million in Repairs and Renovations Funds for Universities $2 Million in General Funds for North Carolina Central University for School of Business Land Purchase (Connect NC Project) $175 Million in Limited Obligation Bonds for Targeted Renewal Capital Projects 33

34 Governor s Recommended Budget Governor s Recommended Budget for Capital (UNC) How Were $175 Million Projects Selected? Used List provided at January 2017 UNC BOG Meeting Reviewed both New and Targeted Renewal Lists Projects must be full building renovation or infrastructure renewal Projects must be over $2.5 million in cost Projects had to be under an amount so that every Constituent Institution received a project Project priority rating then drove the process 34

35 Governor s Recommended Budget Debt Affordability for North Carolina (Millions of Dollars) Funds to Unfunded Liabilities $153.3 $140.4 $139.0 $158.2 $206.1 Total Additional Debt Capacity per Year $1,268.3 $56.3 $39.7 $40.9 $42.2 Debt Capacity Available each and every Year $181.0 $181.0 $181.0 $181.0 $181.0 Policy recently changed Considers taking difference between current debt service and 4.0% debt service to General Fund revenue target to OPEB liability Uses new Debt Affordability Target of 4.5% of debt service to General Fund Revenues 35

36 Questions 36