FY2015 BUDGET CHALLENGE. Shawnee State University Board of Trustees Finance & Administration Committee September 19, 2014

Transcription

1 FY2015 BUDGET CHALLENGE Shawnee State University Board of Trustees Finance & Administration Committee September 19, 2014

2 2 Presentation Objectives Transition from the FY14 financial performance to discussion about the current-year (FY15) budget challenges in order to: Provide an historical context about general fund reserves and reminder on Budget Deficit Reduction Plan and Guiding Principles Illustrate the difference between general fund reserves and the University s net position and the importance of both. Focus upon the impact of fall 2014 enrollment decline and implications of multiple consecutive years of enrollment decline. Have a discussion about a preliminary approach to address the FY15 shortfall designed to minimize negative impact upon current-year general fund programs and personnel. Explain ramifications of the preliminary approach upon the University s FY15 financial net position.

3 3 GUIDING PRINCIPLES from 9/13/13 BOT presentation Focus upon our core mission and the essentials needed to achieve it Utilize a multi-year approach to respond to changing environment, reduce our reliance upon operating reserves, and test effectiveness of changes Engage in efforts to minimize time to graduation for students Minimize impact upon current employees Invest in retention and increasing enrollment and enrollment capacity Minimize across the board reductions and further cuts to non-comp Minimize and phase out use of university funds to support grants as appropriate Do not shift operational costs to SSUDF

4 4 Continuous budget constraints a way of life SSU academic and non-academic departments have realized significant reductions in non-compensation expenditures over time Since 2009, compensation costs have been constrained by: position replacements have been scrutinized, temporary staffing measures used, limited new positions, limits on wage/salary adjustments (no ACB for a year), and FY14 reduction of filled positions and significant limits placed on faculty overload and adjunct service Deployed other budget-constraint measures that have included: Significant internal reorganizations, realignment of functions to achieve efficiencies, and reallocation of funds to provide for new needs and operational demands, such as (but not limited to): Reduction in state funding Response to unfunded federal and state mandates Ohio s retention and completion requirements New academic program needs Crucial upgrading of campus-wide technology Sustaining and modernizing existing facilities (increased local monies due to 2-years with no capital funding) Maintaining essential staffing

5 5 Budget Deficit Reduction Plan University has historically budgeted for a deficit in its general operating budget although not always realized to the extent of the projected deficit In 2013 a plan was developed to gradually reduce future deficit budgeting this plan was revised in May 2014 in anticipation of loss of Access Challenge funds in FY16 The Board approved the FY15 general fund budget with projected $1.25 million use of reserves

6 Budget Deficit Reduction Plan reviewed with F & A Committee - May 2, Year Budgeted Deficit Variance ($) Variance (%) FY10 $1,892, FY11 $3,245,118 $1,352, % FY12 $3,296,417 $51, % FY13 $2,990,856 -$305, % FY14 $1,500,000 -$1,490, % FY15 $1,250,000 -$250, % FY16* $1,000,000 -$250, % FY17 $700,000 -$300, % FY18 $400,000 -$300, % FY19 $0 -$400, % * State support to SSU will be reduced by $1,091,025 in FY2016, in addition to any fluctuations in the State Share of Instruction (SSI). That amount, plus an additional $250,000 deficit reduction, will be absorbed into the FY2016 budget through revenue increases and/or expenditure decreases.

7 7 General Fund Reserves (Operating) Historical: Actual FY2005 FY2013 Preliminary: FY2014 FY2015 Opening GF Reserves Budgeted GF Deficit Actual GF Deficit/Surplus Change in Investment Values 1 Net Increase (Decrease) in GF Reserves FY2005 $14,477,516 ($972,004) $378,808 $962,382 $1,341,190 FY2006 $15,818,706 ($1,939,328) ($811,503) $974,997 $163,494 FY2007 $15,982,200 ($2,810,202) ($1,448,466) $2,123,738 $675,272 FY2008 $16,657,472 ($3,603,425) ($1,692,378) $49,715 ($1,642,663) FY2009 $15,014,809 ($3,802,416) ($2,477,291) ($1,543,966) ($4,021,257) FY2010 $10,993,552 ($1,892,438) ($739,211) $1,380,190 $640,979 FY2011 $11,634,531 ($3,245,118) ($197,717) $1,990,092 $1,792,375 FY2012 $13,426,906 ($3,296,417) ($1,126,745) $90,897 ($1,035,848) FY2013 $12,391,058 ($2,990,856) ($2,786,337) $1,305,264 ($1,481,073) FY2014* $10,909,985 ($1,500,000) $174,077 $2,112,809 $2,286,886 FY2015* $13,196,871 ($1,250,000) *Preliminary - pending approval of FY2014 financial audit. 1 Shawnee State University does not budget changes in investment values.

8 General Fund Reserves and University Net Position Historical: Actual FY2005 FY2013 Preliminary: FY2014 FY General Fund Reserves University Net Position (all funds) As reflected in University financial statement Opening General Fund Reserves Net Increase (Decrease) in General Fund Reserves Opening University Net Position (all funds) Net Increase (Decrease) in University Net Position (all funds) FY2005 $14,477,516 $1,341,190 $81,261,366 $2,467,452 FY2006 $15,818,706 $163,494 $83,728,818 $2,463,161 FY2007 $15,982,200 $675,272 $86,191,979 $1,417,542 FY2008 $16,657,472 ($1,642,663) $87,609,521 ($413,916) FY2009 $15,014,809 ($4,021,257) $87,195,605 ($826,438) FY2010 $10,993,552 $640,979 $86,369,167 $2,174,122 FY2011 $11,634,531 $1,792,375 $88,543,289 $3,057,070 FY2012 $13,426,906 ($1,035,848) $91,600,359 ($1,154,483) FY2013 $12,391,058 ($1,481,073) $90,445,876 ($1,037,216) FY2014* $10,909,985 $2,286,886 $89,408,660 $2,638,338 FY2015* $13,196,871 $92,046,998 *Preliminary - pending approval of FY2014 financial audit Final amounts were restated from published financial statements per GASB 34/35 requirement on 2014 comparative statements (original net positions were: $896,004; $1,048,965)

9 9 FY2015 Tuition Revenue Change Approved FY2015 Budget = $33,099,604 tuition & fees 1% decrease in undergraduate billable credit hours 0% change in graduate billable credit hours 15 th Day Fall semester census Undergraduate -7.9% regular billable hours (i.e., fulltime students X 12 credit hours + actual hours for part time and overload above 18 credits) 732 dual credit hours at $50/hour (current undergraduate rate/credit is $264.34) Graduate +42.1% regular billable hours (i.e., fulltime students X 9 credit hours + actual hours for part time and overload above 16 credits) Projected FY2015 tuition & fees = $31,648,736 Projected revenue shortfall = ($1,450,868)

10 10 Expense Increases Health care expense rates = $342,744 Locally funded projects $250,000 Scholarships $300,000 Other budget adjustments and corrections Personnel and non-compensation = $166,694 Estimated expense increase = $1,059,438

11 11 Total FY2015 Budgetary Shortfall Revenue Decrease $1,450,868 Expense Increase $1,059,438 Budget Shortfall $2,510,306

12 12 KEY FACTORS THAT IMPACT FY15 FY14 began with projected budgeted use of general fund reserves of $1.5 million FY14 ended with a positive balance of $174,077 in general fund operating budget (swing of $1.674 million) and an increase of over $2.1 million in investment income for a $2.3 million increase in general fund reserves University s net position even better with increase of $2.6 million Fall 2014 enrollment realized a decline of 6.2% FTE for a substantial revenue shortfall in FY15

13 13 KEY FACTORS THAT IMPACT FY15 This is the third year of declining enrollment with an overall reduction of 12.4% FTE from fall 2011 Projected FY15 tuition revenue is $1.6 million less than FY12 actual tuition revenue - tuition rates (undergraduate) have increased by 9.3% during this same period of time The reality is: Inability to achieve the entire FY15 budget shortfall within the general fund without extreme impact to mission-critical operations Need to adopt a measure that will: 1) require less extreme (still difficult) cut to current operations, and 2) utilize other funds balances (reserves) Recognize there will be a significant impact to the University net position EOY15

14 14 Short side trip Brief discussion of SSU Fund Accounting General Fund - Operating (funds 10, 11, 12) Auxiliary Fund ( fund 20) Restricted (funds 30-35) Loan Fund (fund 40) Plant Fund (fund 50) Agency Fund (fund 60) University fund accounting structure

15 15 Short side trip Brief discussion of SSU Fund Accounting General Fund - Operating (funds 10, 11, 12) Auxiliary Fund (fund 20) Restricted (funds 30-35) Loan Fund (fund 40 Plant Fund (fund 50) Agency Fund (fund 60) Current year revenue & expenses (10); Select account balances unspent from previous year s budget (i.e. technology fees, (11); Accounts to track income and expenses (lab/course fees, print shop, dental hygiene clinic, etc. (12) Supplemental operations that strive for selfsufficiency (housing) but most supported by GF transfers (e.g., CLC, VRCFA, ECS, Athletics) Grant funds includes federal, state, federal passthrough, local, private (30-35); Houses small loan amounts for students (not FA) e.g., emergency loans Revenue, expenses, fund balances for capital projects, transfers from other funds (auxiliary, GF, revenue & expense from University-issued bonds Revenue, expenses, fund balances held for student organizations (e.g., SGA, SPB, student clubs) and Intramural sports; includes University support

16 Funds with balances (reserves) available for transfer or that can be reduced 16 General Fund - Operating (funds 10, 11, 12) Auxiliary Fund (fund 20) Restricted (funds 30-35) Loan Fund (fund 40 Plant Fund (fund 50) Agency Fund (fund 60) Current year revenue & expenses (10); Select account balances unspent from previous year s budget (i.e. technology fees, (11); Accounts to track income/expenses (lab/course fees, print shop, dental hygiene clinic, etc. (12) Supplemental operations that strive for selfsufficiency (housing) but most supported by GF transfers (e.g., CLC, VRCFA, ECS, Athletics) Revenue, expenses, fund balances for capital projects, transfers from other funds (auxiliary, GF, revenue & expense from University-issued bonds Revenue, expenses, fund balances held for student organizations (e.g., SGA, SPB, student clubs) and Intramural sports includes University support

17 17 Proposed Strategies to Address the Shortfall General Fund Action Impact on General Fund Budget Impact on General Fund Reserves Impact on University Net Position Budgeted operating deficit 0 (1,250,000) (1,250,000) Potential liquidation of investments (General Fund)* 500,000 (500,000) (500,000) Total 500,000 (1,750,000) (1,750,000) *Will impact general fund reserves and University net position only if investments are liquidated and cash is spent.

18 Proposed Strategies to Address the Shortfall Auxiliary Fund 18 Action Impact on General Fund Budget Impact on Auxiliary Fund Reserves Impact on University Net Position Reduce Athletic Contingency fund balance Reduce Athletic Scholarship fund balance Reduce Bookstore Contingency fund balance Reduce Gen Fee Contingency (to Gen Fund) 51,815 (51,815) (51,815) 23,006 (23,006) (23,006) 100,000 (100,000) (100,000) 260,306 (260,306) (260,306) Reduce Gen Fee Contingency (to Psychiatrist - Auxiliary) Reduce University Center fund balance 0 (18,000) (18,000) 75,179 (75,179) (75,179) Total 510,306 (528,306) (528,306)

19 19 Proposed Strategies to Address the Shortfall Plant Fund Action Impact on General Fund Budget Impact on Plant Fund Reserves Impact on University Net Position Charge Nursing renovation to Plant Fund Charge Technology project installment to Plant Fund (planned) 500,000 (500,000) (500,000) 0 (450,113) (450,113) Total 500,000 (950,113) (950,113)

20 20 Proposed Strategies to Address the Shortfall Agency Fund (reducing general fee support only) Action Reduce Chronicle fund balance Reduce Silhouette fund balance Transfer EOC/Gear Up (OACHE) fund balance Impact on General Impact on Agency Impact on University Fund Budget Fund Reserves Net Position 11,387 (11,387) (11,387) 9,911 (9,911) (9,911) 30,249 (30,249) (30,249) Total 51,547 (51,547) (51,547)

21 Action Potential Impact on All Funds Reserves and University Net Position General Fund Reserves Auxiliary Fund Reserves Impact 1 Plant Fund Reserves Agency Fund Reserves University Net Position General Fund Operating Deficit (Budgeted) (1,250,000) (1,250,000) Utilize General Fund Balance 2 (500,000) (500,000) 21 Transfer Auxiliary fund balances to General Fund Reduce Budgeted Support Transfer to Auxiliaries Use Auxiliary fund balances to cover Psychiatrist contract Charge Nursing renovation to Plant Fund Charge Technology project installment to Plant Fund (Planned) (410,306) (410,306) (100,000) (100,000) (18,000) (18,000) (500,000) (500,000) (450,113) (450,113) Transfer Agency fund balances to General Fund (51,547) (51,547) (1,750,000) (528,306) (950,113) (51,547) (3,279,966) 1 Reflects potential decrease in net position at June 30, 2015; assumes zero growth in investment values during FY Potential liquidation of investments, if needed for cash flow.

22 22 Remaining FY2015 Budget Reductions Source Contribution to General Fund Budget Shortfall General Fund 500,000 Agency Fund 51,547 Auxiliary Fund 510,306 Plant Fund 500,000 Total 1,561,853 Total FY2015 Shortfall 2,510,306 Additional Budget Cuts Needed 948,453

23 23 Next Steps Identify $1,000,000 in operational cuts from the FY2015 budget. Communicate revenue shortfall and preliminary plan to address FY15 budget shortfall to the campus; engage governance groups and key stakeholders. Work with University Investment Committee and current Investment Consultant to develop liquidation strategy for cash flow (when needed) in the near term but that acknowledges and preserves the University s long-term investment philosophy. Develop a revised FY2015 budget to present to the Executive Committee of the BOT early October. Full Board review of the revised FY15 budget at its November 14 meeting. Immediately begin FY16 budget development process

24 Comments - Questions 24