Campus Budget Reform September 2018 O F F I C E O F T H E P R O V O S T

Campus Budget Reform September 2018 O F F I C E O F T H E P R O V O S T

Outline Fall: Update on Campus Budget Reform Campus budget overview Budget reform Spring: Planning your Department s Budget Budget planning Best practices New tools O F F I C E O F T H E P R O V O S T 2

BUDGET OVERVIEW O F F I C E O F T H E P R O V O S T 3

State Funding Trend (2019 dollars) $600,000,000 $500,000,000 $142,744,305 $400,000,000 $202,869,060 $65,547,547 $300,000,000 $223,262,566 $78,298,923 $200,000,000 $316,005,023 $100,000,000 $85,149,079 $226,900,000 $65,465,499 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18* FY19* UIUC State Appropriation UIUC Est. SURS (normal costs) UIUC Est. Health, Life, Dental FY19 estimated CPI adjusted dollars; inflation of 2.5% assumed for FY19 *FY18 & FY19 POB estimated at FY17 levels O F F I C E O F T H E P R O V O S T 4

Financial Plan Overview FY19 UIUC portion of the increase in 2% General Funds Base: $4.01 million allocated to tuition colleges based on FY18 permanent budget base No decrease in budget for centrally-budgeted units State Appropriation 22% Income Fund (Primarily Tuition) 78% O F F I C E O F T H E P R O V O S T 5

State Funding Issues Funding uncertainty remains high Continued pressure on benefit shift Currently, two areas Employees in Tier 1 that exceed governor s salary New 3% rule for calculating SURS obligation O F F I C E O F T H E P R O V O S T 6

FY19 Budget Sources Auxiliary Enterprises & Departmental Activities $453M Direct State Appropriations $227M 20% 10% Gifts & Endowment Income $169M 7% 36% Income Fund $814M 20% Institutional Funds $169M Sponsored Research & Fed Appropriations $459M 7% FY19 Total = $2.291B O F F I C E O F T H E P R O V O S T 7

Centrally Awarded Undergraduate Financial Aid $92M Other Centrally Budgeted Academic & Admin Units $157M FY19 Budget Allocations (unrestricted) 13% 8% Tuition Units $559M 46% Technology Services, Facilities and Utilities $139M 11% Campus-Wide Support, Initiatives & Risk Management Reserve $221M 18% O F F I C E O F T H E P R O V O S T 4% Total = $1.210B Campus Level Research Units $42M 8

FY19 Unrestricted Budget $ Millions 200 180 160 140 189.0 169.1 163.1 150.9 120 100 80 60 40 20 110.5 91.6 68.6 62.2 45.4 41.2 30.2 28.6 22.9 18.5 17.3 13.8 10.7 8.0 6.6 4.8 1.9 0 O F F I C E O F T H E P R O V O S T 9

Budgeted Tuition $ Millions 800 700 600 500 400 300 200 100 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Undergrad Grad Professional O F F I C E O F T H E P R O V O S T 10

Budgeted Undergraduate Tuition 600 500 400 300 200 100 $ Millions 0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Base Rate Non-Resident Differential International Differential Program Differentials Summer/Winter Terms O F F I C E O F T H E P R O V O S T 11

Purdue In-State Cost of Attendance First Year Students: Big 10 Publics: 2018-19 $9,992 $10,030 Iowa Indiana Nebraska Wisconsin Maryland Ohio State $9,492 $10,680 $9,242 $10,534 $10,595 $10,726 $11,172 $10,466 $11,430 $11,114 $12,429 $12,474 Minnesota Michigan State Illinois Michigan Rutgers University Penn State $14,760 $14,516 $16,004 $16,225 $14,974 $18,400 $9,910 $10,322 $11,308 $11,534 $12,706 $11,570 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 Tuition/Fees Room & Board Books Other Maximum tuition differentials @ IL = $5,004 additional cost O F F I C E O F T H E P R O V O S T 12

Central Investment in Financial Aid $ million Actual Budgeted 100 91.6 90 85.4 79.5 80 74.5 70 63.5 60 57.0 50 47.8 40 37.6 30.7 30 22.8 18.2 19.7 20 14.1 10 0 O F F I C E O F T H E P R O V O S T 13

Historical Budget Strategies FY16 FY17 FY18 FY19 Campus-wide recurring reductions $49 Million Campus-wide recurring reductions $18 million $2 million reinvestment pool funded from activity based units Campus-wide cash rescissions $50 million $10.6 million reinvestment pool funded from activitybased units Centrally budgeted units recurring reductions $2.5 million $5.3 million reinvestment pool funded from activitybased units Tuition- based units increased $4 million No recurring reductions for centrally budgeted units O F F I C E O F T H E P R O V O S T 14

BUDGET REFORM O F F I C E O F T H E P R O V O S T 15

O F F I C E O F T H E P R O V O S T 16

We need to reinvent or redefine what a public land-grant university an invention of the 19th century is and should do for the citizens of a 21st century world." Robert J. Jones, Chancellor O F F I C E O F T H E P R O V O S T 17

Budget Model Needs to Support This Vision Change Incentives Improve Transparency Unit Actions Budget Outcomes Comprehensive, interconnected campus O F F I C E O F T H E P R O V O S T 18

Integrated and Value-Centered Budgeting Integrated Across disciplines, mission areas Within strategic priorities Via strategic plan INVEST IN EXCELLENCE ACROSS MISSION AREAS Research Teaching Outreach Value- Centered Offers units flexibility in future plans Provides commitment to investments Ensures consistency with values, priorities, and excellence O F F I C E O F T H E P R O V O S T 19

Primary Foci Budget Modeling Revenue o Tuition o ICR Costs: space, utilities, technology College investments: administration, public goods, services University investments: campus, unit priorities Financial Management Reporting Unit needs and wants Best practices Leadership training Long-term forecasting tools Collaborate w/system Offices - accounting infrastructure Processes & Practices Efficient processes Effective & transparent budget reviews Decision-making at the appropriate level Streamlined approval processes O F F I C E O F T H E P R O V O S T 20

This model is a tool to make our decisions about revenue, spending and transfers more transparent. The main difference from today is that these transfers will now be intentional and transparent. O F F I C E O F T H E P R O V O S T 21

Critical Implementation Elements Effective Short and Long Term Planning Predictability Enhances Planning Adequate Time to Transition Data Available at All Levels Data Support Systems O F F I C E O F T H E P R O V O S T 22

Impacts Colleges Departments Centrally Budgeted Units http://provost.illinois.edu/budget/budget-reform/ O F F I C E O F T H E P R O V O S T 23

College Budgets Year to Year Changes Existing Model New Model Unit Actions IUs Majors Graduate Tuition Summer/Winter Tuition ICR/Remission Campus Actions Salary and promotions Incremental campus adjustments Campus strategic investments Unit Actions IUs Majors Graduate Tuition Summer/Winter Tuition ICR/Remission Space Utility usage FTE Expenditures Campus Actions Incremental campus adjustments Campus strategic investments Change in campus goods Change in administrative costs O F F I C E O F T H E P R O V O S T 24

College Budgeting Framework SOURCES of FUNDS: Tuition Indirect Cost Recovery (ICR) University Value-Based Investment Sources Total USES of FUNDS: Existing College Budget Facilities, Utilities & Technology Services Investment in Administration & Public Goods Uses Total O F F I C E O F T H E P R O V O S T 25

Initial Conditions SOURCES of FUNDS: Tuition Indirect Cost Recovery (ICR) University Value-Based Investment Sources Total USES of FUNDS: Existing Unit Budget Facilities, Utilities & Technology Services Investment in Administration & Public Goods Uses Total University Value-Based Investments offsets Uses of Funds not supported by Tuition and ICR O F F I C E O F T H E P R O V O S T 26

Transition: University Value-Based Investments Rationale Cost of instruction, class size, and pedagogy differs across colleges Space quality and space utilization varies across colleges Some mission-related activities may not generate revenue Implementation Administration and College Leadership jointly establish a 3-year target Timeline for colleges to plan Increases across all units have to equal decreases Programmatic differences across colleges O F F I C E O F T H E P R O V O S T 27

Tuition Revenue Per IU Per Major O F F I C E O F T H E P R O V O S T 28

Indirect Cost Recovery: College Managed Tuition Remission 100% attributed to college enrollment of RA Facilities and Administration F&A 45% College Distribution Home of College PI 55% Campus Portion 27% Attributed Colleges 28% Central Campus Cost Offset O F F I C E O F T H E P R O V O S T

Indirect Cost Recovery: IRU Managed Tuition Remission 100% attributed to college enrollment of RA Facilities and Administration F&A 45% College Distribution Home of College PI 55% Campus Portion 27% Attributed Colleges 28% IRU O F F I C E O F T H E P R O V O S T

Institutional Fund Revenue O F F I C E O F T H E P R O V O S T 31

Revenue O F F I C E O F T H E P R O V O S T 32

O F F I C E O F T H E P R O V O S T 33

Direct Cost Assessments F&S Building Costs to Allocate Centrally-held budget accounting for direct-billed services Building & Space Includes centrally-funded leases F&S attributed costs from campus Adjusted for direct billing by F&S for services Centrally-budgeted costs added to cost of the F&S O F F I C E O F T H E P R O V O S T 34

Allocation of Costs Tuition Units By Space Type Office (DMI) Lab 100% Office 46% Classroom 37% Study 38% Special 37% General 37% Support 37% Health Care 100% Residential 100% Based on: CBRE Group, Inc. (formerly Whitestone Research Corporation) Updated from white paper Adjusted for college-funded space costs: Division of Responsibility General classrooms allocated to campus College controlled classrooms allocated to colleges O F F I C E O F T H E P R O V O S T 35

Building Costs Rate Calculation F&S Tuition Unit Allocated Building Costs Adjusted Net Assignable Square Ft (ANASF) Building & Space $27 Million 3 Million ANASF = $9.0 per ANASF FY17 Preliminary Estimate* * This is a draft estimate: ANASF needs to be adjusted for Division of Responsibility Likely need to have incremental increases to address deferred maintenance O F F I C E O F T H E P R O V O S T 36

Utility Costs Utilities Costs to Allocate Direct usage costs Utilities Indirect utility costs: energy administration and overhead Indirect charges allocated in similar proportions to direct cost Utility costs for centrally-budgeted units get added to centrally-budgeted unit cost O F F I C E O F T H E P R O V O S T 37

Central Technology Services Tech Services Costs to Allocate Technology Services Centrally-held budget adjusted for direct-billed services Tech Services attributed costs from campus (utility, space, etc.) Accounts for direct billing by Tech Services and library IT fee Student weight 25% Employee weight 75% O F F I C E O F T H E P R O V O S T 38

University System Office Incomplete list Changing their budget model Likely based on size of budgets among Universities Neutral impact in first year For an organizational chart http://www.pb.uillinois.edu/documents/staffing/so-org-chart.pdf President s Office VP Academic Affairs University Council Business and Financial Services Accounting Audits Payroll Treasury Capital Financing Cash Management Risk Management Budget Planning \Reporting Government Relations System HR Economic Development/Innovation OTM AITS O F F I C E O F T H E P R O V O S T 39

Research and Campus Interdisciplinary Research Units Institutes generate resources Campus portion of ICR used to reduce the costs allocated to colleges Building, space, utilities and tech services costs added Allocation: 25% on all expenditures (adjusted) 75% on research expenditures OVCR Beckman NCSA IGB isee IHSI IPRH PRI* * PRI has a separately budget allocation from the state and costs are not allocated to the units. O F F I C E O F T H E P R O V O S T 40

Administrative and Campus Public Goods Centrally-Budgeted Units Costs allocated based on all expenditures (adjusted) Incomplete list Library Enrollment Management Extension Grad College Public Safety OVCIA CITL Office of Provost Office of Chancellor Human Resources * PRI has Museums a separately budget allocation from the state and costs are not Krannert allocated to the units. O F F I C E O F T H E P R O V O S T 41

Investments, Initiatives and Risk Management Risk Management Enrollment changes Shifts in demand across colleges Provide stability buffering in costs/salary programs Costs Allocated based on all expenditures (adjusted) Incomplete list Fire service contract Promotion and tenure Hazardous waste Leases Grad assistant benefits Worker s comp Medicare Advancement road map funding TOP DUAL Risk Management O F F I C E O F T H E P R O V O S T 42

O F F I C E O F T H E P R O V O S T 43

NEXT STEPS O F F I C E O F T H E P R O V O S T 44

Baseline Discussions Meeting with College teams in Oct to review baselines and initial budget allocations Data available unit levels this Fall Look for colleges to develop 3 year plans uses of budget Encourage transparent discussions Focus on comprehensive budgeting not transaction budgeting O F F I C E O F T H E P R O V O S T 45

Operational Excellence @ Illinois Initiative coming soon Manage Cash Strategically Develop Smarter Budgeting Systems Reduce Redundancies Innovate Processes and Services Streamline Decision Making Identify Cost and Scale Efficiencies Enhance Productivity O F F I C E O F T H E P R O V O S T 46

Paul Ellinger pellinge@illinois.edu 333-5503 Vicky Gress gress@illinois.edu 333-4885 Questions O F F I C E O F T H E P R O V O S T 47