Operating Budget Allocation Process College Council March 20, 2007
2 WARNING! The information you are about to see is extremely boring! You should not use heavy machinery e.g. pencil sharpeners, for up to 4 hours after this presentation. Viewer discretion is advised! This meeting will NOT be canceled due to weather conditions.
4 Budget Process 30,000 Ft. View 4 Governor/Office of Financial Management, Legislature, State Board, Presidents
5 State of Washington Biennial Budget Process 4 Currently working on 2007-09 biennial operating and capital budgets 4 Presidents discuss system budget priorities 4 Request for this biennium $269mil over last for CTC system (let’s look at handout) 4 How do president’s determine this list?
7 State of Washington Biennial Budget Process 4 SBCTC submits operating and capital budget requests to Governor –Fall, even years 4 Governor makes biennial budget proposal to Legislature –December, even years 4 Supplemental budgets adjust the biennial budget (odd years)
8 State of Washington Biennial Budget Process 4 Each chamber of the Legislature writes its own budget –Protocol – Chambers take turns going first –The budget is a law! (with a two-year life) –Both chambers must agree on everything! 4 The Governor signs the budget – has power to veto subsections 4 Legislature appropriates state funds to SBCTC, which allocates dollars to colleges
9 How are funds allocated to colleges? 4 Formulas/models have changed over years 4 A “little” history
10 The “old days” for Budget Allocations 4 Motto: “System solidarity every college for themselves” 4 Separate formulas for CC’s and TC’s 4 CC formula used from 1985 to 1999 4 Formula moved funds among colleges every year
11 Budget Allocations 4 When CC formula was adopted in 1985, tuition collected by colleges sent to State 4 In 1994 the Legislature changed tuition policy- now retained by colleges 4 Formula moved funds from high-collection to low-collection colleges 4 Old formula abandoned in 1999 too complex and seemingly unfair
12 Current Allocation Method 4 It was agreed that the new method would not include increases or decreases in enrollment Allocation of enrollment growth and reductions due to under-enrollment would be governed by the biennial enrollment plan and State Board adopted enrollment rules Current SBCTC “rules”
13 Current Allocation Method 4 Formula frozen in 1999 4 At that time funding per FTE at the CC’s ranged from $2,171 to $5,113 per FTE 4 WACTC adopted principles for new formula Colleges’ “base “ budgets should be independent of other colleges’ actions/circumstances
14 Current Allocation Method 4 Colleges “base” budgets should be predictable from one year to the next 4 There should be no re-distribution of base budgets among colleges 4 The method needs to be understandable and involve fewer variables
15 Current Allocation Method 4 The formula would deal only with state general funds. No local revenues including tuition, would be considered in the allocation of state funding * Quiz! 4 OBC of WACTC worked on new formula from September 1999 to December of 2000 4 WACTC adopted method in concept in December 2000
16 Current Allocation Method 4 Other new appropriations-compensation increases, special programs- to be allocated to appropriation bases to be discussed annually at WACTC (presidents) 4 If new appropriation levels permit, bring up all colleges’ funding with the lowest-funded colleges receiving a larger share of funds 4 Regression curve (too boring to discuss)
State of Washington General Fund Operating Budget 2005-07 Biennium Human Services 32.1% K-12 39.9% Bonds 5.0% Other 7.9% Universities 6.5% Corrections 5.0% CTC’s 4.1% CTC’s 38.5% U of W 22.6% WSU 13.9% EWU 3.2% TESC 1.8% CWU 3.2% WWU 4.0% HECB 12.7% Washington State = $28.2B Higher Education = $3.1B CTCs serve almost 60% of higher education enrollments $1.2B
18 SBCTC State Funds Allocations State Operating Budget 4 “Base Plus” approach – colleges keep the money they have. One- time funds removed, result is college “base budget”. 4 New money is added – typical new funds include: –Growth enrollment slots –Compensation increases –New programs/specified funding 4 Most allocated money is unrestricted – colleges develop local priorities
19 Allocation of Growth Enrollments 4 Biennial enrollment plan – intent is to put enrollment growth where it will be needed 4 NSCC example 4 Funding for growth enrollments set by Legislature, sometimes some of that funding is set aside for other purposes: –Funding for new program startup –Aid for low-funded colleges
20 Tuition 4 Traditionally set by Washington Legislature 4 Recent trend to delegate authority to State Board to increase CC resident tuition up to legislative maximum –State Board has authority to set CC non-resident tuition –Since 1993, tuition revenues (except building fees) are retained by colleges
21 Tuition 4 Components of Tuition and Fees –Operating Fees (80%) Retained locally to help pay general expenses of the college –Building Fees (10%) Sent to State Treasurer, funds a portion of the colleges’ capital budget –Service and Activity Fees (10%) Retained locally; used to fund student activities such as sports, clubs, childcare, etc. Colleges may charge less than maximum* 4 Students have experienced a doubling of tuition over the last ten years
22 Compensation Increases 4 Legislature controls salary increases 4 Increases are delineated in biennial appropriations act 4 Salary increases are limited to those allowed in the appropriations act – no other increases may be provided by the colleges!
23 Typical Types of Compensation Increases 4 COLAs – limited to % set by Legislature 4 Faculty Increments – limited to funds allowed by Legislature, plus turnover savings, sometimes COLA 4 Part-time Faculty – limited by specific legislative language
Comparison of Full-time Faculty Average Salaries FY2004-05 Washington CTCs average is 89% of Western States Most recent as of December 11, 2006. To be updated Jan/Feb 2007.
25 Outside Influences on CTC Programs and Budgets 4 Major recession and economic recovery 4 Significant state budget deficits causing five consecutive years of CTC budget cuts 4 To partially offset cuts in state funds, cumulative 45% increase in student tuition rates 4 Student tuition waivers were reviewed and a new charge established for basic skills 4 Passage of Initiatives
26 Conclusions 4 Implementation of allocation method has: –Protected college base budgets (except for legislative mandated budget cuts) –Maintained independence of colleges’ budgets from actions of other colleges –Been easier to understand than former formula –Used “best fit” basis to allocate compensation, cuts, etc. based on WACTC recommendations to the State Board
27 Conclusions (cont’d) –There is less disparity among the colleges in per FTE funding than in 2000 –High cost programs and basic skills have been allocated additional funds received from legislative appropriations –While lowest funded districts have received enhanced funding for their growth FTES, the amount of funding for this purpose has been low –Enrollment growth funding is where the system has flexibility to affect college allocations
($2,500) ($2,000) ($1,500) ($1,000) ($500) $0 1994 19951996 1997 1998199920002001200220032004200520062007 GF Revenue Reductions in Millions Where Has all the Revenue Gone? (Reductions to General Fund revenue since 1993) Other I-747 – Property Tax Limits I-728 – Lottery & State Property Taxes to K-12 Ref 49 – License Tab Reduction Ref 47 – Property Tax Reduction Hi Tech Incentives/Manuf. & Equipment Exemption Repeal of 1993 B&O Increases
29 District Budget Allocation Process 500 ft. view
30 District Allocation Process Overview 4 Introduction 4 Years of Change ( 1993-96) 4 The Middle Years (1997-1999) 4 Current Process (1997 - present) 4 Allocation Considerations
31 Introduction 4 Prior to the mid-1990’s Community College funding was determined through a complex formula administered by the State Board. 4 Only state funding allocated. Tuition sent to State Treasurer. 4 Seattle District ran State formula to determine colleges’ state allocation with minor adjustments.
32 Years of Change - District Approach 1995-96 4 Continued to use state’s tuition estimate as district target. 4 Adjusted college’s tuition based on actual collections. 4 At end of year would balance out allocations. In total, no one lost.
34 Current Process - 1999-present 4 State Board allocates only state funds to the districts. 4 Seattle District determines each college’s allocation based on total tuition and state funding.
35 Current Process - 1999-present District Process 4 Start with permanent base allocated in prior year. 4 Includes both state and tuition funding. 4 Adjust funding for Legislative changes. 4 Apply tuition increase percent to last year’s tuition allocation amount. Result is permanent base for current year.
Permanent Base - FY 2006-07 Initial Allocation (includes state and tuition) Permanent State Allocation FTE* Central$26,669,1265,580 North$20,589,322 3,795 South$19,436,658 4,316 61,808,914 12,843 *Excludes worker retraining and apprenticeship
38 North’s Process 4 Budget Planning Team 4 College Council 4 Executive Team 4 “Two bucket” approach 4 Tie to Strategic Plan 4 Financial Reports
39 Tuition 4 Target vs Allocation 4 Process 4 Exceptions
40 Tuition - Target vs Allocation 4 Tuition revenue collection target per college does not equal spending amount per college. 4 Tuition collected supports other operations - District Office and District Wide Accounts
41 Tuition Target Process 4 Use same approach for past few years. 4 Verify that colleges met target in prior year. 4 If yes, use target amount from prior year. 4 If no, reduce target by shortfall in revenue in prior year. 4 Increase target by percentage increase in tuition.
42 Tuition Allocation Process 4 Used same approach past few years. 4 Allocate tuition amount in permanent base from prior year. 4 If target not met in prior year, may or may not adjust current year tuition allocation. (The total permanent base remains the same. Just the split between state and tuition would change.)
43 Target Vs Allocation FY 2005-06 TargetAllocation Central$8,587,530$7,266,284 North 7,031,110 6,240,801 South 5,058,300 4,270,362 Total$20,676,940$17,777,447
44 Tuition Distribution Examples 1. None of the colleges meet their target. 4 If during the year, it appears that none of the colleges are meeting the target, all budget units would have to take a budget cut. 4 Target amount is allocation amount for entire district.
45 Tuition Distribution Examples 2. One college (A) misses collection target, however, other 2 colleges (B & C) over collect. Total collections exceed tuition target. 4 No allocation reductions will occur. 4 In the next year’s carry forward calculation, colleges B & C will contribute part of their carry forward to college A equal to the deficit, then the remaining tuition over target is spread to all 3 based on the percent of permanent funding.
46 Tuition Distribution Examples 3. All 3 colleges collect more tuition than the target. College B has excess enrollments. 4 College B can claim a tuition amount for excess enrollment equal to the lower of the amount calculated for excess or the amount collected over target. 4 The balance of all tuition collected over target (after deducting for Excess) is distributed to the 3 colleges based on percent of permanent funding.
47 Allocation Considerations 4 Do we increase spending authority (allocation) for estimates of new enrollments? 4 Do we include other factors in determining a college’s tuition target? (e.g. student mix (FT/PT), collections over target) 4 Do we need to build in incentives for collecting more tuition?
48 Community and Technical Colleges 2005-07 Biennium State Funding 4 Operating Budget$ 1.172 Billion FY 2005-06$ 575.5 Million FY 2006-07$ 596.8 Million* *Adds new enrollments plus miscellaneous increased costs
Washington CC Students* pay 38.5% of their instructional costs in 2005 Research universities Comprehensive institutions Community colleges 41.1% 31.5% 28.8% *Full tuition paying student receiving no tuition discounts 54.9% 42.6% 38.5%
Community and Technical College Tuition Increases 1991 through 2006 In the last 15 years, tuition and fees have increased from $822 to $2,571