May 2016

1. Budget Overview May 2016

2. TOPICS • Permanent Budget vs. General Ledger • Campus Expenditure Review • Rebenching • Fund Source Review • Budget Process – Big Picture • Campus Budget Planning • Capital Funding Overview

3. Class Overview • This class will not show you how to develop a budget for your department. • This class will help you better understand the issues, complexity, and constraints of the UCSB budget.

4. Key Concepts To Take Away • University budgeting is not a single process. • It consists of a number of processes that have evolved separately and which occur with varying degrees of coordination. • Enrollment is the key factor in developing the budget – drives both revenues and expenditures.

5. PERMANENT BUDGET VS. GENERAL LEDGER

6. COMPARISON Numbers above reflect operating expenses only. Campus also spends approximately $150 million annually on capital program. . * Before GASB adjustments which reclassify some expenses. Represents an increase of $40 million or 4.4% from previous year.

7. PERMANENT BUDGET • Reflects “resources” assumed to be available on an ongoing (year-to-year) basis • Feeds into General Ledger on July 1 of each year • Typically adjusted through Transfer of Funds which makes changes in both General Ledger and Permanent Budget files • Result of incremental budget changes over many years.

8. GENERAL LEDGER • Official accounting record of the campus • Includes permanent budget plus: • Carry-forward from previous years • Allocations/funding changes after July 1 of any year • Contract and grant awards • Current year gifts • Distribution of endowment income from Foundation • At year-end UCEN and Associated Students included.

9. PERMANENT BUDGET – GENERAL LEDGER Over 300 different control points making decisions

10. EXPENDITURES

15. REBENCHING CHANGES IN THE DISTRIBUTION OF STATE FUNDS

16. REBENCHING IS …. The aligning of State General funds to attain equal State General dollars per student at each of the campuses Why is it necessary?

17. General Campus Funding Per Student (est.) System-wide Median Source: UCSC 2009 17

18. REBENCHING BACKGROUND • Overtime, significant difference in State funds per student have developed • Campuses with fewer dollars per student identified the variance as an issue that needed to be addressed • UCOP implemented multi-year program to eliminate the per student funding differences

19. IMPACT ON UCSB • Substantial increase in our state general funds per student • Initial projections of additional funding have been in the $40 million range when fully implemented – permanent additional funding • Rebenching started in FY 2012-13 and the “additional revenue” is part of the plan to address unfunded campus budget issues

20. Rebenching Example • Funding to be Allocated $37.0M • UCSB’s Share Under Rebenching 24.6% • UCSB’s Allocation $ 9.1M • UCSB’s Historical Share of 8.0% Workload • UCSB’s Allocation $ 3.0M • Over 6 years UCSB will receive approximately $40 million more than under previous allocation formulas

21. UCSB FUND SOURCE REVIEW

24. FUND SOURCE CATEGORY #1 • Core Funds • State General Funds • UC General Funds • Mandatory Student Fees • Indirect Cost Recovery (Overhead) • Other State • Typically considered the “base” when dealing with budget cuts

25. FUND SOURCE CATEGORY #2 • Non-Core Budgeted Funds • Sales and Services Revenue • Auxiliary Revenue • Student Fees (Campus & Student Approved) • Budgeted Endowments • Typically part of base for various campus imposed taxes and assessments

26. FUND SOURCE CATEGORY #3 • Extramural Funds • Contracts & Grants • Private Gifts and Endowments • Typically not budgeted, but are assessed overhead or up-front gift fees • Use is normally restricted for a particular purpose

27. GENERAL FUNDS • Category includes: • State Appropriations • Portion of Federal Indirect Cost Recovery • Non-Resident Tuition • Variety of Miscellaneous Fees • Primary Source to Fund Instruction (93% of total expenses) • Approximately 75% of all general fund revenue used to support instructional program • Amount subject to state budget

28. STUDENT FEES • Mandatory Fees – Tuition and Student Services • Fees established by the Regents • Tuition Fee used to support Student Financial Aid and general operations of the University • Student Services Fee used to provide a supportive and enriched learning environment for students • Fee policy requires a 1/3rd return to aid for undergraduates and 50% return to aid for graduate students. • $241.9 million from tuition revenues in FY 2014-15 and another $21.2 million from the student services fee. • Non-Resident Supplemental Tuition (NRST) • Approximately $49.5 million in NRST up from $22 million eight years ago.

29. Student Fees – Campus Based • Approved by student vote for specific purposes –restricted use. • Fees can pay for operations, debt, or both. • Newer fees have a financial aid component. • Examples of operational funding include – Disabled students, child care, MTD bus services, recreation, CLAS, multi-cultural center. • Examples of debt funding include – ICA, recreation, University Center, and Student Resources buildings

30. Student Fees - Other • Summer Session Fees • Per unit charge based on Mandatory Fees • Campus based fees amount charged at a flat amount regardless of the number of units taken • Technology Course Material Fee of $2.50 per unit also charged • Example: • 4 units costs $1,559.79 (undergraduate) • 8 units costs $2,657.79 (undergraduate) • Extension (Self-Supporting Program • Fee levels established to cover cost of program • Course Material Fees • Enhanced educational experience for students

31. Student Fees

32. CONTRACTS AND GRANTS • Federal and Non-Federal Awards • $174.3 million in expenses in FY 2014-15 • $129.5 million in Research (net of Sub Y/ICR) • $36.4 million in Pell Grants (fund 23483) • Uses are restricted for specific uses • Indirect cost is assessed against direct expenses

33. INDIRECT COST RECOVERY (ICR) • Overhead on federal and private contact and grants – amount recovered is a function of ICR rate and grant activity • Complicated distribution formula with portion becoming General Funds and remainder becoming unique fund sources • Represents the most flexible funding the campus has as it can be used for both operating and capital expenditures

34. Federal Indirect Cost Recovery

35. Gifts and Endowments • Includes payout from endowments, as well as current year gifts. Annual giving amounts typically fall into the $40 to $100 million range • Doesn’t mean this much is available as much of the annual fund raising goes into endowments • Vast majority of gifts restricted for a particular use – capital project, endowed chair, student financial aid, etc. • Funded approximately $33.1 million (3.5%) of operating expenses in FY 2014-15

36. GIFTS AND ENDOWMENTS CON’T • Current endowment value at $275 million (Foundation at $155.5 million, Regents at $119.5 million) • Annual endowment payout of approximately $12 million • Only about $1.6 to $1.8 million of annual gifts are unrestricted • Up-front gift fee assessment to increase from 2% to 6% in July, 2011with a maximum fee of $180,000 on any gift.

37. Income & Other Funds • User charges for campus provided services • Fees established by departments with campus review • Examples include: • Student housing • Parking • Funded about $144 million of FY 2014-15 operating expenses, 15.2% of total

38. Assessments (Taxes) • UCOP Assessment • Annual tax used to fund services provided by UCOP • Takes into account expenses, number of students, and number of faculty/staff at each campus • UC Path assessment is calculated separately based on payroll information • FY 2015-16 assessment is $21.8 million and the corresponding tax rate is 2.66% of campus operating expenditures. • Financial Aid is except from the assessment as are most campus based fees. • Approximately 79% of the assessment is funded centrally with the remainder assessed to Vice Chancellor control points.

39. Assessments Con’t • Non-State Administrative Support (NSFAS) • A campus assessment on income areas designed to recover cost associated with provided administrative support services • The assessment on these funds is currently 7% of expenses and generates about $8 million annual • Enterprise Technology Services (ETS) • The ETS assessment is relatively new and is used to fund operations, maintenance, system development, and debt associated with central technology services. • The current assessment rate is 1.95% of expenses and generates $13.8 million per year. • Approximately 76% of the assessment is funded centrally with the remainder being the responsibility of Vice Chancellor control points.

40. Recharges • Defined as the cost charged by one department for specific goods or services by another department • Rate proposals reviewed by the Income and Recharge Committee and approved by the Executive Vice Chancellor or Chancellor • $83.2 million in campus recharges in FY 2014-15 • Approximately 9.2% of total expenses are recharge related. • Examples include: automobile rentals, use of research equipment, design and construction services, and furniture services

41. BUDGET PROCESS THE BIG PICTURE

42. SCHEDULE – BUDGET PROCESS July – Budget Tables & Information Requests September to October –UC Review of Budget Proposal November – Regents’ Approve Budget Proposal & Submit to Governor January – Governor’s Budget Released January to May – Budget hearings, responses to information requests, lobbying May – Governor’s May Budget Revise Released June – State Budget Approved July to September – Campus Allocations from UCOP

43. STATE FUNDS • Funding less of the annual campus operating expenses: • FY 1990-91 51.8% $157 million • FY 2000-01 45.8% $216 million • FY 2010-11 26.2% $181 million • FY 2011-12 14.1% $117 million • FY 2013-14 17.1% $154.7 million • FY 2014-15 19.6% $185.4 million • Still the driving force behind the UC budget planning. Drive decisions on: • Enrollment • Student Fee Levels • Salary Programs • Capital Program

44. UCSB CAMPUS BUDGET PLANNING

45. Budget Planning • Strategic Academic Plan • Long Range Development Plan • 2010 LRDP Mitigation Implementation and Settlement Agreement • Coordinating Committee on Budget Strategy • Budget Allocation Framework

46. Strategic Academic Plan • Adopted in 2007 to update campus vision for academic program and guide future growth • Provides a framework for campus resource allocations • Outlines a managed-growth approach to future campus development • Guided development of the Long Range Development Plan (LRDP)

47. Long Range Development Plan (LRDP) • Provides physical planning parameters to attain the Strategic Academic Plan goals • Grow enrollment by 5,000 students by 2025 • Identifies capacity for 1.8M ASF for Instruction, Research, and Support space • 5,000 new student bed spaces • 1,874 new faculty and staff housing units • 5-8 acres of additional recreation space • 3,650 additional parking spaces

48. 2010 LRDP Agreements • Mitigation Implementation and Settlement Agreement negotiated with the County of Santa Barbara and the City of Goleta • Includes campus growth-related commitments in area of Enrollment Management, Housing, Traffic Impacts, and Public Safety Impacts • Ties enrollment growth to the provision of new student housing development on campus land

49. Coordinating Committee on Budget Strategy • Advisory committee to the Chancellor on budget issues • Committee charge: “Develop strategies designed to protect academic quality, as well as student access, that we have strived so hard to achieve.” • Responsible for in-depth study and analysis of budget issues and potential solutions/actions • Developed and recommended actions for budget reductions, program assessments, and distribution of resources

50. Campus Allocation Decisions • Based on: • Systemwide programs (Salaries & Benefits) • Enrollment Changes • Funding formulas • Campus consultation • Campus priorities • Fund source restrictions • Control point decisions