March 4, 2010

Budget first drafts due April 1

by Anne Krapfl

The university's budget units are working toward an April 1 deadline to submit budget first drafts to the executive vice president and provost's office. Last week, units received preliminary reduction numbers for the fiscal year that begins July 1.

The reduction targets assume there will be no additional state appropriations next year and make permanent this year's $24.5 million mid-year reversion. A combination of mandatory unpaid days for all employees, a temporary reduction in the university's share of TIAA-CREF contributions, a partial campus shutdown over winter break and reductions to departmental expenses covered the reversion in the current budget.

The reduction targets also don't count on Gov. Chet Culver's proposal to restore about $10.8 million of the reversion.

"Until the Legislature completes its work, things are uncertain," said associate vice president for budget and planning Ellen Rasmussen. "We'd rather overshoot the reduction at this preliminary stage."

Rasmussen emphasized the preliminary nature of this round of planning. Key variables that aren't resolved yet include:

  • Tuition estimate based on projected fall enrollment (new estimate due in late March)
  • Final state appropriations (resolved when the Legislature adjourns in late March)

She said final budget plans likely will be due in mid-May, with operating budget details ironed out in June.

Differential reductions

The reduction targets range from 4.8 percent to 6.75 percent of state appropriation funding. Noting that in an environment in which all units "are meeting goals and contributing to the mission of the university," executive vice president and provost Elizabeth Hoffman wrote last week in her most recent budget memo that it is "challenging to differentiate among units." Hoffman said her decision reflects lengthy discussions last fall by senior leadership and budget advisory groups, out of which came a list of factors for differentiating (pdf). The factors include:

  • Core to the institutional mission (includes teaching, service, research and support services)
  • Program excellence (for example, national rankings, accreditation or uniqueness within Iowa)
  • Importance to maintaining undergraduate enrollments (includes academic and non-academic units)
  • Importance to enhancing and supporting externally funded research

A few services or funds are exempted from sharing the $24.5 million cut. They include: admissions, the Institutional Excellence Fund, student financial aid, deferred maintenance, central utilities and utilities for general university classrooms.

Other variables in the proposed budget

Beyond an expected $24.5 million less in state appropriations next year, other changes will shape the FY11 budget. Additional revenue will come from both indirect cost recovery on externally funded research and a 6 percent resident tuition increase (4.1 percent for non-residents). Additional expenses will include an estimated $5 million to $7 million in unavoidable cost increases (such as rising employee benefits costs, salary increases required by the merit contract or for faculty promotions, library subscriptions and opening Hach Hall and the biorenewables research laboratory). At this early point in the planning process, the projected net effect is a deficit for most units that generate income, from several hundred thousand to several million dollars.

No rebalancing

For the first time in the three-year history of the budget model, no "rebalancing" will be done at the start of the fiscal year. During the first two years, funds were redistributed to balance differences between a college or vice presidential unit's revenues and expenses. Heading toward July 1, units showing a deficit will have to cut expenses. Units showing a surplus can commit those funds where needed. Rasmussen said the first two years under the new budget model were a transitionary period. She said the budget model has incentives built into it, and the practice of rebalancing every July 1 doesn't allow those incentives to really work.

Making the mid-year reversion permanent for FY11
Preliminary reductions

Colleges Reduction Percent reduction*
Ag and Life Sciences $3,019,896 4.80
Business $982,642 6.10
Design $837,554 6.75
Engineering $2,307,425 4.80
Human Sciences $1,561,285 6.75
Lib Arts and Sciences $4,737,922 5.45
Veterinary Medicine $1,602,998 5.45
Library $974,394 4.80
VP units
Business and finance $2,355,586 6.10
Executive VP/provost $584,135 6.10
Extension and outreach $1,961,183 6.10
Research and economic dev $918,613 4.80
Student affairs $969,386 6.10
IT Services $384,825 4.80
President $610,162 6.30
Subtotal $23,808,006
Special purpose**
Leopold Center $45,821 10.00
Livestock disease research $19,928 10.00
Vet Diagnostic Lab $382,699 10.00
Small Business Dev Center $99,437 10.00
Institute for Physical Research and Technology $161,227 10.00
ISU Research Park $14,446 10.00
Total $24,531,564

*Percent of FY10 base budget minus exempted services and funds

**Receive their own direct state appropriation