April 21, 2011
Planning memo for FY12 budget sets salary parameters, early reduction targets
by Anne Krapfl
With about 10 weeks left in the fiscal year, work on the university's next budget still fits into two broad categories: what's known and what's in flux. In her fourth FY12 budget development memo (PDF) to campus leaders (April 14), executive vice president and provost Elizabeth Hoffman provided insight on both.
"This is a particularly difficult budget planning process. While we're pleased that our expected enrollment next fall could set another record, and resulting tuition income will increase, we also face a third consecutive year of substantially reduced state appropriations," Hoffman said.
Now that the Iowa Legislature has finished its deliberations on redistricting the state, it is expected to focus on finalizing a state budget. When that task is done, the most significant "what-ifs" disappear from Iowa State's budget development process.
Known: New revenue
Some good news is that university officials are expecting a fall enrollment that tops this year's record 28,682 students and, with tuition rates approved last month, Iowa State will add a projected $25.7 million in new tuition revenue to its operating budget. Nearly 24 percent of it -- about $6.1 million -- will be set aside for student financial aid and the rest distributed to colleges according to enrollments and student credit hours taught.
Because of Iowa State's increasing success landing competitive research grants and contracts, the accompanying revenue from facilities and administrative cost recovery (IDC) also will be up; an estimated $2.5 million more in FY12 than this year.
In flux: Anticipated cuts in state funding
The not-so-good news is that ISU budget leaders assigned reduction targets to units last week, assuming a 6 percent reduction in state appropriations for the year that begins July 1. This is the reduction -- nearly $16.7 million -- to Iowa State in Gov. Terry Branstad's proposed budget. (The Iowa House proposed deeper cuts, the Senate essentially flat funding in FY12.) The reduction includes a $3.2 million one-time appropriation in the current university budget.
In the current budget year, Iowa State is receiving about $228 million in state funding to support the university's operating budget.
Because new revenues could soften the impact of the reduction in state appropriations, Hoffman advised units that share the 'general university' and Ag and Home Economics Experiment Station appropriations from the state to plan for a 3.1 percent across-the-board cut. Their reduction targets total about $15.2 million. A handful of units or functions were exempted from the cuts, including central student financial aid funds, admissions office, deferred maintenance, CyRide and classroom utilities.
Units that receive a direct appropriation from the state -- including Cooperative Extension, Leopold Center, livestock disease research, the Veterinary Diagnostic Lab -- also face reductions to their state appropriations. Current planning for these units follows the 6 percent reduction in the governor's budget.
Actual state appropriations won't be known until the governor approves a state budget.
In flux: Federal appropriations
Another unknown is the impact of the federal budget planning process, particularly on Cooperative Extension and the Agriculture and Home Economics Experiment Station. These two units receive annual directed appropriations that support core activities to Iowa State's land-grant mission.
Known: Salary increase parameters
The 2011 Legislature will not pass a separate bill that appropriates funds for salary increases for state employees. Salary increases for university employees will be funded within budget units, either with new revenues or reallocated funds.
As required by the university's new salary adjustment policy for faculty and professional and scientific staff, Hoffman provided parameters for performance-based salary increases in FY12. A minimum 0.5 percent increase must be awarded to employees whose work is deemed satisfactory or better. Units may award higher salary increases, but any performance-based increase above 5.0 percent requires approval at the vice presidential level.
"We recognize that many individuals and units around campus are again being asked to do more with less," Hoffman said. "We feel it's absolutely essential to allocate funds for very modest faculty and staff salary increases, while also meeting the contract commitment for merit employees and directing resources toward other mandatory cost increases."
The size of the mandatory salary increases for faculty promoted to associate professor and professor this spring are being set this week. Promotion increases do not replace or eliminate performance-based increases.
Because the parameters allow a range of increases and because salary increase decisions will be made locally, it's difficult to estimate a total for salary increases university-wide.
Under the terms of the state's new two-year contract with AFSCME (American Federation of State, County and Municipal Employees), merit employees covered by the contract will receive a 2 percent increase on July 1 and a 1 percent increase on Jan. 1, 2012. Merit employees who are not at the maximum of their pay grades also will receive the applicable step increases on their anniversary dates with Iowa State.
Known: Other cost increases
Budget leaders approved $4.9 million in cost increases (including salaries) for the six administrative service centers in the budget model -- broad campus service providers that are funded by those they serve. The six are: facilities services, business services, the library, IT services, student services and administrative support programs. The approved cost increases represent about 60 percent of the six service centers' requests for additional funding. How that additional $4.9 million will be allocated among colleges and administrative units will be finalized this week.
Incremental funding for some salary increases also will be provided to central administrative units -- the president, provost and VP offices -- that don't receive tuition or IDC funds.
Known: Strategic investments
Budget leaders also approved first-year funding for four university-wide efforts identified as high priorities but weakened by several years of underfunding or for which permanent funding is needed. First-year support will total $3.1 million; the three-year goal is $14.4 million. These costs also will be allocated among colleges and administrative units. The four are:
| Priority | Goal | Current | FY12 funding |
| Institutional Excellence Fund | $10 million | $4.6 million | $1.2 million |
| Deferred maintenance | $6 million | $1.6 million | $900,000 |
| University marketing | $2 million | -- | $500,000 |
| Enterprise administrative systems* | $2 million | -- | $500,000 |
*A long-term effort to shift many of ISU's computer software systems (financial, human resources, payroll, course registration, etc.) to an open source system. Iowa State is part of a higher education-focused collaboration to accomplish this.
Timeline
Campus budget units have an April 29 deadline to submit preliminary plans that reflect the scenario in Hoffman's April 14 memo. Hoffman acknowledged that units may not be able to meet their reduction targets in a single year. She asked them to "indicate the level of permanent reductions that will be made in FY12, FY13 and FY14."
If their proposed budgets include position eliminations, layoffs or reorganizations, units must submit personnel plans by May 15. Human resource services staff must review the personnel plans before they can be implemented.
