University Budget Advisory Committee
February 25, 2015
In attendance: Dr. Roy Day; Dr. Jerry DeSanto; Jennifer Dillon; Dr. Dwight Hahn; Dr. Dan Kilbride; Dr. Peter Kvidera; Rich Mausser; Dr. Pam Mason; Dr. Elizabeth Swenson; Dr. Jerry Weinstein; Brian Williams; Dr. Mark McCarthy, David Wong
- The University Budget Advisory Committee (UBAC) met on February 25, 2015. Among the matters that were discussed at this meeting were curricular proposals for a new minor in Humanitarian Action and Technology (HAT) and a new minor in Music.
- Dr. Pam Mason presented on the proposal for the HAT minor. After a detailed discussion by all present the University Budget Advisory Committee took the position that the HAT budget proposal did not accurately reflect projected revenues since the committee saw little or no evidence that the new minor would attract additional students, thus not increasing marginal revenue. Brian Williams’ pointed out that the name for the minor might not be understood by students interested in the minor since only three websites come up if you Google “Humanitarian Action Technology.” Further, Brian pointed out that the linkage of the minor to big data and data analytics would resonate more with prospective students. This said, committee members did see value in the minor in particular in the context of globalization as a focus of study.
- Dr. Peter Kvidera presented on the proposal for the Music minor. Following a spirited discussion the committee agreed that the Music minor would be a good fit for the new core curriculum and our commitment to the liberal arts. Further, the committee felt that it might just be a decision-maker for some students who may wish to combine the study of music with other majors such as business, science, and education. The committee was favorably disposed to this minor but once again expressed some concern about generating enough new students to at least cover the anticipated costs above and beyond current funds allocated and the need to support staff and operations in place for existing performing groups and liturgical music program.
- The University Budget Advisory Committee ended their work for the day by hearing about the challenge going forward to balance the institution’s operating budget. Rich Mausser described a process that would engage the UBAC in activities to review and set budget assumptions and parameters first without regard for the actual limitations involved in balancing the budget. Then as Rich described, the committee will look at the gap between the projected revenues and expenses, and the parameters selected, to determine what actions need to be followed to actually balance the budget. These conversations will need to be informed by solid data. The UBAC agreed that a meeting in March to begin this initiative would be desirable.
University Budget Advisory Committee
March 25, 2015
In attendance: Dr. Jeanne Colleran; Dr. Roy Day; Dr. Jerry DeSanto; Jennifer Dillon; Dr. Dwight Hahn; Dr. Dan Kilbride; Rich Mausser; Dr. Mark McCarthy; Dr. Elizabeth Swenson; Dr. Jerry Weinstein; Brian Williams.
- The HLC Accreditation “Notice” Report was reviewed in the context of concerns that were identified as being related to the charge of the UBAC. These included the following:
- With Respect to Core Component 5B: “since the evaluation visit the University has acted to re-establish leadership structures across the University, establish new committees to address collaboratively the budget and related areas, and provide increased opportunities for communication.”
- With Respect to Core Component 5C: “the evaluation team also found that faculty and department chairs and other internal constituents lacked appropriate input into the budget, planning and decision-making processes.
- With Respect to Core Component 5C: “the evaluation visit team found that the University had not appropriately linked strategic planning with budgeting, assessment of student learning, and academic program review.”
- With respect to item 1A above, the University leadership structures that have been re-established include the University Strategic Planning Group (USPG), Staff Council and this University Budget Advisory Committee (UBAC). To improve communication, membership of the UBAC includes appointments from both the USPG and the Staff Council
- With respect to item 2A above, the UBAC began work on defining a budgetary framework that will allow the University’s internal constituents to better appreciate the many “levers” that drive fiscal performance. The bulk of the meeting was spent on better understanding the University’s primary revenue drivers, including metrics such as tuition, room and board pricing (elasticity); financial aid discount rate strategies; and enrollment (headcount) management. Committee conversation on these revenue topics was robust. The next meeting will continue this conversation, with a focus on major University expense drivers. The eventual goal of this process is to develop long-term revenue and expense operating assumptions which can be modeled to predict future operating results and cash flows.
- With respect to item 3A above, the UBAC discussion revolved around upcoming academic program reviews, which led to the determination that these reviews did not contain a distinct a budgetary or fiscal review component. The Committee asked R. Mausser and D. Wong to prepare a sample template of fiscal and operational measures that might be used as part of the program review process. This sample template will be reviewed at the next meeting.
University Budget Advisory Committee
April 29, 2015
In attendance: Dr. Roy Day; Dr. Jerry DeSanto; Jennifer Dillon; Dr. Dwight Hahn; Dr. Dan Kilbride; Rich Mausser; Dr. Mark McCarthy; Dr. Jerry Weinstein; Brian Williams; David Wong (Staff Council representative).
- The JCU Board of Directors (BOD) Finance Committee will meet Friday, May 8, 2015 and the full BOD will hold its annual retreat the following Tuesday and Wednesday. The following topics are on the Finance Committee agenda:
- The 2014-15 Operating Forecast shows deterioration in some areas and improvement in others with the bottom line projection unchanged at a $800,000 deficit. Increased spending related to two Dean searches and HLC related costs is expected to be offset by savings in several areas including health care and utilities. Budget managers are working diligently to manage operating costs but this is becoming increasingly challenging as there have not been budget increases in the last several years.
- The 2015-16 Preliminary Budget was discussed starting with freshman enrollment. The budget assumes a class of 800 which is consistent with the size of the starting class in the past two years. The deposit activity to-date is in line with the trends in the past two years despite some challenges which resulted from the HLC notice news being released at a critical time in the enrollment cycle. Enrollment activity typically continues throughout the summer and the Enrollment team will be working with prospective students and families to achieve the freshman class goal as well as the goal for 85 transfer students.
- The Endowment spending policy was discussed at length. In recent years, JCU has used a 4.25% spending rate supplemented by an additional draw each year to support strategic initiatives as authorized by the BOD. In 2014-15 the University increased its spending rate to 4.5% generating an additional $500,000 and decreased the supplemental draw by $500,000. The BOD approved a plan in September 2014 to further increase the spending rate to 4.75% and decrease the draw by an additional $500,000 in 2015-16. This gradual phased-in approach to adjusting the spending policy over several years was chosen to allow the University to thoughtfully manage the spending changes in each of the specific endowment accounts; however, an acceleration of the changes is currently being considered, prompted by perceived HLC concerns. Further discussion is planned at the upcoming Finance Committee meeting.
- By 2016-17 there will be a more intentional linkage between the University Strategic Plan and the Operating Budget. Significant progress is being made by the University Strategic Planning Group in developing a new strategic plan but there is not time to fully use it to drive the 2015-16 budget since the 2015-16 fiscal year begins June 1, 2015. The preliminary budget includes revenue increases from student fees which are projected to be fully offset by increased expenses. Compensation expense increases include the impact of faculty and staff raises already awarded, two new Deans for both schools, and an anticipated increase in health care costs. Operating cost increases include HLC related costs, contract cost escalation, Athletic team spending due to high student participation levels and Murphy debt service all of which are being largely offset by divisional budget reductions. The preliminary operating budget does not contain any items that might be construed as new strategic initiatives. These will be deferred until the new Strategic Plan is known. The preliminary bottom line shows a slight deterioration from the 2014-15 Operating Forecast.
- A fiscal academic program review template was presented as the meeting neared its end, with additional discussion now planned at an additional meeting scheduled for May 14, 2015. Administrative program reviews will also be initiated in 2015-16. Due to faculty contractual constraints, no official meetings will be held over the summer, although work related to program review, endowment spending, resource allocation, linking of planning and budgeting, and budget balancing will continue, with periodic updates to be shared by email with all committee members.
University Budget Advisory Committee
May 14, 2015
In attendance: Dr. Jeanne Colleran; Dr. Roy Day; Dr. Jerry DeSanto; Jennifer Dillon; Dr. Dwight Hahn; Dr. Dan Kilbride; Rich Mausser; Dr. Mark McCarthy; Dr. Jerry Weinstein; Brian Williams; David Wong (Staff Council representative).
- An update was provided from the JCU Board of Directors (BOD) annual retreat just completed on March 13 & 14, 2015. The Board called for a balanced 2015-16 budget proposal at the next Board meeting scheduled for October 7, 2015. The preliminary 2015-16 budget projections show a $910,000 deficit before including any funding for capital needs. Despite $1.2 million of budget reductions recently identified by the vice presidents within their functional areas, the deficit is projected due to rising costs in a number of areas discussed at the previous UBAC meeting April 29, 2015. While budget managers have worked hard these past 5-7 years to control spending within their areas, operating costs have grown to a point that is not viable. JCU must make changes to achieve fiscal sustainability, and be able to self-fund both its operating and capital costs.
- Much discussion about the process to develop a balanced budget ensued. There was clear recognition of the need to quickly initiate a cost, efficiency and restructuring analysis to provide the basis for making decisions that will have significant and long-lasting impact on the University operating budget, as well as provide funding for new strategic initiatives. The competitive environment in northeast Ohio is extremely difficult as the number of high school graduates has dropped significantly in recent years and competition is fierce as schools work to attract the incoming freshman class. Schools are essentially competing on discount for their survival. Several schools have attempted to modify their tuition pricing model in order to lure more students, but those efforts have not generally succeeded.
- The need for transparency and the collaboration of faculty and staff in the budget review process was emphasized as paramount. Ideally, work must occur throughout the summer in order to achieve the October 7 deadline. It was recommended that a budget task force (subsequently named Task Force on Strategic Budgeting) be established and charged with identifying a framework to analyze and collect data/information about University programs and operations, and for making budget recommendations thereon.
- The difficulty of fully engaging faculty into this process was also discussed. Upon commencement on May 17, the faculty’s contractual obligations for the current academic year end. In order to have faculty participation in the process, it was recommended that faculty department chairs, who continue to work over the summer months, be asked to participate on the task force.
- Since there will be program reviews conducted on twenty-four academic programs during the 2015-16 academic year, it was recommended that the University should leverage this opportunity to also include fiscal metrics which could then inform budget evaluations as well as operational measurements. Data and a framework for analysis can be identified for inclusion in the review process. It was suggested that Input from each of the new deans be sought to incorporate their prior experience and expectations. Analysis of non-academic programs should also commence. Higher education is in the midst of change due to increased scrutiny and expectations from parents, students, government and accreditors and we must respond to those pressures.
- Members of the UBAC requested that a communication be drafted to the JCU community describing the current budget situation and the Board’s request for a balanced budget by October. This communication, preferable from the president’s office, should outline the composition of the task force, timeline and objectives for the work to be done leading up to the October 7 Board meeting and beyond.