12 November 2010

Unending Budget Numbers

A while ago I posted a brief commentary on our operating budget numbers over the last 7 biennia.  It occurred to me that I might not have been entirely fair, since I reported those in dollars, not in dollars adjusted for inflation.  So here's another round of contemplating the operating budget numbers from  the same source (http://ir.wsu.edu/utils/File.aspx?fileid=5956).  Converted into 2010 dollars using the U.S. government's inflation calculator (http://data.bls.gov/cgi-bin/cpicalc.pl), our operating budgets over the last seven biennia have been

  • 1998-1999     $956,770,690
  • 2000-2001     $947,017,550     (1 % cut from the preceding biennium)
  • 2002-2003     $1,044,491,010  (10% increase from the preceding biennium)
  • 2004-2005     $1,078,352,700 (3% increase from the preceding biennium)
  • 2006-2007     $1,084,138,730  (1% increase from the preceding biennium)
  • 2008-2009     $1,255,350,460 (16% increase from the preceding biennium)
  • 2010-2011     $1,229,711,000  (2% decrease from the preceding biennium)
With the best will in the world, I find it difficult to see this as a disaster that requires immediate, catastrophic restructuring.

We might also consider that the proportion of our operating budget that comes from tuition has been steadily increasing over this period--so why does it make sense to reduce the number and quality of undergraduate courses (since like most other universities, the bulk of our students are undergraduates)?

P.S.  I am a linguist, not an accountant.  I would be happy to see anyone with more experience working with budgets take over my self-assigned task of interpreting the operating budget.  Really I would.


P.P.S. Click here to see the proportions of the operating budget from each of the major sources.

Lynn Gordon


(edited to add link to chart and to correct typo)

4 comments:

  1. The WSU financial situation is more complicated than annual budgets can capture, but your question is fair. I would very much like to see detailed budget figures.

    Not all of the budget is fungible. For example, most grant and contract direct expenditures must be used for very specific purposes. So any budget analysis would need to distinguish between fungible and non-fungible revenue sources.

    But state support is not the only fungible source of funding. Major revenue sources would include (a) state support; (b) tuition; (c) indirect costs on grants and contracts; (d) licensing, patent fees, etc...; and (e) endowment returns. While we know exactly how state support has changed over time, I'm not sure where we could find a complete analysis of WSU revenues and expenditures over the past decade.

    It is certainly possible for core support to decline dramatically while total revenue continues to increase. We simply don't have enough information to make conclusions one way or another.

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  2. Oh I quite agree--and another problem with the data is that it comes from April 2010 and I believe we have lost general fund money since then.

    However using the data we can see something else--the big change in the source in the funding has not been in grants and contracts (which changed from 22% to 26% of the budget over the seven biennia), nor the local funds (which changed from 12% to 14%), nor federal funds (which stayed exactly 2%). It was in tuition funding and general fund monies: the tuition funding increased by 10% over the same period, while the general fund money decreased by 15%.

    How much of our general fund money and tuition money is locked into particular programs is unclear from the available information; Together the general fund and tuition money make up 58% of the current biennium operating funds; in the 1998-1999 biennium they made up 63% of the operating budget.

    The proportion of the operating budget funding from each source is available here.

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  3. Looking at the Operating+ tuition category

    Biennium_$millions_delta
    Bi_97-99_______460___0%
    Bi_99-01_______501___9%
    Bi_01-03_______538___7%
    Bi_03-05_______558___4%
    Bi_05-07_______641__15%
    Bi_07-09_______747__17%
    Bi_09-11_______704__-6% *

    * this includes the Oct $11.2 million cut

    WSU did very well with the 05-07 and 07-09 budgets. So even with the major cuts in state support over the past two years, WSU General Fund + tuition funding is 26% greater than the total for the 03-05 biennium. That works out to an average 4% annual increase over the six year period.

    While G&C total dollars are roughly equal to tuition (estimated to be $300+ million in this biennium), only a fraction of grant dollars are returned to the university as indirect costs. If we assumed an effective IDC rate of 25%(see comment below), then WSU might realize ~$65 million in IDC returns. We aren't getting "rich" off of research. There are a lot of reasons to develop competitive research programs (for both WA citizens and our students) but funding the university as a whole isn't one of them... at least not at WSU.

    NOTE: It would be useful to know our effective IDC rate, which is probably much lower than the official rate because many grants and contracts come with IDC caps, including a 0% IDC rate on state grants and contracts.

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  4. For some time I have wondered why Elson Floyd didn't pursue more aggressive budget cuts, strategic reorganization. At least we could stop hiring new faculty and administrators! It now seems clear that through the spring of 2010, the state budget cuts could fairly easily be met with federal stimulus funds, a major tuition increase and modest attrition.

    There was a huge dramatic build up to the spring of 2009 budget cuts with talk of major vertical cuts and reorganization plans, but ultimately WSU experienced little substantive change. A little over 300 positions were eliminated, almost all low-level vacant staff positions. The extension centers were whacked, and Theater was eliminated apparently to make an example of someone. (How much money did we save?)

    Then in the spring of 2010, a second round of drama led up to the BIG public forum announcement that... nothing was being cut.

    (1) We could obviously absorb the first two cuts without dramatically changing the university. Our senior administrators were in denial about the possibility of deeper cuts in the future, believed the economy would bounce back in time for the 2011 biennial budget, and hence put off major changes.

    (2) We now know that our senior administrators really did NOT have a plan to deal with the "worst case" scenario that we now face. Now the budget cuts are real, and probably permanent for at least the medium term future.

    WSU administrators are making major decisions with an ad hoc approach in a crisis environment. Just as Gary Rhoades suggested would happen back in February, strategic planning has been tossed out the window in favor of a political process: (1) dean's propose cutting whoever can be cut most easily; and (2) there will be a mad scrum among the deans to see who takes the biggest hit.

    Ad hoc: Dr. Floyd added several VP positions and new administrative units when he came to WSU in 2007. Now he has eliminated three VP positions. If a flatter administration is more efficient, why didn't Floyd implement such a structure when he came to WSU in 2007? Or in 2008 when it was clear that we were facing some serious economic head winds? Do we have to be in a crisis to restructure a clearly bloated administration?

    Ad hoc: School for Molecular Biosciences moves into Vet Med. This wasn't mentioned anywhere in laboriously constructed AAPP report. And to date, I have yet to hear a strategic vision for the future of the gutted College of Sciences.

    Ad hoc: In early October, we were first told to come up with "big ideas" for completely rethinking the university and our role in the university. And we essentially had a couple of weeks at the department level to re-vision WSU on a napkin.

    Ad hoc: It quickly became clear that these "big ideas" weren't going to save any money. So we had to send information to the provost on the performance of our units. The upper administration was going to make strategic cuts based upon performance metrics.

    Ad hoc: The strategic university-level cut approach was ditched in favor of passing the responsibility to make cuts down to the deans. But... the Deans are "encouraged" to make vertical cuts.

    Universities need to be able to change course in response to changing conditions. But strategic cuts should be well thought out and implemented gradually. Give senior faculty incentives to retire. Give junior faculty enough time to change units or institutions. And give students time to complete programs they have started. Anyone on deck with their eyes to the horizon could have seen the economic storm clouds gathering back in 2008. Yet here we are in late 2010 finally responding in a serious way. "Lack of planning on your part does not constitute an emergency on my part."

    If a presidential “no confidence” vote was put to the faculty, I would have to respond thumbs down.

    --Eric Blair

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