California State University, Long Beach 2007-08 Resource Planning Process
Budget Recovery Plan
In the early 90s, the campus was poorly positioned financially to deal with budget cuts. As a result, conventional reduction measures were applied to all base budgets, which resulted in dramatic enrollment loss, layoffs, program elimination and damage to the campus image and reputation.
There was a real need for a different financial strategy to respond to the state's imposed budget cuts of 2002 and 2003. Fortunately, the campus had made a lot of progress since the early 90s when we didn't have accumulated reserves, the enrollment management capability, and the financial analytical tools and processes. So, when the indications of California's downturn began to become evident in 2002, the campus began to consider alternative financial strategies that would help position us to deal with cuts in a less painful way. The strategy was based on four fundamental assumptions.
- The downturn would be relatively short lived.
- We have adequate reserves to see it through.
- Preserving instructional capacity is a necessity to avoid a downward enrollment spiral, and
- Future enrollment growth will provide funds to eliminate dependency on temporary funding.
The primary ingredient of this financial strategy is the budget recovery plan. There are two distinct phases of this recovery plan – Budget Mitigation and Budget Recovery. During the budget mitigation phase of the plan, the campus applied substantial amounts of temporary reserve funds to mitigate the base budget cuts. These temporary funds consisted of both general university savings and division savings. The budget recovery phase is dependent on enrollment growth since that is the only source of new discretionary funding. The first priority is given to funding new faculty positions to accommodate increased enrollment. All residual dollars are pledged to the recovery plan to restore base budgets and reduce dependency on temporary funding. Funding the recovery plan takes priority over funding any new initiatives at the university level.
We are now in the fourth year of the recovery phase of this budget strategy when temporary resources are being replaced by permanent funds. Of the $16 million in permanent budget cuts, $9.5 million has been restored to date, with the remaining $6.5 million to be restored over the next two budget cycles: specifically, instructional budgets would recover in 2007-08, while non-instructional budgets would substantially recover in FY2008-09.
Given the disruptive effects of not restoring the remaining $6.5 million, RPP recommends that the budget recovery plan be continued in 2007-08 and completed in 2008-09.
The Budget Recovery allocations being recommended for 2007-08 are as follows:
- Base (Permanent) Funding for Faculty to meet additional enrollment $1,833,855
-
For 2007-08, CSULB has been assigned an enrollment target of 29,357 FTES, an increase of 637 resident FTES over the current year's funded enrollment target.
Funding for faculty to accommodate the increase in our enrollment target is the first commitment against new resources. One hundred of the 07-08 enrollment increase was permanently allocated to Academic Affairs in 2006-07; the balance of 537 FTES is funded in 2007-08 at the rate of $3,415/FTES to support these costs. That amount is derived from the CSU marginal cost calculation using average faculty salary and a student faculty ratio of 18.9:1.
- Base (Permanent) Recovery Allocations $2,652,000
-
After faculty costs are covered, the remaining permanent dollars are allocated on a pro-rata basis to each division to preserve instructional capacity, improve quality, continue prior year mitigation strategies, restore services impacted during the budget reduction years and implement requirements to address emerging new priorities and unfunded mandates. This permanent allocation reduces each divisions' dependency on temporary funding.
- University Reserves – temporary (one-time) funding $3,000,000
These are the cumulative savings to be used to accelerate the campus recovery plan, in anticipation of future year base budget adjustments. These one time savings result from conservative management of university-wide budgets.
- Division Reserves – temporary (one-time) funding $4,201,606
-
These are the cumulative division savings (available balances at fiscal year end 2006-07) to further accelerate the recovery plan in 2007-08.
Total Recovery Plan Resources $11,687,461
Contingency Planning
Although we are very optimistic that the budget proposed by the Governor will be passed by the Legislature, should allocations be less than the level planned by the Task Force, each division will reduce expenditures in the order of the priorities stated in the plans as presented to RPP.