Budget Overview Contact Kelly Thorngren, Budget Director, with any questions 786-4636
Describing the State’s current budget 89% of the State’s unrestricted situation is pretty simple really.... general fund revenue relies on oil related revenue (Petroleum Taxes and Royalties) Oil Production is Declining over time... Oil Prices are Plunging quickly... High $109 Low $49 Brent Crude (ICE EU) Price Source: http://www.marketwatch.com/ Source: http://www.tax.alaska.gov/programs/oil/prevailing/ans.aspx investing/future/brent%20crude?CountryCode=uk
State operating revenue drops by $3 Billion when the price of oil drops from $110/barrel to $50/barrel FY16 General Fund Unrestricted Revenue with Price Sensitivity FY15 FY16 FY17 GF GF Unrestricted GF Unrestricted Unrestricted ANS $/Barrel ANS $/Barrel ANS $/Barrel Revenue Revenue Revenue $ 50 $ 1,880 $ 50 $ 1,810 $ 50 $ 1,820 $ 60 $ 2,140 $ 60 $ 2,030 $ 60 $ 2,000 $ 70 $ 2,380 $ 66 $ 2,197 $ 70 $ 2,300 $ 76 $ 2,551 $ 70 $ 2,300 $ 80 $ 2,630 $ 80 $ 2,660 $ 80 $ 2,580 $ 93 $ 3,430 $ 90 $ 3,140 $ 90 $ 3,340 $ 90 $ 3,657 $ 100 $ 4,070 $ 100 $ 4,220 $ 100 $ 4,300 $ 110 $ 5,030 $ 110 $ 5,110 $ 110 $ 5,190 $ 120 $ 5,890 $ 120 $ 6,010 $ 120 $ 6,090 $ 130 $ 6,850 $ 130 $ 6,910 $ 130 $ 6,980 $ 140 $ 7,730 $ 140 $ 7,810 $ 140 $ 7,850 $ 150 $ 8,510 $ 150 $ 8,710 $ 150 $ 8,710 Source: Anchorage Chamber of Commerce presentation by State Budget Director Pat Pitney, Dec. 2014 (That’s a lot when you consider the unrestricted operating budget totals $6 -7B)
The Current Level of State Spending is Not Sustainable, Reserves are Being Used Up by Annual Deficits Source: Anchorage Chamber of Commerce presentation by State Budget Director Pat Pitney, Dec. 2014 (For further analysis on a sustainable level of State spending, see ISER/Scott Goldsmith’s Maximum Sustainable Yield Web Notes at http://www.iser.uaa.alaska.edu/Publications/webnote/2013_01_03-WebNote14-FY2014MSYupdate.pdf)
Change in how fast State Reserves are Depleted at $50 oil- by 2018 Source: Pat Pitney, director State of Alaska Office of Management and Budget, presentation to UA BOR in March, 2015
So, Why Does UAA Care About the State Budget Crisis? How Big a Part of the State is UA? UA is the 3 rd largest UA is THE largest of 18 Depts in UGF of 18 Depts in # Positions FY2015 Management Plan - Positions FY2015 Management Plan - UGF University Dept of Education and of Alaska, Early 4934 Dept of Development Transport/Pu 31% blic Facilities Dept of 6% Transportati on/Public Dept of Dept of Facilities, Corrections Health and Dept of 7% 3806 Social Health and University of Services Social Dept of Fish Alaska 28% Services, and Game, 8% 3661 Dept of 1683 Corrections, 1871 Source: State OMB 11-20-14 UGF: Unrestricted General Fund
What is the % of funding we receive from the State? Why just look at Unrestricted Revenue? FY15 UAA % of FY15 Anch % of Revenue Activity MAU Total Campus Total (in thousands) Unrestricted General Funds 134,365 43% 113,901 42% Net Tuition/Fees 73,906 24% 61,458 23% Interdepartment Revenue 9,220 3% 9,006 3% University Receipts 8,616 3% 7,015 3% TVEP & Mental Health Tr 3,552 1% 3,130 1% Source: UAA internal FY15 S Report Indirect Cost Recovery 3,409 1% 3,260 1% CIP Receipts 832 0% 832 0% Total Unrestricted 233,900 75% 198,602 74% Restricted (Grants & Contracts) 47,418 15% 44,025 16% Auxiliary (Business Enterprises) 26,759 9% 25,211 9% Designated (Scholars/Lnd Grnt) 2,002 1% 2,002 1% TOTAL 310,079 100% 269,840 100% Restricted, Auxiliary, Designated earn their own revenue to cover increased costs Interdepartment Revenue e.g.: charges by one UAA department to another, such as telephone services, printing. University Receipts e.g.: foundation, sales, testing fees, workshop fees, misc revenue. CIP Receipts: Construction in Process entry to account in fund one for personnel costs from capital projects
How Does Unrestricted Expense Affect Budgets at the Anchorage Campus FY14 Expense Actual % (000’s) Type 90% Personnel 142,150.2 74% Travel 3,068.5 2% Majority of UAA 6060% 6060% Contract. Services 34,684.7 16% Anchorage Campus Commodities 9,203.6 5% expense sits in Equipment 1,381.6 1% Personnel and Misc 3,400.3 2% Contractual Services Total 193,888.9 Source: S Report Anchorage Allocation Personnel: Each year the largest budget expense Contractual Services: Utility $5M, custodial we need to cover with new revenue is 50% of $1M, phone $1M, Network connectivity $1M, personnel salary rate and benefit increases (the facilities rental $3M, Software license/maint. State usually pays for the other 50%) $2M, Prof. Services contracts $5M
Of our two major revenue sources, we already know State general f und is declining, how’s Tuition doing? • Tuition is also experiencing challenges due to a dip in Alaska student demographics and other factors like lower tuition rate increases... % Change in Anchorage Campus Project Alaska Population of 18 yr olds SCHRS 2004-2014 13000 4% 3% 6% 3% 2% 1% 0% 2% 4% 1% 2% 12000 -2% -3% -3% 12163 12074 12034 12041 0% 12020 12010 12001 11941 11946 FY15 11931 11881 11819 11789 11714 -2% est. 11424 11376 11349 -4% 11000 11315 freeze 11162 11163 11178 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 10834 10815 10666 10659 10354 10000 10320 10335 10301 10294 10284 10270 10094 9974 9787 9759 Source: 2014 Fact Book, SW IR DSD data at semester closing freeze 9000 % Change in UA Tuition Rates 2004-14 8000 10%10%10% 12% 10% 7% 7000 7% 8% 5% 5% 4% 5% 6% 4% 2% 4% 6000 2035 2033 2031 2029 2027 2025 2023 2021 2019 2017 2015 2013 2011 2009 2007 2005 2003 2001 2% 0% 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Source: Table created from Ak Population Projections 2017 from AK Dept of Labor and Workforce Dev, Research and Analysis Section Source: UA Approved Operating and Capital Budget (Yellow Book) (2011, 2015) Tuition Rate History, Apendix B, lower division rates
Annual University Budget Gaps • In the university budget world you have to earn enough revenue to pay your expenses. If your revenue sources go down (as with a cut to general fund by the State or a downturn in enrollments) or expenses go up (as they do annually due to salary rate increases), then you have three basic options to balance your budget gap: – Decrease expense – Increase revenue • Of course we like this one better and exert a great deal of effort each year pursuing more students, more State funding, etc... – Or, distribute a general fund cut to all budget units to balance the budget gap • UAA has distributed across-the-board cuts to General Fund in 7 of the last 10 years (usually 1 to 2% each year) $15.8M • In two of those years only Administrative depts were cut
The Future: FY16 FY15 Budget Status FY15
FY15 : Community Your Largest Campuses Dept State cut Manage 5% since 1987 Budget Cut Anchorage Campus 5% State Cut: $5.3M UAA General Fund $135M 5% State Cut: $6.2M UA General Fund $371M 5% State Cut: $17M
FY15 Anchorage Campus Budget Gap $7.5M • Total Expenses – ($4,348.3) – $3,321.9 Salary Rate/Benefit Increases – +$1,759.7 Staff Benefit Rate Decreases – $2,000.0 Cover FY14 Budget Shortfall – $786.1 Cabinet and PBAC distributions • Total Revenue $2,170.8 – +527.6 Tuition Revenue – +$1,643.2 50% of Wage Compensation from State • Total Cut from the State -($5,322.5) – ($4,970.7) State Decrement 5% – ($351.8) State (legislature) cut to Travel • – ($4,348.3) + $2,170.8 - ($5,322.5) = -($7,500.0)
FY15: Back to Our Three Options: Cut Expense, Increase Revenue or Reallocate General Fund • In the short run, UAA chose to distribute the cut to general fund temporarily to balance the budget shortfall for FY15 – Distributed a temporary decrement to general fund to all units across-the-board (ATB) • Temporary because we were awaiting the results of program prioritization to better inform our mission focus – Many units covered the cut with carryforward funds (excess, unspent budget) in FY15 temporarily, while planning for the permanent distribution in FY16
The Future: FY16
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