TO:Vice Chancellors, Deans and Community Campus Directors

Memorandum

DATE:April 4,2014

TO:Vice Chancellors, Deans and Community Campus Directors

FROM:Bear Baker, Provost and Vice Chancellor of Academic Affairs

Bill Spindle, Vice Chancellor, Administrative Services

SUBJECT:Strategic Guidance and FY15/FY16 Operating Budget Development Process

A. Introduction.

1. The purpose of this memorandum is to provide the principles, assumptions, guidelines, and timelines for the FY15/FY16 operating budget development process.

2. We are moving into an increasingly uncertain and challenging fiscal environment over the next two to five years. 43% of UAA’s total budget is reliant on funding from the State of Alaska. The State is currently facing reduced revenue and a need to reduce costs to maintain a sustainable operating budget for the future. The Governor has recommended the FY15 UA appropriations budget be reduced permanently by $14.9M, however, the legislature is still in session and both the House and Senate University budget subcommittee’s recommended adding an additional $1M to UA’s reduction. UAA’s portion of a $15.9M reduction is currently estimated to be $5.8M. The final number won’t be known until May/June, 2014.

3. UAA’s other primary source for funding fixed operating costs, such as salary increases, is tuition. The FY15 base budget is being built on the assumption SCHs will fall 2% overall. It must be acknowledged that after a decade of growth, UAA student credit hours (SCH) dropped 2.3% in AY13. In AY14, UAA Fall 2013 SCHs dropped 2%.

4. Based on current information, we estimate that our total unrestricted revenue will fall short of our total MAU requirement to maintain current service levels by approximately $8-9Min FY15. If State cuts continue, the FY16 shortfall could be as much as an additional $6M for a cumulative two year shortfall of $8-15M. As a result, the Chancellor has asked that each major budget unit pursue cost saving and revenue enhancing measures equal to 8% of their general fund appropriation to cover the FY15 base budget shortfall for one year. While this is a temporary cut to the major budget units in FY15, this is a permanent decrease in UAA’s base budget. Results from the program prioritization reviewwill inform the budget planning process in Fall 2014 as UAA develops a budget plan to permanently distribute a possible cumulative $8-15M base budget shortfall beginning FY16.

B. Process.

1. The Major Budget Units (MBUs) that will be required to submit FY15/16 operating budget requests include Kenai Peninsula College, Kodiak College, Mat-Su College, Prince William Sound Community College, Provost’s Office, University Advancement, Administrative Services, Student Affairs, Consortium Library, College of Arts and Sciences, College of Health, College of Education, College of Business and Public Policy, Community and Technical College, and the College of Engineering.

2. Because the prospects for growth in general funds are so limited, MBUs are advised to confine requests for FY15 to only those fixed cost increases that cannot be met by the MBU and to only a few of the highest priority FY16 budget increments. Requests are to be submitted in priority order usingAttachment(s) III. Please make it clear in Attachment III if you are requesting one-time funds or general funds.

3. Each MBU is requested to provide a status report for each special project or initiative allocation of internal, legislative, or statewide funding for FY14. Please use Attachment(s) I for this purpose. A listing of FY14 awards is provided at Attachment II for your convenience.

4. This budget development process will be guided and managed by the UAA Office of Budget, principally by Kelly Thorngren. This office will also be responsible for summarizing and analyzing all submissions. As such, any questions and requests for clarification, technical assistance, or consultation should be directed to Kelly. All materials will be due electronically to Kelly by April30,2014.

C. Other Principles, Assumptions, and Considerations.

UAA will:

1. continue the practice of using a separate allocation process for the Community Campuses for FY15. (Note: UAA receives a separate line-item allocation for each community campus.) Community Campuses are advised, however, that changing fiscal conditions may require a re-examination of this management model.

1. continue the practice of allowing all major budget units to carry forward all prior or current fiscal year balances to next fiscal year. As a guideline, the President’s recommended carry forward balance for the MAUs is 2% to 6% of the unrestricted budget. At UAA, 2% to 4% is the recommended target for each MBU, but because of the need to increase the UFB in FY15, percentages as high as 6% are allowable.

1. maintain the 80/20 tuition revenue sharing practice of the last several years. Anchorage campus schools and colleges will retain 80% of the tuition revenue, including 80% of any increases over the FY15 target. That target is the sum of the FY14 tuition target plus a tuition rate increase of 1.2% (the approved BOR rate increase average of 3.2% less an estimated -2.0% decrease in FY15 SCHR growth.) Tuition-producing MBUs are advised that units that do not meet the tuition target will need to absorb the shortfall in FY15.

1. coverannual wage/benefit increases consistent with mandates, obligations and directives approved by the Board of Regents.

D. List of Attachments

Attachment I is the form to be used in evaluating allocations received for FY14.

Attachment II is a listing of allocations received for FY14.

Attachment III is the form in which requests for FY15/FY16 budget increments are to be submitted.

Cc:Chancellor Tom Case

Members of PBAC

Budget Director Kelly Thorngren

ATTACHMENT I

Project/Initiative Status Report

FY14

Project/Initiative Title:

$ Awarded:

Org #:

Contact:

E-mail:

This document is intended to provide basic assessment information for each special project or initiative program funded in FY14 (identified in Attachment II). This includes priority program funding from the Legislature, base funding through the UAA internal reallocation process, or one-time funds received. This evaluation will be used to assess the effectiveness of funded projects and programs and as part of the internal scan for the upcoming accreditation process.

Please provide a brief paragraph on each question, with the total document totaling no more than two pages.

1. What were the original objectives of this initiative? (Include goals, expected outcomes, what you hoped to accomplish.)

1. What was accomplished? (What actually happened? Include personnel hiring, status of funds spent, and any changes to original plans, goals, or objectives. What goals were met? Include specific outcomes of the project or initiative.)

1. What has been the impact? (How has UAA benefited from this initiative? Were additional courses offered or students served? What research was completed, what knowledge gained? What are the indicators that point to the impacts? How do the results further the strategic objectives of UAA 2017? How has the initiative affected UA Performance Measures?)

1. What are the expected future outcomes of this initiative? (Where is this initiative going next? How will this initiative continue to benefit UAA and its constituents? What is the anticipated future impact on UA Performance Measures?)

1. Amount Spent. (As of month end: ______)

ATTACHMENT II

FY14 Project/Initiative Awards

ATTACHMENT III

Incremental Request Form

FY15/FY16

Title (Provide a brief, unique, and descriptive title.)

MBU Priority Ranking #:

1. Request Description/Strategic Purpose.

1. Provide a detailed narrative of the request. Include the purpose of the request and the market demand the request is intended to meet. If applicable, include the number of students affected and specific employer demand met. For research programs, include areas of state needs met and external funding source (i.e., National Science Foundation.)

1. How does the request advance the strategic priorities of UAA?

1. Does the request fill a gap, remedy a problem, or respond to an external requirement (e.g. accreditation or professional standard)?

1. Internal MBU Reallocation. (Will any funds be reallocated internally to support this effort?)

3. Statewide System Performance Measures.[1] What is the anticipated impact of the requested increment on one or more of the SWS performance measures? If there is no obvious link between the request and an existing SWS Performance Measure, it is not necessary to fill out this section.

1. For each performance measure related to this request, provide the estimated timeframe for realization. (Example: This increment will increase student credit hours by FY17, because FY16 will be used to hire the additional professor. University-generated revenue and student credit hours will be impacted in FY17by the additional course offerings provided by the new professor.)

1. What strategy-specific sub-metric will be used to demonstrate return on investment? Which strategy specific sub-metric will be used to track intermediate progress. (Example: Program major enrollment will be tracked as a preliminary indicator of eventual increases in high-demand graduates.)

1. For this sub-metric, what is the current baseline, the expected change, and the timeframe for realizing it if the requested funding is received? (Example: In Fall 2013, there were 120 program majors enrolled. This increment would grow enrollment by 20 majors in FY16.

4. Other Output Measures. If no SWS Performance Measure is applicable, what measure will you use to assess the effectiveness of this investment? What change in the measure, from what baseline, within what time frame? Provide specific estimates.)

5. Total Amount Requested. (In the table below, list the general funds requested, any non-general fund revenue that may be generated as a result of new general fund received, and the number of positions requested. Enter the fiscal year(s) for which the request is being made.)

[1]For reference, please see UAA Performance ‘13, beginning page 16