ANNUAL BUDGET PLANDEPARTMENT HEADS FORUM

NOVEMBER 21, 2019

• University Budget and Presentation to the Board of Trustees

• Financial Reporting for Dept Heads• Flow of funds from Provost/College/Dept• Departmental Revenue and Expense• Best Practices for managing your department budget• F&A and Research Incentive Funding

AGENDA

• Budget is approved by the State every two years. In April of 2019, the State budget was established for fiscal year 2020 and 2021

• Purdue prepares and approves a budget annually. The budget is approved by the Board of Trustees in April –June of each year to be effective July 1st

• Prior to Board of Trustee Approval, each department and college establishes a budget for the next year

ANNUAL BUDGET PROCESS

Operating (Including

Debt)

Repair and Rehabilitation

(R&R)

Sponsored Programs

(SPS)

Total Operating

Budget

OPERATING BUDGETIncluded:

Not Included:

Capital (New Building and

Major Renovations)

Endowment (Gifts and Investment Gain/Loss)

Agency Funds (Pass through Student Aid)

• Maintain a reasonable annual surplus – By unit, maintain or identify a path to a structurally balanced budget– Maintain sufficient surplus to fund strategic investments (operating + non-operating)

• Strategic use of resources – Student affordability – Competitive merit increase – Investments targeted to key strategic initiatives

Enrollment growth in STEM Transformative education – Data Science Grow fundraising through expansion of UDO Krannert growth/BSIM focus

• Sustain enhancements to our financial culture – Transparent, consistent and simple – Quarterly projections and reviews

FY 2020 GOALS / OBJECTIVES

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OPERATING REVENUE SOURCES- ALL FUNDS

OPERATING EXPENSES

West Lafayette Campus– Student enrollment: freshman class of 8,000 – Merit increase salary policy of 2.5%

Regional Campuses– Enrollment budgeted down 3.47% at PNW and Flat at

PFW– Merit increase policy 2% one-time at PNW and 2%

recurring at PFWUniversity-Wide

– State appropriations based on final budget– No new or increases to State Line Items

With the exception of ADDL, already approved by the State Board of Animal Health

– Medical inflation of 5% for CY 2019 and 5.7% for CY 2020

– Budget based on 3+ years historical data and run-rate, adjusted by units for known differences

FY 2020 BUDGET KEY ASSUMPTIONS

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TUITION AND FEES:West Lafayette Campus• 0% Tuition Increase• Flight Program fees

– FY20 – 3.0% increase– FY21 – 5.6% increase

Regional Campuses• 1.65% Tuition Increase for both campuses• Fort Wayne (new fees):

– International Tuition $24.90 per credit hour; or $373.50 per semester

for undergraduates $31.57 per credit hour for graduates

• College of Visual and Performing Arts Differential Fee $25 per credit hour for undergraduates $31.57 per credit hour for graduates 2 year phase-in; 50% per year

OPERATING REVENUE

Drivers for FY20:• Tuition and Fees – $23.5M

• Continued increased enrollmentWL

• Increase Athletics Income- $5M• Increase Sales & Service - $7M

• Online B2B contract income• Increase Grants - $24M

$1,900,000

$2,000,000

$2,100,000

$2,200,000

$2,300,000

$2,400,000

$2,500,000

$2,600,000

(In T

hous

ands

)

Operating Revenue

2018 2019P 2020

OPERATING EXPENSES

Drivers for FY20:• Salary, Wages and Fringes- $60M

• Medical inflation - $8M• Merit/salary increase - $38M• Additional faculty and staff - $14M

• Increase in scholarships – $4M• Replaces PU-administered

student loans

$2,000,000

$2,050,000

$2,100,000

$2,150,000

$2,200,000

$2,250,000

$2,300,000

$2,350,000

$2,400,000

$2,450,000

$2,500,000

(In T

hous

ands

)

Operating Expenses

2018 2019P 2020

FY 2019 TO FY 2020 SURPLUS CHANGE

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Steady State Surplus

$87M

$24M

$114M

$76M

$15M

$91M Surplus w/ one-times

One-time activity

Increases to surplus

Decreases to surplus

$3MStaff Appreciation

Payment

FY 2020 ANNUAL OPERATING PLAN BY CAMPUSWest Lafayette Fort Wayne Northwest Total

REVENUETUITION & FEES 857,737 68,610 73,261 999,608 APPROPRIATIONS 328,043 47,964 52,662 428,669 SALES & SERVICES 353,848 14,874 6,718 375,440 GIFTS 69,257 1,469 1,158 71,884 GRANTS & CONTRACTS 440,127 15,319 21,269 476,714 INVESTMENT INCOME & DISTRIBUTIONS 124,548 4,711 3,539 132,798 OTHER OPERATING REVENUE 7,117 2,260 659 10,035 RECOVERY 34,991 - - 34,991

REVENUE Total 2,215,667 155,206 159,266 2,530,140 EXPENSES

S&W 975,358 64,486 75,912 1,115,756 FRINGES 353,167 21,052 24,047 398,266 SUPPLIES & SERVICES 449,106 31,522 23,750 504,378 OVERHEAD (4,960) 2,174 2,785 -CAPITAL - EQUIPMENT AND R&R 129,181 3,881 4,472 137,534 SCHOLARSHIPS, FELLOWSHIPS & AWARDS 156,723 22,190 20,553 199,466 DEBT AND FINANCING EXPENSES 81,123 10,263 7,572 98,958

EXPENSES Total 2,139,697 155,570 159,092 2,454,358 FY20 S/(D) 75,971 (364) 175 75,782

FY20 One-times 12,962 435 1,624 15,021

Steady State S/(D) 88,933 71 1,799 90,80312

FY 2020 RISKS AND OPPORTUNITIES

RISKS:• Faculty Recruitment/Retention

– STEM faculty vs student growth– Faculty Start-Up Costs

• Regional Enrollment• R&R Expenses

OPPORTUNITIES:• Gift Revenue with new UDO capacity• Expense management• Research/F&A recovery

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• Dedicated landing page for Department Heads– Located on the Management Dashboard https://www.purdue.edu/managementdashboards/

FINANCIAL REPORTING FOR DEPT. HEADS

Coming Soon: Automated Dept.

and Account level projections

BUDGET PROCESS FOR COLLEGE AND DEPARTMENT

A portion of the departmental budget flows from the University to the College in the form of general funds.

Increases to the general fund budget are typically from:• Merit raises • Benefit inflation• Approved University Initiatives (Purdue Moves,

Expansion Programs, Cluster Hires)

Examples of decreases to the general fund budget can be from:• Budget Reductions• Faculty Rightsizing

BUDGET PROCESS FOR COLLEGE AND DEPARTMENTOther funding sources are also reviewed and budgeted at budget time. Targets are established based on trends but can be adjusted based on departmental knowledge. These funding sources vary between departments. Examples include:

• Endowment distribution – budgeted based on distribution rates of current and expected endowments

• Gifts• Revenue from sales and service

• Recharge rates• Room and Board• Farm Income• Vet Teaching Hospital• Conference Activity

• Royalty • Tuition Revenue for Study Abroad, Course Fees, Lab Fees• County, State and Federal Appropriations

BUDGET PROCESS FOR COLLEGE AND DEPARTMENTDepartmental Expenses are budgeted based on trends but can be adjusted if appropriate.

Expenses are budgeted on all funds in the department including:• Departmental Operating• Faculty allocations• Gifts funds• Recharge accounts• Grants• Scholarships

Transfers between units are also budgeted. Examples include:• Start-up • Research Incentive Funds• R&R Projects • Dual career support

BUDGET PROCESS FOR COLLEGE AND DEPARTMENTHow can a Department Head increase the department’s annual budget?

• Increase revenue streams:• Gifts and endowment distributions• Online activity (both for credit and non-credit)• Royalty income• Grant

• Salary savings policy for grants and possibly other funds (conference or online activity for example)

• Internal Reallocations • In most departments, the Department Head has budget authority over the operating

budget and can reallocate:• S&E expenses - Are there faculty funded S&E expenses that could be charged to

other funds? Is there a departmental policy? Review the newly developed Faculty Allocation Reports.

• Salaries of Admin/Prof staff, Clerical and Service staff, and Graduate Students. Could positions be shared across units?

• Review departmentally funded staff that are supporting individual programs.

BUDGET PROCESS FOR COLLEGE AND DEPARTMENTHow can a Department Head increase the department’s annual budget?

• Budget requests – A request for budget increases is sent annually (November/December) from the President to the Executives. The Provost then sends a request to the Dean of every College. The Provost prioritizes the requests and will submit a subset to the Treasurer and President for approval. When possible, the Provost may also fund minor requests.

• Examples of budget requests approved in recent years have been associated with Purdue Moves and enrollment growth

• How is data used to make budget decisions? • Faculty Right Sizing• Academic Program Reviews• Enrollment Change • Financial Reports

BUDGET PROCESS FOR COLLEGE AND DEPARTMENTThere are also many University Funding Opportunities

• Provost Office - many of these are coordinated at the college level (examples include Dual Career Assistance, Strategic Opportunity Hires, Instructional Equipment, Research Refresh)

https://www.purdue.edu/provost/faculty/facultyInitiatives/facultyinitiatives.html

• Office of the Executive Vice President for Research Partnerships – (examples include Research Bridge Funding, Major Equipment, PRF International Travel Grants)

https://www.purdue.edu/research/funding-and-grant-writing/funding/overview.php

RESEARCH INCENTIVE ALLOCATION• EVPRP provides an incentive to faculty that is based upon their SPS

expenditures in the prior year.

• 25% of the research incentive funds are required to be returned to the P.I. that generated the funds. Colleges manage the remaining share in different ways (start-up, equipment needs, transfer to department heads)

• In FY18, $4.8 million will be dispersed based on FY 17 expenditures

Research Incentive Allocations