Budget Planning

Iowa State University’s approach to the management of financial resources involves both local and central decision-making to meet present needs and obligations as well as to make progress on strategic planning goals.

Vice presidents, deans, directors, and department chairs have the authority to plan the budget(s) of the unit(s) under their administration, and the responsibility to see that resources are used wisely and in a manner consistents with University and board policies. Each administrator is given the flexibility to respond to emerging needs or long-range goals by shifting and realigning resources within the total block of funds assigned to their particular unit, e.g., shifting resources between equipment and supplies accounts and those used for salaries.

Allocation of new revenues and, when necessary, assignment of budget reductions targets are made centrally by the University’s Budget Cabinet, which consists of the president, three vice presidents, and the assistant to the president for budget planning and analysis. Key administrative assistants and a variety of advisory groups including the Presidents Advisory Committee on Budget Priorities and Planning, which is comprised of faculty, students, and staff, inform the decisions made by this group.

Early each fall, the University begins a process of estimating the amount of new revenues that may be available for the next fiscal year. The three main sources considered are new state appropriations based on the Board of Regent’s request to Iowa’s governor, new tuition revenue based on enrollment projections, and increased revenue from indirect cost recovery based on sponsored research trends. These estimates are refined several times throughout the year as new information becomes available. In years when budget reductions are necessary, the size of the reduction and distribution among University units is also part of the estimation process. The final revenue estimate is made after the Iowa Legislature completes its work on the state’s budget and adjourns, generally around the first of May. At that point, changes in the University’s appropriation from the state are known, and tuition and indirect cost recovery revenue estimates are confirmed with the latest data.

Most of the institution’s state funding is appropriated in the education appropriations bill. The first subsection always appropriates funds to the “general university” for “salaries, support, maintenance, equipment, miscellaneous purposes, and for full time equivalent positions.” The general university includes the colleges, student service units, and general administration. The subsections that follow include separate appropriations for the Agricultural and Home Economics Experiment Station, Cooperative Extension Services, the Leopold Center for Sustainable Agriculture, and for livestock disease research. A different subcommittee makes appropriations to Iowa State’s economic development programs. This separation was made several years ago to ensure that economic development initiatives do not compete for the same pool of funds as academic programs and research initiatives. Iowa State’s Small Business Development Centers, the Institute for Physical Research and Technology (IPRT), and the ISU Research Park receive state funding from the economic development appropriations bill.

The process of estimating cost increases runs parallel to the development of revenue estimates. Estimates of compensation and unavoidable cost increases begin in the fall. Various levels of increase to faculty and professional staff salaries and benefits are developed to aid decision-making. The final policy for faculty and professional staff compensation increases, determined by the President in consultation with the Budget Cabinet, balances available resources with institutional goals. The University has little control over compensation increases for merit staff (clerical, blue collar, security, and technical employees), which are determined during union negotiations with state leaders. The Board of Regents requires each of Iowa’s public universities to annually devote at least 15% of gross tuition revenues to student financial aid. Iowa State increases the pool of funds available for student financial aid from new tuition revenues each year, typically expending over 20% of gross tuition revenues. Other unavoidable costs include increases in purchased fuel and utilities, property insurance, the operating and maintenance costs associated with opening new buildings, and obligations associated with federal or state mandates, e.g., Americans With Disabilities Act, Homeland Security Act, and the Student and Exchange Visitor Program.

The President also invites each vice president in consultation with the deans/directors in their area to develop and submit proposals that require new funding. The strategic plan serves as the guide for developing and evaluating these proposals, which are reviewed and prioritized by the Budget Cabinet and the President’s Advisory Committee for Budget Priorities and Planning. The President makes the final set of decisions regarding the University’s budget; a budget proposal is then developed for review and approval by the Board of Regents. Final review and approval of the University’s budget proposal is generally accomplished during the Board’s June meeting. The University’s budget proposal for FY2006 was first presented to the Board of Regents at their June 2005 meeting with final approval occurring at their August meeting.

Substantial reductions in the State of Iowa’s support for the University in recent years has required significant cuts in operating budgets and elimination of many faculty, professional staff, merit staff, graduate assistants, and undergraduate work-study positions. Reallocation of resources has been necessary to sustain academic programs and continue operations. The Board of Regents also requires that each institution in its purview annually reallocate a portion of its operating budget for strategic purposes. For much of the past decade, Iowa State has been required to reallocate 2% of its total operating budget for strategic purposes. Reallocation plans are included in the budget proposal that the University submits to the Board of Regents for review and approval.

The Board of Regents’ reallocation policy for FY2005 through FY2009 states that “reallocation of institutional funds occurs when funds within the base budget of a defined university entity (presidential/vice presidential unit, college, academic or nonacademic department, division, program, or other unit) are removed by the dean, vice president, or president overseeing that entity and redirected to another entity or purpose. Funds so removed cannot be redirected back to that original entity or purpose within four years except under extraordinary circumstances and only then by increasing an equivalent reallocation amount for the current year. Reallocation may be made to support new strategic initiatives, to meet enrollment increases and the demand for new courses and services, to fund new but unavoidable or mandated cost increases, or to support any other initiatives important to the core functions of the university.” The Board sets the reallocation target annually; for FY2006, Iowa State was required to internally reallocate $8 million.

In spring 2005, President Geoffroy charged a committee to study alternative budget models with the goal of recommending changes to Iowa State’s budget practices. Particular emphasis was given to models that link allocation of resources and expenses with each unit’s responsibilities and its contribution to progress on Forward Thinking: The Iowa State University Strategic Plan for 2005-2010 (Strategic Plan). The committee has been asked to complete work on the model by July 1, 2006. Fiscal year 2007 will be devoted to integrating the new model into the budget development process and putting the appropriate systems in place that will allow its full implementation on July 1, 2007, for fiscal year 2008. A web site is being used both to communicate progress on the budget model to the University community and invite broad input.