Washburn University FY 09 Budget Comments
January 30, 2008
Mr. James R. Roth
Woodard, Hernandez, Roth & Day
257 North Broadway, Suite 300
Wichita KS 67202
Dear Mr. Roth:
This letter is prompted by the discussion at the January 25, 2008 Washburn University Board of Regents Budget/Finance Committee regarding the FY 09 operating budget, salary program and Fall 2008 tuition rates.
Contingency Funds
The FY 08 budget includes $285,859 in contingency funds (pdf). Some areas, such as the School of Business, have access to significant other funds in the Restricted and Agency Fund (Fund 8), so there is no operating budget for contingencies.
The FY 08 budget included an estimated $1.9 million in FY 08 salary savings (pdf) and an additional $303,222 budgeted as Uncommitted Salaries & Wages (pdf). In addition to the $1.8 million budgeted expenditure for Regents Contingency, there is ample wiggle room for just about anything this administration wants to spend.
Budget transfers
The following is stated in the Bylaws of the Board of Regents of Washburn University:
Section 8. Duties of the Treasurer
The Treasurer shall examine all accounts, claims, and demands against the University and no money shall be drawn from the accounts of the University unless the amount thereof be adjusted and settled by him or her and found to be within the budget appropriations or provision therefore. If the Treasurer shall upon examination of any account, doubt its correctness or find the appropriation or provision insufficient, the Treasurer shall submit the account to the President of the University or to the Board of Regents for decision.
The current Treasurer has stated under oath that she has interpreted this to mean the following:
An expenditure in excess of the budget for a particular department is not an expenditure in excess of the budget for the entire university. The requirement of the bylaw is that the entire university budget not go into a deficit situation.
Board members should not be surprised that funds were moved to cover Debate. The FY 06 annual financial report indicated several areas where expenditures exceeded the budgeted amount, including the Finance Office, Admissions, University Relations, Facilities Services and the University Counsel/Board of Regents.
Salary Program
The FY 00 budget included a 3.0% merit salary increase and an additional 1% for faculty merit increases. The administration and, consequently, members of the WU Board of Regents continue to assume that administrative salaries require the same level of “catching up” as the faculty. Yet no support has been provided for this position.
Budget Savings – Administrative or Academic
There was some consideration given to trimming the operating budget if enrollment continues to decline. President Farley discussed the difficulty of cutting faculty to realize any significant budget savings. If budget cuts become a necessity, I hope Board members will realize the folly of looking at academic expenses first for any necessary savings.
When businesses cut costs, the first place scoured for savings is in the overhead area, the general and administrative expenses. The core of the business, the business purpose that generates the revenues, is not the first area on the cutting block.
For example, the headcount in administrative information technology services has doubled while the operating budget has tripled. That is one area that could be given some serious consideration for potential cost savings.
Fall 2008 Tuition Rate
In December, 2007, the Iowa Board of Regents approved a 3.2% Fall 2008 tuition increase. President Farley has indicated that a 6% increase is likely at Washburn University. While it makes sense to increase tuition annually to cover a competitive salary program, it also makes sense to make sure that the increase is reasonably justified.
Now is the time for members of the Board to press President Farley for the financial information that is vital to making a responsible decision in regards to the Fall 2008 tuition rate. You cannot rubber stamp his tuition recommendation without risking a continual enrollment decline.
President Farley has clearly stated his lack of desire to manage the university within any reasonable budget restraints. However, given the estimated $1.9 million in FY 08 salary savings, the likely increase in state aid and a closer look at the budget dollars provided for ongoing costs, it is quite realistic to expect the WU Board of Regents to hold the Fall 2008 tuition rate increase to 2.7% or a $5 per credit hour increase. There is no reason why the students and the taxpayers should support spending practices that are not constrained by a realistic budget document.
Scholarships
The FY08 $1.8 million scholarship budget increased scholarships by $231,000 over the FY 07 budget level as follows:
- $ 105,000 - Law
- 85,000 - Athletic
- 21,000 - Mock Trial
- 20,000 - Debate
President Farley indicated that the increased scholarship budget reflects the increased tuition costs and are used to recruit students. Biology, Communication, History, Philosophy, Psychology, and Theatre have specifically mentioned “lack of scholarship funds” as one of their program weaknesses in their program review reports. This area may warrant further investigation while the WU Board of Regents struggles to understand the decreasing enrollment figures.
Health Insurance – Clarification
At the budget committee meeting, President Farley indicated that the $125,000 proposed increase in health insurance premiums was on top of $3.9 million. He also indicated that too little had been appropriated and funds had to be taken out of reserves. In fact, you were told at the September 7, 2007 Board of Regents meeting that the $5.2 million FY08 premium for health insurance budgeted in the general fund ($180,000 higher than the FY07 budget) did “cover the University’s portion of the increase.” The actual health claims are paid from a restricted fund (not from the general fund) with a FY07 year end balance of $2.5 million.
Property Insurance/Worker’s Compensation - $100,000 Increase
On September 7, 2007, the WU Board of Regents approved the purchase of insurance policies for property, liability, and workers compensation. The agenda item noted that “proposed increases were included in the FY08 budget.” The FY08 budget was increased $75,000 for insurance while the renewal premiums actually decreased $45,000 from $999,733 to $954,659. The FY08 $328,583 workers compensation premium was charged against a budget of $427,000.
Now, President Farley is recommending another increase in the FY 09 budget for property insurance. This $100,000 recommendation is in addition to the $75,000 added last year and does not reflect the actual decrease in premiums.
Operating Expenses
In the meantime, operating expense budgets for academic programs remain at a level that has not changed for almost ten years. A review of the annual program review reports indicates that there are many academic areas that are woefully short of the funds needed to accomplish their academic potential, thus lowering the faculty’s morale and motivation.
Transformational Experience
Before the Board sets the Fall 2008 tuition rate, or approves the FY 09 operating budget, a full accounting for the $850,000 plus Transformational Experience graduation requirement should be provided by the administration for your information. A complete Transformational Experience report should also include the $100,000 of support from Human Services funded through the WEA Innovation Grant.
It would also be a good idea to insist on an impact statement of the Transformational Experience graduation requirement from Paskill Stapleton & Lord as part of their enrollment management consulting services.
KAW Transition
It was unclear from the discussion whether contracting services of the current USD 501 employees from a third party “employer” in order for these employees to retain their current benefit program is permanent or will be phased out. For example, will new employees be employees of Washburn University with regards to their employee benefits, or will KAW employees, new and transferred, always be “contracted” services?
In the absence of a meaningful internal audit function, the WU Board of Regents will continue to make decisions that jeopardize the welfare of this institution since your decisions are based upon inadequate and misleading information provided by this administration.
Sincerely,
Mary Lou Herring