FY06 Public Budget Comments

July 20, 2005

Mrs. Nancy A. Paul
PO Box 5318
Topeka KS 66605

Dear Mrs. Paul:

I have recently reviewed the detailed budget information that supports the Washburn University FY 2005-06 Public Budget. In addition, I have reviewed the Washburn University FY 2005-06 operating budget that was approved by the board at the June, 2005 board meeting. I have assumed that the University's operating budget further supports the figures reported in the Public Budget. Therefore, in addition to the Public Budget documents, some of my questions and comments are derived from the University's FY 2005-06 operating budget.

Work papers that summarize the funding changes reflected in the FY06 operating budget for Washburn University can be viewed at:

http://www.washburnedu.com/money_issues/op_budget/fy06/fy06_revenue.html http://www.washburnedu.com/money_issues/op_budget/fy06/fy06_new_money.html

The public budget documents and these work papers provide the support for the following questions and comments that I will provide at the Public Budget hearing scheduled at 4:00 pm on July 29, 2005.

General Fund

Tuition Income. The tuition rate increase could have been held to a modest 3% increase if the budget had been developed more specifically to what was needed, rather than what the market might bear. Washburn University is depriving members of this community of an affordable community college experience as it continues to raise tuition rates to support an overly aggressive capital improvement program rather than academic needs.

Endowment Income. In FY05, endowment income is estimated at $603,690, less than 50% of the budgeted amount of $1,268,650. Considering the FY05 estimated revenue, is the FY06 budgeted income level of $1,342,286 realistic?

Other Income. In FY06, $75,000 in dues from the new Student Recreation and Wellness Center were included in the Other Income budget. What is the basis for the calculation of this new source of revenue?

Reserve Funds. The revenue from reserve funds decreased by $1.2 million in the FY06 Washburn University operating budget approved by the board at the June, 2005 meeting. This "revenue source" represented the budgeted funds that were unlikely to be expended, historically due to budget savings derived from unfilled budgeted positions that occur throughout the year. The removal of this funding source helped to justify the 9.3% tuition increase. If the unfilled budgeted positions remain consistent with the level that has been experienced in prior years, the FY06 operating budget is likely to result in an operating surplus that exceeds $1.2 million. How does the board anticipate using these surplus funds? Alternatively, has the board considered restoring this use of reserves as a source of funds in order to modify the tuition increase to a more conservative 3% growth rate?

Transfers-FY05. Transfers of $2,767,101 were budgeted in the FY05 operating budget. Estimated transfers for FY05 are reported at $8,676,766 in the public budget document, exceeding the budgeted amount by almost $6 million. What is the amount and purpose of the FY05 transfers and what is the source of budget authority for the transfers?

Total Expenditures-FY05. Total estimated FY05 expenditures are reported as $67,499,517, a spending level of over $2 million in excess of the FY05 budget of $65,200,573 reported in the FY06 Washburn University operating budget approved by the board at the June, 2005 meeting. What is the source of budget authority for that spending level?

Contingency-FY06. The $2.5 million Contingency included in the FY06 public budget is not included in the FY06 Washburn University operating budget approved by the board at the June, 2005 meeting. With the $1.4 million contingency included in the FY06 Washburn University operating budget, this $2.5 million brings the level of funding included in this public budget to $3.9 million. With only $2.1 million of the University reserves earmarked for Board contingency/marketing (per the FY04 university audit report), and $1.8 million included in the budget as a source of revenues, this seems to indicate that the budget is seeking authority to spend funds in excess of the university's contingency reserves.

FY06 Funding Level. Although the University's position seems to be justifying the 9.33% tuition increase with improving the educational experience, a review of the percentage increases seems to indicate that the University may be concentrating on administrative areas at the expense of academic endeavors. The budget for Institutional Support is 21.2% higher than the estimated FY05 spending level. The budget for Education and Instruction is only 8.1% higher than the estimated FY05 spending level.

FY06 New Positions-School of Business. With a 3% decrease in projected credit hours for FY06 in the School of Business, what supports the need to add $275,000 in new positions in this area?

FY06 Other Operating Expenses. As stated above, the emphasis seems to be on administrative areas at the expense of academic areas that directly support the students. For example, only $13,587 is provided in the budget for new operating expenses in the College of Arts & Sciences to support a 7.7% projected growth in credit hours. Even then, the $13,587 is distributed to only four specific areas. It is difficult to imagine how the faculty members in this area alone are able to maintain their professional expertise when inadequate funds are provided for professional memberships, continuing education, professional journals, and additional classroom materials specific to their disciplines. The historical distribution of other operating budgets for the past four years can be viewed at:

http://www.washburnedu.com/money_issues/op_budget/ooe_budgets.html

On the other hand, budgets for other operating expenses increased in the President's Office, Institutional Research, Academic Affairs, Administration, Finance, and Administrative Information Systems with no apparent justification.

Auxiliaries

Total Expenditures-FY05. Total estimated FY05 expenditures are reported as $8,060,820, a spending level in excess by over $200,000 of the FY05 budget of $7,858,185 reported in the FY06 Washburn University budget approved by the board at the June, 2005 meeting.

Revenues & Expenditures-FY06. The FY06 Washburn University operating budget approved by the board at the June, 2005 meeting reported $8,240,931 for both budgeted revenues and expenditures. The public budget increases the budgeted revenue to $8,690,931 and the budgeted expenditures to $8,890,931, creating a budgeted $200,000 use of reserves. Why the difference?

Washburn Village. The budgeted expenditures exceed the budgeted revenues by over $100,000. What funds this budget deficit?

Corner Store. The FY06 Washburn University operating budget approved by the board at the June, 2005 meeting indicates an 11% decrease in gross revenues for the Corner Store. Why did the budgeted revenues decrease from the FY05 budget level?

Concessions. The FY06 Washburn University operating budget approved by the board at the June, 2005 meeting indicates a 7% decrease in gross revenues from Concessions. Why did the budgeted revenues decrease from the FY05 budget level?

Union Operations-Student Fees. The FY06 Washburn University operating budget approved by the board at the June, 2005 meeting indicates an increase of $100,000 (almost 30%) from $350,000 in FY05 to $450,000 in FY06 in Student Fee Memberships transferred from the Educational and General Funds. Why did the budgeted revenues increase so significantly from the FY05 budget level? How did this increase in the auxiliary subsidy affect the tuition rate increase?

Union Operations-Reserves Transfers. The FY06 Washburn University operating budget approved by the board at the June, 2005 meeting indicates an increase of $122,480, from $76,115 in FY05 to $198,595 in FY06 for Reserves Transfer. Why did this budgeted expenditure increase so significantly from the FY05 budget level?

Debt Retirement & Construction Fund

Ad Valorem Tax. With a delinquency rate of 2.25%, why is the "Tax Required", rather than the net amount of FY06 Ad Valorem Tax utilized when calculating the resources available? Is not the delinquency amount from prior years included in the Delinquent Tax line?

Revenue Sources. What is the nature and source of the funding sources named Neighborhood Revitalization and In Lieu of Taxes (IRB)? What is the basis of the estimate for each funding level?

Sales Tax Budget. Is the "Other Income" line the Sales Tax revenue of $250,000 allocated from the total proforma FY06 Sales Tax Budget?

Parking Fee/Transfers for Parking. Why is this budget amount for revenues and expenditures not increasing to reflect the recent increase in parking spaces?

Tort Claim Fund

Delinquency Computation. The delinquency rate of 2.25% on the $306,858 tax required is $6,904, with a net amount of FY06 Ad Valorem Tax calculated as $299,954.

Smoothing Fund

Sales Tax Revenue. This $750,000 sales tax budgeted revenue was not included in the FY06 Sales Tax Proforma distributed at the June 15, 2005 Board of Regents Budget & Finance Committee meeting. Has the projected total FY06 sales tax revenue increased by this amount?

Transfer to Building Construction Fund. What projects in the Building Construction Fund were funded with the FY05 estimated transfer of $3.8 million and which project(s) will be funded with the FY06 budget of $4.0 million?

Capital Improvement Fund

Revenue-Nonmandatory Transfer General Fund. The FY06 Washburn University operating budget included a transfer to the Capital Improvement Fund of $130,000. Why isn't this amount reflected in the public budget document?

Capital Project Expense. What capital projects were funded with the FY05 estimated expense of $600,000 and which project(s) will be funded with the FY06 budget of $482,964?

General Questions

Classroom Renovation. What classroom upgrades were completed in FY05 and where are these expenses reflected in the budget documents? What amount is included in the FY06 budget for this capital improvement, and where are these funds included in the budget?

Transformational Experience Program. What funds were spent on this program in FY05 and where are these expenses reflected in the budget documents? What amount is included in the FY06 budget for this program, and where are these funds included in the budget?

Anticipated Growth. Is there anything discreetly included in any of these budgets that provides for funding of a new classroom/office building or that anticipates additional funding from the city?

Timing. What impact does a public budget hearing in July, 2005 have on an operating budget that is approved by the Board in June, 2005?

Thank-you for your consideration of these questions and comments. I am looking forward to your response on July 29.

Sincerely,

Mary Lou Herring