President's Budget Advisory Committee

Minutes May 8, 1997

Members Present

Staff Present

Members Absent

Guests Present:

Meeting Agenda

Materials Distributed with Agenda Packet

Approval of the Agenda

Don Farish convened the meeting at 8:13 AM by asking for a motion to approve the Agenda. Katharyn Crabbe moved to approve the Agenda. A second was obtained from Bill Barnier. Two items were added to the Agenda: IV - CSU Senate Budget Committee Survey; and V - Summer Meeting Schedule. With these additions, the Agenda was approved unanimously.

Approval of the Minutes of April 23,1997

Farish asked for a motion to approve the minutes of the April 23, 1997 meeting of the PBAC. Debbie Gallagher moved to approve the Minutes. A second was obtained from Barnier. The minutes of the meeting were approved unanimously. After the vote, Les Adler asked about a motion which he had moved, and which had been seconded, to approve a distributive model to fund the remaining deficit. Farish explained that motions not acted upon at one meeting were not carried forward to the next. In addition, in the interest of coming to a resolution of the issue before PBAC, it appeared best to begin today's discussion with the proposal developed by him and Larry Schlereth.

Presentation of Preliminary Financing Model for Fiscal 97-98

Farish began a discussion of this topic by summarizing his perception of the budget discussion at the last meeting. During that meeting, PBAC members pursued two threads simultaneously: (1) identification of funding sources which could be applied toward the deficit; and (2) how to distribute that portion of that deficit which could not be assigned to a particular university function to the four divisions in a fair and equitable manner. After that meeting, he and Larry Schlereth met with the President to find a mutually acceptable solution. The two vice-presidents had a fruitful meeting. The plan before PBAC today reflects the result of this meeting, even though it still has "some rough edges." The plan represents "a resolution of the budget problem as we know it today." The plan is presented for the review, modification, and/or endorsement of PBAC, whose advice the President wants. Because of continuing uncertainties with the final FY 1997/98 budget, PBAC should make plans for summer meetings, in case the final budget presents significant unforeseen problems.

Schlereth then walked the members through the Preliminary Financing Model. The following clarification points were provided:

Replacement of PEP, Part-Time Faculty, Instructional Equipment, and Information Technology by Enrollment Growth, Inflation, and Revenue above the Base, along with Academic Affairs covering the Residual was also explained.

Schlereth stated that the next steps, assuming PBAC approval of the Preliminary Financing Model, were (1) appropriate discussions within the divisional deliberative bodies - VPBAC for Academic Affairs and CRC for Administration and Finance; and (2) review by PBAC should collective bargaining negotiations over the raises of 3.4% or 4.0% percent salary increases result in a reduction of Technology, Inflation, Enrollment Growth, or New Buildings moneys - any combination of which might be reduced.

Farish stated that the proposal is based upon sentiments expressed by PBAC members during the course of their deliberations all semester. Next, the members should return to any of the items about which there are questions.

Farish explained that the CSU-Mandated Internal Audit Charge and the Employee COLA's in Excess of Allocation are being covered by funds within Information Technology. This means a reduction in the IT budget, but not in its buying power, since ATT charges will decrease. Victor Garlin asked whether this savings is independent of discussions regarding elimination of the remote-access charge. Farish answered in the affirmative. Larry Clark asked whether, if this were not done, these savings would be passed through to the departments, resulting in telephone-charge savings at that level. Schlereth stated that this amount represents the real costs of long-distance charges, which he assumes otherwise would have been passed through to the departments. Farish stated that he didn't know but assumed it was contract savings and not the actual per-call charge, in which case it would not be passed on to the departments.

Melinda Barnard asked for an explanation of the increase in Working Drawings costs from $160,000 to $200,000. Schlereth explained that the latest estimate from the architectural firm was approximately $200,000.

Farish noted that the $300,000 for a University-Wide Reserve (including the Risk Pool Deductible and the Natural Gas Price Increase) is at this point a somewhat arbitrary figure, but one borne out by the University's historical experience. Two items are known to exist, the $70,000 deductible and the estimated $28,000 natural gas price increase. Actual costs in the reserve would accrue back to the Divisions, but different costs would affect divisions in different ways.

Schlereth spoke to clarify the deductible, noting that the CSU recommends each campus set aside two deductibles of $35,000 each. He said it was possible that deductibles above the recommended two could occur. There is no cap on the cost of this item. If there are six occurrences, then the cost could be $210,000. Harris, noting that the last meeting had reflected a disagreement over both the percentage of distribution to the four divisions, and the funds included in the calculation, asked whether it was the intent of the authors to leave this purposefully ambiguous, with the Cabinet making a decision when and if it had to. Schlereth responded in the affirmative, noting that it would depend on the nature of the cost.

Farish stated that the actual impact of the On-Going CSEA Settlement Costs was quite "tricky," that they were "just now getting a list of the actual names." The individuals are spread across all parts of the University. He noted that the schools would have money for this expense, since 96-97 was the last year for the "Golden Handshake" payoff, and the Schools will now have unencumbered money. The rest of the campus will bear some amount of cost, depending upon the number and status of their employees.

Regarding the CSEA Settlement Back Pay and Implementation cost, Schlereth emphasized that this represented a real reduction in the budget of Administration and Finance. Andy Merrifield noted that the Implementation cost was one-time, and that for Back Pay was a three-year commitment. Harris asked why the authors of the proposal had developed inconsistent approaches to the On-Going and Back Pay issues, when both involved real employees in real units. Schlereth responded that the idea had been put forward by PBAC members. Some of the cost could be absorbed by additional revenue resulting from tripling next year of the remaining units within Housing. Farish added that this also related to the question of the feasibility and advisability of shifting EMT cost to Housing as a mechanism for providing more money to Academic Affairs. Schlereth stated that Tim Tiemens is now developing an estimate of the impact of tripling on Housing. Given the financial condition of Housing, it is not likely that this money will actually come from Housing. Instead, it will have to come from other sources available to Administration and Finance. Marty Ruddell asked what other sources? Schlereth replied that CRC will meet tomorrow, their primary task being the development of recommendations regarding reduction in expenditures and services within A&F to meet these costs. CRC members will be asked to identify activities and recommend reductions at that meeting. Clark asked when the various Housing mortgages would be retired. Schlereth responded that the earliest relief would not come until 2002.

Schlereth explained that the portion of the Structural Deficit to be paid by replacing the interfund loan debt service (recommended by PBAC on March 12, 1996) with funds allocated for Space Management debt service results from the liquidation of that debt in 1997/8 and 1998/9. This fund currently pays the cost of temporary buildings occupied by Fiscal Services, Human Services, and Financial Aid. This recommendation will result in pushing back the repayment schedule one year. Parking Maintenance and Building fund balances will not be replenished at the same rate. As a result, Administration & Finance will have to build a smaller, temporary lot (with a covering of gravel rather than asphalt and with adequate, but temporary lighting) which will have to last until at least 2001. Routine maintenance and repairs of existing lots and roads will also suffer.

Schlereth also explained that the GTE Moblenet funds represents new money which is not otherwise encumbered. There appear to be no Health & Safety or research problems associated with the project, which should also have no significant visual impact on the campus because it is sheltered by the trees in the Corporation Yard.

Schlereth noted that the remaining source, Allocation of the Residual to Administration and Finance, represents a real reduction to A&F. Discussion within CRC will result in recommendations regarding the reductions.

Barnier asked what impact this would have on the idea of Enterprises generating more money for the General Fund; "does this take off the table a look at SSE?" Schlereth responded that one idea is to fully reimburse SSE for services performed by this University, which will result in a reduction in the net income of Enterprises.

Regarding the proposal to cover a portion of the Risk Pool Premium from the Moody Position, Farish made a "technical correction". Link and he had agreed that the position, which was on Academic Affairs' payroll, would be divided 1/4th to Academic Affairs and 3/4ths to Student Affairs; thus the correct figures are $20,000 from Academic Affairs and $60,000 from Student Affairs. Link expressed his disagreement with this interpretation. Harris stated that he didn't care what the split was, so long as it came to $80,000. Garlin asked the Provost to "explain the rationale for shifting" Salaries and Wages from Academic Affairs to Student Affairs "when the personnel costs of Academic Affairs are rising dramatically." Farish explained that the original intent had been to cover the cost of the new Academic Affairs Budget Officer with the funds budgeted for the Assistant to the Vice-President. He felt it appropriate to move Bonnie to Student Affairs, assuming that Academic Affairs' budget would remain stable. Before the November PEP vote, he assumed he could use PEP funds. In addition, "Student Affairs had been dramatically cut, and this was a way of restoring that money." Farish also stated that "the only net increase [in positions] was a Secretary's position. Others were just moved around." Link added that PBAC had already reviewed the needs of the Office of Campus Life, which had been reduced from four positions to one. Barnier asked about the estimated increase in the Risk Pool cost. Schlereth reminded PBAC members of A&F's earlier estimate, based upon the mid-point of the range provided by the CSU. The campus recently received word from the CSU confirming the $350,000. Schlereth also stated that for certain Special Funds - Housing, Parking, Independent Operations, and Continuing Education - this will represent a new expense. The Auxiliary Corporations will not be impacted because they do not participate in the Risk Pool.

Regarding replacement of the Thermal Energy Storage cost , Schlereth stated that all Special Funds will pay the full cost of Utility services provided by the General Fund. Farish noted that the projected savings in Benefits was of "considerable concern. To the extent that it doesn't materialize, it represents another item added to the Reserve costs. Academic Affairs will have the lion's share of that piece."

Farish suggested that the Replacement of PEP was a misnomer; it should instead be referred to as "PEP In-Lieu" funds. A variety of funds are available this year, but these would not be available next year. "The schools would not be hit; there would be no impact on the schools in terms of the instructional budget." The reduction would impact other portions of Academic Affairs, and he needs to work with the VPBAC just as Larry is working with CRC. The campus still doesn't know what sources of revenue will be tapped by the system to increase compensation from 3.4% to 4%.

Garlin asked whether the $287,000 in Enrollment Growth was based upon some formula. Farish responded yes, a systemwide formula that provided $5,740 per FTES. Garlin asked whether the Chancellor's Office would hear "special case negotiations." Farish responded that the Chancellor would be "highly resistant" and that he "wouldn't want to count on success." We will have to wait and see how it comes out. The Democratic legislature is encouraging the 4% compensation increase; the Governor is opposed to reductions in Technology; the Trustee will not favor a reduction in Deferred Maintenance. Schlereth added that the Inflationary Increase appealed to some as a source. Ruddell asked what hope there might be of getting an $18 million augmentation in the CSU budget. Garlin asked about figures of $9.3 million and $13.5 million. Schlereth said he believed the $9.3 was just the Faculty portion of the 4% increase. Merrifield point out that nothing could be known until the Governor has signed the budget and the CSU does its calculations. Farish noted that there will also be the issue of the money the system retains for its own activities.

Barnard asked for a clarification of the Revenue above the Base, a part of which is generated by the Consolidated Student Fee, but is proposed to go to the PEP replacement. Farish stated that the policy is that those who earn additional revenue above a threshold hold on to those earnings. Thus, this increase would be retained by Admissions and Records and not go to Part-Time Faculty or Instructional Equipment. VPBAC will have to make recommendations once PBAC makes its recommendation. He has already told the Deans there will have to be greater efficiencies.

Garlin asked whether the only contingency was the $287,000 in Enrollment Growth. Farish stated that Inflation could also be hit. He said that Silvia estimates the exposure of Academic Affairs at the $200,000 level, but "that's unlikely." Garlin stated his understanding that the 4% was on the table, along with an augmentation in the CSU budget. Merrifield said that both the 3.4% and the 4.0% include COLAs, MSAs, and PSSIs - it's total compensation, not just COLAs.

At this point Barnier moved to accept the Preliminary Financing Model. The motion was seconded by Ruddell. Barnard stated that Academic Affairs will suffer a big hit, $400,000. Farish observed that there are some who feel we need to fulfill a negative prophecy and feed into the cynicism which emerged at the time of the PEP vote. Instead, we need to recognize that the situation has changed - the increase in the Risk Pool Premium, for instance. The Cabinet had agreed that all new money for 1997/98 is to go to Academic Affairs, which increases the problem for the rest of the campus. This was a determined effort to mitigate the cost to Academic Affairs.

Harris requested that the vote be a Recorded Vote and reminded members that the Model would result in real reductions in services.

Garlin asked for Farish's best estimate of the "extent of funds available to us. Can a shortfall of $126,000 be covered by funds available to Academic Affairs this year?" Farish answered yes. To Garlin's follow-up, Farish stated that the published schedule of Fall classes can go into effect.

Garlin proposed a "friendly amendment" that the PBAC prepare a statement of the reasons for its vote - the assumptions and consequences of this recommendation, a one-page explanation. Farish responded that he saw that as a real problem. The vote was being taken on a budget that was not yet written. PBAC is making an interim recommendation, based upon what we know today. It should reserve the right to modify or reconsider based upon changed circumstances. The appropriate time for such a statement would be August. Persuaded, Garlin withdrew his proposal. Ruddell supported the idea of delaying a formal explanation until August, but saw the need to provide a conceptual understanding of the proposal. Farish stated that he was anxious that we not portray this as the end of the process. Barnier observed that the motion infers, but does not state, that the proposal identifies the location where sources of funds can be found to balance the budget, leaving to the appropriate committees the responsibility for implementing the resolution. Merrifield noted that, under the model, "sections have been protected; there are real cuts to A&F." Garlin observed that "students can enroll with the expectation that the classes will be offered. Schlereth noted "there will be real costs, definite changes." Barnard observed that PBAC had, during its deliberations, seen all areas of the budget, including those activities which we had added on.

Letitia Coate stated that while she was Staff to PBAC and could not vote, she supported the resolution. However, she wanted to emphasize that cuts to the non-academic services will have a significant impact, especially on the financial integrity, the audit responsibilities, and the financial reporting requirements of the University. Gallagher noted that as Staff Representative to PBAC and a member of Financial Services, she shared Coate's concerns.

Farish observed that "what we are doing is crisis management; we will have to come back and do strategic planning." Barajas stated that $106,000 is only part of the cut to Academic Affairs; there are additional costs of $300,000 to $450,000.

Adler moved, and Ruddell second, to amend the motion to read:


PBAC is recommending to the President approval of a budget for 1997-1998 which balances a projected $2.5 million deficit by making a number of cuts and reassignment of costs in the following manner:

SONOMA STATE UNIVERSITY PRELIMINARY FINANCING MODEL 1997-1998

PRIORITY UNFUNDED ITEMS
Item Amount
CSU Mandated Internal Audit Charge $6,400
Employee COLA's in Excess of Allocation $20,000
Working Drawings - Information Center $200,000
Risk Pool Deductible $70,000
Natural Gas Price Increase $28,000
University Reserve $300,000
CSEA Settlement Costs, On-Going $137,000
CSEA Settlement Costs, Implementation $90,000
CSEA Settlement Costs, Back Pay $126,000
Structural Deficit from 1996-1997 $422,000
Increase in Risk Pool Premium $350,000
Replacement of PEP, Part-Time Faculty $500,000
Replacement of PEP, Instructional Equipment $200,000
Replacement of PEP, Information Technology $100,000
TOTAL $2,549,400

 

Finance the following items by utilizing savings generated by the newly negotiated long distance contract negotiated with ATT. Savings are projected to total between $20,000 and $30,000 annually.
Item Amount
CSU Mandated Internal Audit Charge $6,400
Employee COLA's in Excess of Allocation $20,000
TOTAL $26,400

 

Finance this item utilizing interest earning generated on the Schultz gift for the Information Center. Interest earnings to be repaid, if possible, from savings in the Information Center construction budget.
Item Amount
Working Drawings, Information Center $200,000

 

Finance the following items by allocating expenses, should they occur, to the Divisions.
Item Amount
Risk Pool Deductible $70,000
Natural Gas Price Increase $28,000
University Reserve $300,000

 

Finance this item by allocating cost of CSEA Settlement on-going costs to each Division based on that Division's actual composition of impacted CSEA employees
Item Amount

CSEA Settlement Costs, On-Going

$137,000

 

Allocate costs associated with these items to Administration and Finance and the Housing Program.
Item Amount

CSEA Settlement Costs, Implementation

$90,000

CSEA Settlement Costs, Back Pay

$126,000

 

Finance Structural Deficit item in the following fashion:
Item Amount
Structural Deficit from 1996-1997 $422,000
 
1. Eliminating the interfund loan debt service* $200,000
2. Utilizing newly created resources from GTE Moblenet $20,000
3. Allocation of Residual to Administration and Finance $202,000
TOTAL $422,000

*Interfund loan debt service to be restored as the Space Management debt service liquidates.

Finance Risk Pool Premium item in the following fashion:
Item Amount
Increase in Risk Pool Premium $350,000
 
1. Assess Special Funds for their portion of the increase $50,000
2. Eliminate Thermal Energy Storage Debt Service** $60,000
3. Eliminate vacant Public Affairs position $60,000
4. Eliminate Academic Affairs portion of Moody position $35,000
5. Reduce Employee Benefit Budget by $100,000*** $100,000
6. Allocate Residual Expense to Student Affairs $45,000
TOTAL $350,000

** Thermal Energy Store debt service replaced by TES Savings and full reimbursement fromSpecial Funds for utility costs. Deficits in the utility budget to be charged to the University Reserve.

***Savings of $100,000 are thought to materialize in Employee Benefits as a result of additional benefit resources allocated to the campus in 1996-1997. Shortfalls in benefits, should they take place, will be financed by the University Reserve.

Finance PEP items in the following fashion:
Item Amount
In lieu of PEP, Part-Time Faculty $500,000
In lieu of PEP, Instructional Equipment $200,000
In lieu of PEP, Information Technology $100,000
 
1. Utilize new CSU Resources for Enrollment Growth $287,000
2. Utilize new CSU Resources for Inflation $81,000
3. Utilize Academic Affairs "revenue above the base" $306,000
4. Allocate Residual Expense to Academic Affairs $ $126,000

Based upon these assumptions, there are no reductions being recommended in the instructional schedule for Fall 1997. Specific reductions in services will be determined based on discussions underway in the Campus Reengineering Committee, the Vice-President's Budget Advisory Committee, and comparable bodies. These will be presented to the campus community once the full implications of the Governor's budget for the CSU are known.

The motion passed with 17 Ayes, 0 Nays, and 0 Abstentions. The vote being Unanimous, the call for a recorded vote was deemed unnecessary

CSU Senate Survey

Barnard distributed copies of the CSU Senate Survey of campus budget committees. Since the CSU Senate wants to use Sonoma State as one of four case studies, it is imperative that she have these surveys completed and returned to her at today's PBAC meeting. The Statewide Senate intends to use the case studies and survey to provide pressure for other campus to develop a budget proces

Good of the Order

Garlin (and others) moved a vote of thanks to Don and Larry and the Staff (Silvia Barajas, Bill Ingels, Letticia Coates, Janice Peterson, Tandy Whitaker, and Dennis Harris) for working collegially and well under such difficult circumstances. The motion passed by acclimation.

Next Meeting

The next meeting of PBAC is scheduled for Wednesday, August 6, 1997, from 10:00 AM until 12:00 Noon.

Adjournment

At 9:54 AM Farish adjourned the meeting.

Minutes prepared by Dennis Harris

VIII, Note for the Record

Immediately after the Meeting, Farish and Link requested the following clarification be added to the Minutes. The $80,000 in the Moody position is both the Original Budget figure for Salaries of $64,344 and $15,656 in associated Benefits. They have agreed upon the following division of these funds, beginning with FY 1997/98: Academic Affairs, $35,000; Student Affairs, $45,000. This agreement supersedes the statements by them which appear on pages 3 and 5 of these Minutes.


PBAC minutes 1996-1997
Updated 2007-12-14
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