Keeping the Focus on our Mission

1
Keeping the Focus on our Mission While Meeting
the Budget Reduction Challenge Jan. 8, 2008
2
The Current Situation
434 million state budget shortfall this year

Drop in tax revenue blamed on economic downturn
(low employment, high gas costs and slowdown in
housing industry). Other factors in the shortfall
include unbudgeted expenditures and rising costs
of Medicaid and corrections. 265 million will
come from lFY
07 state budget surplus of 145 million
lUnbudgeted/excess state funds
of 42 million
l78 million from state
agencies, including higher education Governor
will not use 232 million rainy day fund until
at least next year, but will
revise budget to cover additional 169 million
shortfall related to additional spending
needs.
3
Impact on Higher Education
Fiscal Year 2007-08
4
Impact on Higher Education
Fiscal Year 2007-08
5
Impact on Higher Education
Fiscal Year 2007-08
College/BU Public Funds Base Reduction
(1.5) Revised PF Base Ashland 17,221,800
254,200 16,967,600 Big Sandy 19,044,000
281,100 18,762,900 Bluegrass 43,293,600
639,000 42,654,600 Bowling Green 10,794,700
159,300 10,635,400 Elizabethtown 19,713,800
291,000 19,422,800 Gateway 12,155,100
179,400 11,975,700 Hazard 19,219,200
283,700 18,935,500 Henderson 8,689,800
128,300 8,561,500 Hopkinsville 12,106,100
178,600 11,927,400 Jefferson 45,633,900
673,600 44,960,300 Madisonville 15,403,600
227,400 15,176,200 Maysville 15,407,800
227,400 15,180,400 Owensboro 15,785,900
233,000 15,552,900 Somerset 24,529,500
362,100 24,167,400 Southeast KY 18,209,000
268,800 17,940,200 West KY 22,144,400
326,900 21,817,500 Total 319,352,200
4,713,900 314,638,300
State appropriation tuition
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Impact on Higher Education
Fiscal Year 2007-08
Business Unit Public Funds Base Reduction
(3) Revised PF Base System Operations 50,381,600
1,511,300 48,870,300 and Support Fire
Commission 3,024,000 90,700 2,933,300 (State
Fire Rescue Training) KBEMS 2,373,800
71,200 2,302,600 KY WINS 6,000,000 180,000 5,
820,000 KY Coal Academy 3,000,000
90,000 2,910,000 UK Health Insurance 1,000,000
30,000 70,000 Corrections
Education 5,800,000 174,000 5,626,000 Grand
TOTAL 390,931,600 6,861,100 384,070,500
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January 7th Announcementof a Second Budget Cut
for FY 09

• 525 million projected shortfall for next Fiscal
  Year, 2008-09.
• 6 percent below current budgeted spending of 9.4
  billion
• Governor has asked universities and KCTCS to
  develop plans for worst case scenarios as high
  as an additional 12 percent (15 total)

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How will we manage the reduction?

• Phase I Achieving the 673,600 cash reduction in
  the current year
• Phase II Ensuring a balanced budget at the end
  of this year
• Phase III Planning for the recurring budget cut
  next year
• Each phase is progressively more difficult

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Phase IAchieving the 673,600 Reduction for
this year

• Carry-Forward from 2007 183,000
• Additional Tuition Income from Fall Semester
  200,000 (Additional 200,000 already committed.)
• Status of Contingency Reserves 2.7 million
• Fully funded mandatory reserves, the result of a
  healthy carry-forward from last year
• Eligible to use up to 875,000 of the reserves
  (4 of public funds base)

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Phase II Ensuring a balanced budget this year

• The Challenge
• 485,000 projected operating deficit for FY
  07-08 based on using carry forward and fall
  tuition surplus, which are now lost to the cut.
• Operating deficit caused by
• Actual costs (escalated fixed costs)
• Utilities, postage, copiers
• Deferred infrastructure needs IT, Security, MO

• Projected costs
• Filling critical positions
• Bad debt (unpaid tuition) higher than expected

Does not figure in Spring Summer tuition above
projections.
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Phase II Ensuring a balanced budget this year

• KCTCS suggested options
• Review each faculty and staff vacancy and
  approved new positions.
• Review class offerings planned for spring and
  summer 2008 and eliminate classes that cannot be
  offered due to the inability to hire faculty. 
• Cancel  summer term classes that are not
  self-supporting.
• Review offerings at extended campuses and
  eliminate classes if enrollment falls below a
  minimum enrollment to be established by the
  institution.
• Reduce travel.
• Reduce adjunct faculty.
• Reduce KY WINS economic development/training
  incentives to existing and new business/industry.
• Cancel equipment upgrades for the remainder of
  2007-08.
• Reduce fire and rescue training for fire
  departments.
• Reduce operating expense budgets/measures to
  prevent going over budget.
• Consideration of an additional tuition increase
  for summer and fall.

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Phase III Planning for the recurring budget cut
next year

• Unknowns
• Extent of budget cuts (range from 3 to 15
  percent)
• Higher educations share
• General Assembly budget allocations
• Amount of tuition increase by KCTCS Board of
  Regents
• Increases in fixed cost (salaries, health
  insurance)

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Phase III Planning for the recurring budget cut
next year
Knowns Council on Post-Secondary Education The
Reduction Plan should provide information on
programmatic reduction and eliminations,
implications for workforce levels, alternative
options, impact on federal funds, acknowledgement
of the effect on legal mandates, and any other
information that is useful. This is a planning
process that is necessary to complete the budget
decision-making for the Executive Budget. The
submission of a plan does not mean it will be
fully accepted, though all consequences of a 12
percent reduction must be communicated. A cut
of that nature that cuts deep into the bone is
something that makes you limp for years to
come. In the new-age economy of 21st century,
states can no longer afford to treat higher
education as the budget balancing remedy of first
resort. - CPE Interim President Brad Cowgill.
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Phase III Planning for the recurring budget cut
next year

• KCTCS Suggested Options for 3 reduction
• Close or delay opening of new buildings that
  dont have maintenance and operation funding
• Limit or cap enrollments
• Reduce dual credit enrollments
• Reduce off-campus offerings
• Continue elimination of low-enrollment programs
• Review potential impact on KCTCS business plan,
  including extending ultimate implementation to
  2022 or 2024

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Discussion of Strategies

• Short-term strategies
• Phase I Ideas (673,600 Cash Reduction)
• Phase II Ideas (Achieve Balanced Budget by June
  30, 2008)
• Long-term (recurring) strategies
• -Phase III Ideas (3 to 15 reduction)

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Next Steps

• Continuous updates to faculty and staff as
  information becomes available.
• Working sessions with Board of Directors today
  and Jan. 15.
• Feb. 8 Division Chairs, Program Coordinators,
  Unit heads.
• Budget development for 2008-09
• SACS