This First Friday report is about the initiation of the 2005-06 budget development process at the Jonesboro campus.  This budget will be presented for consideration by the Board of Trustees at the May 2005 meeting and, if approved, will become operational July 1, the start of the next fiscal year.  Many budget considerations will occur in the meantime, especially those in response to the Legislative Session that is underway at this time.

Additional legislative appropriations, if any, will have a positive impact on the ASU budget.  As has been reported in previous First Friday issues, the need-based funding formula demonstrates that $11 million new dollars are merited by ASU on the basis of our current activities.  If the General Assembly would allocate this amount or a major portion of it to ASU’s operational base, many needs could be addressed immediately and in the future.  As this legislative process has just begun, it is too early to factor potential appropriations into budget planning.  But we may plan now to dedicate the first new money from appropriations for salary increases for faculty, whose salary averages are below peer comparisons, and for staff to address cost-of-living and merit-based increases.  It also is desirable to create a pool of money for extraordinary salary needs as defined by budget managers.  Any effort to produce campus-wide salary increases will require significant new and continuing additions to the base budget of the university so that the increases can be sustained in future years.  Annualized salary increases also require corresponding increases in the fringe benefits budgets of the university, which are based on budgeted salaries.  As a result, decisions to address salary changes will have significance in the budget planning process.

Actions of the Legislature may have financial implications on the annual budget of the university through mandates, requirements or restrictions, or because of changes stipulated by statute.  For example, if a new scholarship program is mandated but unfunded, costs for the program will have to be met through current institutional budgets.  Or, if legislation is approved requiring universities to provide additional teaching activities for programs for new groups of students, but does not also provide funding for these efforts, currently budgeted funds will need to be directed to meet the demands of the legislation.  Fortunately, previous Legislatures have been responsible to limit unfunded mandates, and have exercised caution in adopting costly statutory changes.  As the budget planning process proceeds, we will need to be mindful of the intended and unintended consequences of the Legislative Session that is ongoing simultaneously.

The annual budget is based, in part, upon tuition and fees collected from student enrollments.  In theory and in practice, it is prudent to keep these costs as low as possible in order to encourage participation by many students.  The initial budget planning process will exclude any consideration of tuition and fee increases, though these changes may be shown to be necessary later.

At present, budget development will focus on several aspects of the Strategic Plan, which was the subject of the previous First Friday.  The institutional priorities within the plan will inform the budget considerations, and will animate the process that will produce the budget.

The first of the priorities to be utilized is that we strategically manage resources among divisions and colleges based on institutional priorities, and that there be defined and implemented an institutional allocation and reallocation process.  This effort will be different from previous budgeting activity, which either added to or subtracted funding from various budget units on an incremental and generally equal basis.  Under the new priority, some budget areas of the university will be reduced in order to increase funding for other areas.  Throughout this process, it will be important to protect the core business of ASU, teaching, and that we define budget allocations based on priorities within that mission.

As a public university, we are sensitive to those needs identified by the state that require our performance.  Two areas of statewide critical employment need, the production of teachers and of nurses and healthcare providers, can be addressed by ASU programs and will be priorities in the budget allocation.  We recognize that these disciplines already have been significantly productive in our region, but additional funding is needed for them to sustain and improve productivity.  This funding also will address the Strategic Plan goal to develop programs to meet community needs and interests.

Another ongoing state need is to respond effectively to the changing demography of Arkansas. In our region, that implies that ASU consider ways to involve African-American and Hispanic students, faculty, and staff.  This is a Strategic Plan priority, to enhance the diversity and inclusiveness of the university, and is an area where measurable progress has been made recently.  More funding will enable additional hiring achievement and more focus on diversity development.

Apart from state-influenced budget priorities, there are those that relate to institutional needs, and that also are identified in the Strategic Plan.  These areas will require infusion of new money to be achieved, in contrast to some areas of the plan that may be addressed by policy changes or by redefinition of operational practices.  Examples of costly priorities in the plan that now will have greater attention in the budget include:  Efforts to increase enrollment, retention, and graduation rates; efforts to increase resources to the university; and, efforts to increase the university’s reputation, visibility and influence.  The forthcoming budget will include new funding for retention, development, and communication to provide for these priorities.

It also will be necessary for the budget to address a circumstance that has proved troublesome in the current and previous budget years; we now have more expense items identified within the educational and general budgets than we have revenue sources identified to address these expenditures.  We need to reduce the level of budgeted expenditures to the actual amount of revenue that we will receive in the coming years.  This reduction, equal to approximately one percent of the budget, should make it possible for budget managers to operate throughout the year without budget modification, and will encourage more confidence in our fiscal management systems.

ASU has ongoing budget needs in response to external evaluation by the Higher Learning Commission, such as improved library funding, support for research infrastructure, and improved access to information resources and learning technologies.  The issues are congruent with the Strategic Plan and will be the basis for new allocations in the budget.

To summarize the immediate budget priorities that emerge from the Strategic Plan, we may anticipate a budget that will allocate and reallocate the existing resource base to address:

• Teacher education, nursing and healthcare education

• Diversity initiatives

• Additional scholarship funding

• Communication, marketing, and university promotions, and development support

• Retention and graduation rate improvements

• Enterprise computing system support

• Reduction of education and general budgeted expenditures

The objectives to be addressed later in 2005-06 budget development include:

• Salary increases for employees, including classified, non-classified, administrative and professional positions in the education and general budgets and in auxiliary budgets

• A pool of money to be used for promotion and tenure-based adjustments

• A pool of money to be used to address extraordinary salary needs.

The process to consider these budget needs began earlier this week in discussions with the University Planning Committee.  The executive staff, being the president and vice presidents and vice chancellors at Jonesboro and the chancellors of ASU two-year campuses who are affected by the Jonesboro budget, will begin regular meetings to visualize an effective allocation and reallocation process.  As this system is more clearly defined, budget managers at all levels will join the discussions to evaluate how the decision process will be employed across campus.  On several occasions, the University Planning Committee will be reconvened to address development of the budget and to provide the president with responses and observations on the process.  These UPC meetings are open to the public, should you wish to attend.  An announcement of the time and place of each UPC meeting is announced on the ASU Digest.

The development of the budget is always a time-consuming process, but this year will be even more deliberate and involved as we seek to make changes suggested by our Strategic Plan.  Through this and many other efforts, we hope to continue to build a university that is responsive to the needs of the state, and represents excellent value for the investment by the students we are privileged to serve.

If you have comments about First Friday or any other aspect of Arkansas State University, I would appreciate receiving your communication to president@astate.edu.  Thank you for reading First Friday.

Leslie Wyatt
President

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