The budget process was launched the week of August 10. A timeline for the process is available on the budget process page. Generally speaking, the process will take approximately two months to complete.
Yes, a section of the narrative template will be devoted to this. The $1.5M pool will be available to address cases where extraordinary relief is justified. This is not an opportunity for divisions to submit funding requests for a common unmet need or to pursue a new initiative - as would have been the case in previous years. Should you believe your reduction will cause severe inequity or hardship, you can submit a funding request for these resources.
There will be four templates used during the budget process: a three-year planning template in the form of a SRECNA, two supporting templates through which you are asked to specify planned expense reductions and use of reserves, and a narrative template to provide context for your financial plan. The budget call letter and guidelines provides more specific details on the templates.
The budget targets used over the past several years, based on a net surplus/deficit model, have been discontinued in light of the financial impacts associated with COVID-19.
We’ll provide guidance on carry-forward balances in the call letter and budget process guidelines.
The fiscal close dates are set by UCOP and so will remain the same for the most part. We’ll communicate any updates to the dates.
Will seismic capital projects be delayed? Is there a prioritization for which capital projects will be deferred?
To help address our financial challenges the Chancellor and EVCP are considering the deferral of capital projects on campus.
Cost recovery plan
The $65M reduction is based on the Common Good expenses related to COVID-19 (extensive cleaning, testing, remote learning, and loss of tuition). Some of these expenses will be temporary (testing) while others may linger (loss of tuition). Therefore the amount associated with COVID-19 costs, which informs the reduction, will be assessed annually if not more frequently given the uncertainty surrounding the virus. As our financial position improves, the campus will be able to lift the reduction.
It is difficult to say due to the high level of uncertainty with respect to the virus. Campus will reassess reductions at least annually (if not more frequently) and make necessary adjustments to reflect changes in our overall financial circumstances.
We’ll make adjustments to campus support as needed to reflect changes in our overall budget situation - either positive or negative. Though changes could take place mid-year, they are not likely to take place during the budget process.
No, we have separated the financial impact of COVID-19 from the structural deficit issues in the central ledger.
Campus will form a task force this year charged with developing a plan to rebuild central reserves to a responsible level in 3-5 years, beginning in FY22.
It is difficult to say without greater certainty about the continued impact of COVID-19. It is our hope that these measures would be suspended in FY22. More information about the hiring freeze is available on the People & Culture website.
The Finance Committee has approved an $11M plan to support remote teaching. Investments include greatly improved online delivery of major gateway courses, graduate student support to help faculty develop remote learning tools, expanded infrastructure to support remote instructional delivery, and a technology equity program to ensure that low-income students have the equipment and services they need to learn remotely.
Yes, you can make withdrawals from FFEs but should do so prudently. Like the use of reserves, withdrawal from an FFE provides one-time cash that can be used to address your financial challenges. Doing so, however, comes at the expense of the annual FFE payout, which will be reduced as a result of the withdrawal.
Use of reserves
The use of ending balances is encouraged but should be balanced by the need to use reserves for other priorities and the anticipated length of the COVID-19 recovery period. Divisions should be careful not to deplete their reserves should the crisis extend into future years, in which case temporary or permanent expense reductions may be necessary. For the budget process, campus will provide a 3-year budget template to help divisions select the budget levers that best fit their individual needs.
We will try to provide this flexibility. The Financial Planning & Analysis team still needs to work through the mechanics and determine the feasibility of this approach.
We strongly encourage divisions to adhere to the “first dollar principle” and optimize their use of “spendable” reserves. You should review how restricted your funds really are. For example, some units have inherited funds that may have been further restricted but could actually have more flexibility in the fund terms versus the full chartstring (DeptID, CF1, or CF2) level. Also, some funds may be classified as restricted at a campus level but may be unrestricted at a college, departmental or program level. If you are holding restricted funds that you can no longer use but another unit within your L3 could use them, perhaps you could consider providing that flexibility/funding source to the other unit.
Methodology and calculations
The data were pulled from SmartView/Cal Reporting reports. We followed the same methodology used during the last budget reduction. It is important to note that we excluded all C&G funds. We used the three-year average of expense exclusions from FY17, FY18, and FY19, and applied these against total (non-C&G) expenses forecast in the Q3 submission for FY20. The proportion of this figure to the total forecasted expenses campus-wide (less calculated exclusions) is each unit's share of the $65M reduction.
To verify the data, you will also need to remove any double-counting that might occur as the reports are pulled based on accounts and fund groups.
1. Academic Salaries & Benefits - 3yr Avg = Account Expenses Category Academic Salaries & Wages minus 50242 Acad Teach/Limited Benefits minus 50212 Acad Nonteach/Limited Benefits plus 53060 Benefit Assess/Acad Regular
2. Scholarships/ Fellowships - 3yr Avg = Account Expenses Category Scholarships & Fellowships
3. Designated Student Fees - 3yr Avg = Fund Bucket Designated Student Fees (Total Funds/Current Funds/Unrestricted/Designated/Designated Student Fees)
4. SHIP - 3yr Avg = Expenses for Department FXSHP/Student Health Insurance Plan
The financial impact of COVID19 is related to either revenue “shocks” (mostly loss of tuition) and increased expenses (cleaning, technology, and testing).
Can we request additional exclusions? I strongly believe that my expected reduction is too high. Is there an appeal process?
No, the exclusions are final. They were reviewed and approved by the Chancellor and Provost. For the budget process, campus has made available a $1.5M pool of discretionary funds to address cases where extraordinary relief is justified. Should you believe your reduction will cause severe inequity or hardship, you can submit a funding request during the budget process.
Divisions will be allowed to submit two unrestricted funds from which the in-year reduction will be taken. The funds provided must be unrestricted in nature: #19900, #68600, sales and services funds, tuition.