October 5, 2023 Minutes

PRESIDENT'S BUDGET ADVISORY COMMITTEE

October 5^th, 2023

MEMBERS PRESENT:

STAFF PRESENT:

GUESTS PRESENT:

MEMBERS ABSENT:

            AGENDA

1. Call to Order and Welcome
2. Approval of the Minutes: August 31^st, 2023
3. President’s Updates
4. 24-25 Budget Planning
5. Announcements for the Good of the Order

1. Call to Order and Welcome

Provost and Vice President of Academic Affairs, Karen Moranski, welcomed the committee and began the meeting at 8:31 a.m.

2. Approval of the Minutes: August 31^st, 2023

Moranski introduced the agenda and asked if there were any additions. Hearing none, Moranski requested a motion to approve the minutes of the August 31^st meeting. The minutes were approved unanimously.

3. President’s Updates

President Lee attended to provide updates on University Wide initiatives. Lee spoke about the budget forum that was on October 3^rd and two main takeaways of the forum were the financial situation of the University including the need to resolve the deficit by July 1^st, 2024 and the need to get enrollment back up. Lee discussed there is no expectation for a quick turnaround on enrollment, but the University needs to be able to do what it has been asked to accomplish by the Chancellor's Office (CO). President Lee was referring to the fiscal health memo the campus received at the start of 2022-2023. President Lee also discussed the enrollment memo the campus received from the CO in 2022-2023. The memo outlined that for all 23 campuses, any campuses outside of 7% of their funded enrollment target will receive a 5% decrease in general fund allocation and a decrease in enrollment target. Lee commented that the final decision on that enrollment memo would be up to the new Chancellor who just started at the beginning of October. Whether or not the enrollment memo budget reallocations take effect, it is vital to focus on increasing enrollment with realistic expectations. There are signs the market is turning and SSU has very strong graduation rates which should work in favor of the University. Lee also discussed seven campuses within the CSU system are in a similar position as Sonoma State, with decreasing enrollment and the need to resolve budget deficits among pressure of unknown compensation agreements and enrollment realignments. Sonoma State, among other campuses, has reduced expenses where possible and is at a point where if more funding is reduced, it will put a major strain on campus operations and mission delivery and the seven campuses are trying to send that message to the CO. 

4. 24-25 Budget Planning

Laura Lupei presented the 2024-2025 Budget Planning update. The Budget Planning update included the 2024-2025 Board of Trustees (BOT) budget request. The BOT request included a total of $557M increase for the CSU System for 2024-2025. Of the $557M, $148M would be revenue from the tuition increase the BOT passed in September, outlining a 5-year 6% tuition increase. $24M would come from tuition from new enrollment growth, $240M is from the Governor’s compact funding increase, and the BOT requested an additional $145M in new unrestricted general fund dollars. The total $557M increase in revenue would support the following initiatives: increases to Financial Aid: State University Grant ($58M), Student Access and Enrollment ($55M), Graduation Initiative ($30M), Student Basic Needs and Mental Health ($7M), Compliance Programs ($20M), Required Operational Costs ($63M), Academic Facilities and Infrastructure ($25M), Faculty and Staff Compensation ($221M), and Health Premiums ($78M). The 2024-2025 BOT request also included a multi-year budget plan that showed preliminary budget requests through 2028-2029 which would be the last year the 6% tuition increase would be in effect. Throughout the BOT multiyear plan, the BOT has planned their increased revenue request in the same categories as the 2024-2025 year; the tuition increase, enrollment growth, the Governor’s compact funding, and new general fund dollars. The planned expenditures are also the same as the 2024-2025 budget request with differing amounts each year, and an addition of retirement benefits.

Lupei then discussed the current planning that the campus is doing for 2024-2025. Lupei outlined the enrollment projections being used in the University’s multiyear plan. Currently, there are two sets of enrollment projections, one set of projections is the budgeted headcount projections and the other set is the Strategic Enrollment Management (SEM) headcount goals. Currently, the budgeted headcount projections are the ones incorporated in the multi-year plan as they are based on prior three-year average actuals for application and yield rates. For 2024-2025, the projected budgeted headcount is 5,868. The SEM unit’s goal headcount projections will be incorporated into the budgeted figures once the actual increase in enrollment begins to be reflected in the actual application and yield rates. Another aspect of the campus 2024-2025 budget planning is the 6% tuition increase. The increase will apply to all students effective in the 2024-2025 year which will provide the University with more tuition revenue in the 2024-2025 year. An additional main piece of multi-year budget planning is the projected compensation increases for employees and the projected compensation pool that would be given to campuses to fund the negotiated increases. Over the next three years, the CSU has planned out what a 5% compensation pool would cost to the system and campuses. For 2023-2024 through 2025-2026, a 5% compensation increase for all employees would cost $829M, however, the compact funding planned to fund compensation increases would be $303M, leaving $526M passed down to campuses to fund. Factoring in the anticipated funding from the 6% tuition increase, there would be an estimated total of $204M that could help the campuses fund their compensation increases, leaving $322M over three years to be funded by campuses. These current compensation projections are still uncertain as all bargaining units are still in negotiations and the 5% planning figure is not the settled amount.

Lupei then presented the projected campus deficit for 2024-2025. Lupei presented two scenarios for the projected deficit. The first reflects the deficit without the 6% tuition increase and 5% compensation increase. The purpose of this scenario is to show the deficit that originally needed to be solved before compensation increases and tuition increases. Ultimately this scenario is what the University was being held to resolve in the fiscal health memo the CO sent to the campus at the start of the 2022-2023 year. The first scenario projected a 2024-2025 deficit totaling $7.5M. Included in this deficit figure is a $9.3M deficit from the 23/24 base deficit that was not resolved, but an anticipated slight increase in tuition revenue of $1.8M and an increase in cost allocation revenue of $750K. There are also anticipated unfunded mandatory costs as well as new positions to be funded totaling $723K in increased cost. The second scenario for 2024-2025 deficit planning, totals a much higher anticipated deficit mainly due to the anticipated unfunded compensation increases. This scenario totals a $13.2M deficit due to the following: a $9.3M deficit rolled from the prior year; an anticipated $4.8M in tuition revenue due to anticipated enrollment growth and the 6% tuition increase; a reduction in revenue of about $1.1M for the portion of the tuition increase that goes to the system-wide SUG pool; and a projected $750K increase in cost allocation revenue to the University. Similar to the first deficit scenario, there are projected increases in mandatory costs as well as unfunded positions totaling $723K. The projected unfunded compensation the campus will have to absorb based on a projected 5% compensation pool is $3M for the 23-24 year, and $4.6M for the 24-25 year. This deficit scenario includes 23-24 compensation because the campus will receive the base funding for the 23-24 compensation pool in 24-25 and will need to cover the shortfall in the base in 24-25 as well.

Lupei then reviewed the campus multi-year plan that has been updated to include the 6% tuition increase and a 5% compensation pool over the appropriate years. Over the next six years, with moderate enrollment growth projected from the budgeted headcount figures, the campus would have budgeted deficits each year ranging from $5M to $14.3M. This multi-year plan does not consider any anticipated reductions at this time.

There is still much uncertainty in the 2024-2025 planning and many more decisions to be made before this plan is finalized.  We will continue our campus planning efforts as the state and CO continue to make decisions and we will work to keep the campus updated.  We do know that we have a campus deficit that we need to work to resolve and we will continue to put our efforts into increasing our enrollment.

5.Announcements for the Good of the Order

None.

Moranski adjourned the meeting at 10:00 a.m.  

Minutes prepared by Hayley Avery.