Perspectives on the State Budget: Deans and Chairs Spring Meeting

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Perspectives on the State BudgetDeans and
Chairs Spring Meeting

• March 2008

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Beginnings Definitions and Concepts
The Florida Constitution Governs the Use of State
Monies ARTICLE VII (c)  No money shall be drawn
from the treasury except in pursuance of
appropriation made by law. All money received
by any state agency is required to be deposited
into the treasury, unless specifically exempted
from this requirement. Disbursement from the
treasury are by warrant drawn upon the treasury
by the Chief Financial Officer upon initiative of
the agency authorized to make the expenditure.
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There Are 3 Types of Funds Into Which Monies are
Placed

• The General Revenue Fund
• Discretionary Revenues
• Trust Funds
• Earmarked Revenues
• Budget Stabilization Fund
• Mandated contingency for revenue shortfalls and
  emergencies

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There are 2 Types of Revenues

• Recurring
• the income stream is not time limited in statute
• Non-recurring
• the income stream is time-limited (e.g. lawsuit
  revenues)
• By practice, not statute, only recurring revenues
  are to be used to fund recurring expenditures,
  except
• Article III, SECTION 19.  State Budgeting,
  Planning and Appropriations Processes.--
• (a)  ANNUAL BUDGETING.
• (2)  Unless approved by a three-fifths vote of
  the membership of each house, appropriations made
  for recurring purposes from nonrecurring general
  revenue funds for any fiscal year shall not
  exceed three percent of the total general revenue
  funds estimated to be available at the time such
  appropriation is made.

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There are 2 Types of Expenditures

• Operating
• Categories used to fund the current expenses of
  state government
• Fixed Capital Outlay
• Category used to fund real property (land,
  buildings, including appurtenances, fixtures and
  fixed equipment, structures, etc.)

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State Universities Receive Monies From a Variety
of the FundsFY 2007-08 All State University
Appropriations(Before vetoes, in millions)
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The Operating Budget of FSU has 8 Budget Entities

• Educational and General (EG) 452 m
• College of Medicine (EG) 49 m
• Auxiliary Enterprises 196 m
• Contracts and Grants 212 m
• Student Activity 16 m
• Athletics 42 m
• Campus Concessions (Vending) .5 m
• Financial Aid 122 m

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The Operating Budget Excludes FSUs 8 Direct
Service Organizations (DSOs)

• Ringling Museum
• FSU performing Arts Center Foundation
• Seminole Boosters
• FSU Foundation
• FSU Research Foundation
• FSU Financial Assistance
• FSU International Programs Associations
• FSU Alumni Association

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State Restrictions on Funds

• Funds cannot be moved between budget entities
• Use of Fee and Auxiliary monies is limited by law
• Use of DSO monies are limited by law and their
  corporate charters

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E G is the Largest University Funding Entity

• Includes All formulagenerated activities related
  to
• credit instruction that may be applied to toward
  a postsecondary degree or certificate
• non-project research and service performed to
  maintain professional effectiveness
• Individual or project research assigned and
  managed through academic departments
• public service activities that benefit groups of
  individuals in the service areas of the
  universities
• administration for administrative support of
  instruction, research, and public service
• service programs and
• other functional areas include academic
  advising, academic computing support, academic
  curriculum development, and academic personnel
  development.
• The university is required to maintain a reserve
  equivalent to 5 of the total budget
• Balances are retained and invested by the
  university

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E G Includes

• General Revenue
• Lottery Funds
• Student and Other Fees
• Tuition
• Student Fees
• Miscellaneous revenues (registration fees,
  library fines, indirect costs assessed to CG)

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General Revenue is the Largest Source of
University Funding

• The taxes that make up the general revenue fund
  are sensitive to changes in the economy
• The taxes that make up the general revenue fund
  are narrowly concentrated in consumption taxes

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Fixed Capital Cannot be Used For Operating
Expenses

• General Revenue
• Occasionally non-recurring is used
• PECO (Public Education Capital Outlay)
• Result of Bond sales
• Backed by gross receipts and communication
  services taxes

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State Finances

• Both State Revenues and Expenditures are
  Influenced by a Few Factors

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The State Consensus Estimating Process Ties All
the Elements of the State Budget Process Together
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Consensus Estimating ConferencesFall 2007
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The Estimate of General Revenue Has Shrunk
Dramatically
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General Revenues usually fall over the Business
Cycle

• Typically revenues fall by 5 or more
• Historically offset by revenue increases, but not
  in the last 15 years
• This decline is faster and further than most

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General Revenue Tax Collections Can Be Expected
to Grow 5 Per Year But Vary Dramatically Across
the Economic Business Cycle
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In a GR Decline, there is Severe Competition for
Monies Among State Agencies

• There are just a few large GR agencies
• Statutory Requirement regarding educations
  proportionate reduction
• 215.16 (2)  If the state appropriations from the
  General Revenue Fund for the benefit of the
  uniform system of public free schools, state
  institutions of higher learning, and community
  colleges cannot be paid in full during any given
  year, they shall be diminished only in the same
  proportion that appropriations for all other
  purposes from the General Revenue Fund are
  diminished during such year. Additionally, any
  funding reductions to public free schools, state
  institutions of higher learning, and community
  colleges shall be diminished in proportions
  identical to one another. For the purpose of
  implementing this section, general revenue funds
  exclude the administrative budgets of the Board
  of Governors and the Department of Education.

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Universities Compete with a Few Agencies for
General Revenue95 of GR in 15 agencies
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Some Agencies Represent Constituencies that are
Difficult for State Policymakers to Ignore
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Public Schools

• Public School Enrollment is down
• But Class Size Amendment costs continue to be
  addressed
• The Property tax base of public schools is under
  considerable pressure

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Next Steps in the State Budget Process
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Prospects for Future Funding