Critical Concepts Affecting University's Financial Planning
Six Critical Concepts &
How they Effect The University's Financial Planning
1. Long range planning is extremely challenging with state funds. The Commonwealth’s maintenance appropriation is based primarily on historical patterns, past legislative decisions, and current fiscal and political realities. There is no fixed legislative formula that determines how much will be set aside for the University each year. The General Court or Legislature appropriates most state funds for all the campuses of the University into one main line item of the state budget. Once the state budget is final, the President's office allocates the state appropriation to each of the campuses based on strategic priorities for the System. While the priorities of the UMass Boston Campus have a significant impact on the overall direction of the University system, they are considered in relation to the goals of the other four campuses and of the System as a whole. Hence, since the state appropriation constitutes more than 35% of the Total Funds Budget for the Campus, it is impossible to establish a long-range budget on the Campus level that can be followed precisely from year to year.
2. The timing of the budget can be erratic. The budget for UMass Boston is an annual one and can be finalized only after the state budget is passed. Although the fiscal year for both the state and the Campus begins on July 1st, in some years the state budget is not decided for weeks or – in rare cases - months after this date. Thus, the Campus budget is often not finalized until after the fiscal year has already begun.
3. State funds are not very flexible. UMass Boston can only spend state funds after receiving allotments through the state's accounting system. The allotments are based in part on spending plans submitted annually to the Executive Office for Administration and Finance ("EOAF") who monitors spending for all state agencies. UMass Boston has chosen to utilize state funds primarily to pay the salaries of benefited employees, as the 31.28% add-on cost for fringe is assumed by the Commonwealth. The fringe expense for benefited employees who are paid by trust funds other than the Commonwealth’s maintenance appropriation is borne by the respective trust funds..
4. State funds disappear if not spent. State funds, in the operating budget, cannot be held over from one fiscal year to another. All operating monies from the state must be spent or are reverted to the state treasury. Hence, judicious saving of state funds from year to year is not encouraged. Capital funds, on the other hand, normally are available for five years, although they can be extended by legislative action.
5. Collective bargaining is complex and expensive. The state has final approval of collective bargaining contracts and sets the overall financial parameters that guide negotiations. The campuses negotiate their contracts with unions directly pursuant to the direction of the System and submit requests for funding to the Legislature. Collective bargaining contracts are subject to appropriation by the Legislature and thus are not operative until so approved. Hence, collective bargaining costs, which typically consume approximately three-fourths of any increased state appropriations, are only partially under the control of the Campus.
6. Major capital projects are not managed the Campus. Capital Projects costing under $1,000,000 may be managed by UMass Boston staff. Projects in excess of this amount are managed by a central state agency known as the Division of Capital Asset Management ("DCAM") or by the University of Massachusetts Building Authority. Hence, it is challenging for UMass Boston staff to monitor and influence larger capital projects since they are not directly under the control of the Campus.