University of Virginia

University Budget Office

2011-12 Budget Development Instructions

Table of Contents

Important Issues for 2011-12 Budget Development 2

State General (SG) Budget Reductions 2

Other Budget Reduction Concerns 3

Equipment Trust Fund (ETF) and Maintenance Reserve. . 3

Eminent Scholars Match. 3

New Budget Model 3

Endowment Distribution/Endowment Fee Assumptions 3

Expenditure Assumptions 4

Salaries and Benefits. 4

Fringe Benefit Rates. 4

Other Than Personnel Services (OTPS). 5

Graduate Financial Support 5

Graduate Teaching Assistant (GTA) Full-time Equivalents (FTEs). 5

2011-12 Budget Submission Requirements 6

Budget Development Calendar 6

Budget Training 6

Budget Submission Components 6

Budget Submission Narrative 7

Tuition or Fee Increase Requests. 7

Integrated System (IS) General Ledger (GL) and Grants Accounting (GA) Budget Detail 7

Planned Expenditures from Selected Fund Sources 8

Budget Addenda Request 9

Reserve Projections 9

Annual Renovation and Infrastructure Projects Plan (ARIP) 10

Budget Checklist 10

Index of Attachments 10

Important Issues for 2011-12 Budget Development

State General (SG) Budget Reductions

Budget targets on SG awards have been reduced again for 2011-12 by 2.5 percent for schools and libraries and 3.0 percent for all other Major Budget Units (MBUs). This target decrease is related to the reduction that units originally planned for in October 2009. At that time, the University anticipated an additional $19.3 million reduction in its general fund (GF) tax appropriation from the state and each MBU planned for a 6.0 percent reduction in SG funds. However, in April 2010, the General Assembly reduced that cut to only $4.6 million, with the remaining $14.7 million reduction deferred to 2011-12. That action allowed the University to defer a portion of our internally planned 6.0 percent reduction for one year; for 2010-11, the reduction in SG targets was 2.5 percent for schools and libraries and 3.0 percent for all other MBUs. The cumulative impact of the 2010-11 and 2011-12 reductions is 5.0 percent for school and libraries and 6.0 percent for all other MBUs.

The good news is that, although Governor McDonnell required each agency to submit 2.0 percent, 4.0 percent, and 6.0 percent GF budget reduction plans for 2011-12, higher education did not receive any additional reduction beyond that already expected in his proposed budget.

To summarize the impact of reductions since 2007-08:

·  In October 2007, the state reduced the University’s GF appropriation by $9.2 million (6.25 percent), which was passed along to schools and departments as a 1.8 percent mid-year SG reduction in fall 2007 and an additional 1.2 percent SG reduction to 2008-09 budgets.

·  In October 2008, the state further reduced the University’s GF appropriation by $10.6 million (7.0 percent), which was passed along to schools and departments as a 3.0 percent mid-year SG reduction in fall 2008.

·  In April 2009, the General Assembly approved the Governor’s recommendation for an additional $12.4 million (8.0 percent) GF reduction. This resulted in a 3.2 percent SG reduction to 2009-10 departmental state general budgets.

·  In April 2010, the General Assembly approved the Governor’s recommendation for an additional $4.6 million (3.6 percent) mid-year GF reduction. This resulted in a 2.5 percent SG reduction to 2010-11 academic budgets and a 3.0 percent SG reduction to 2010-11 administrative budgets.

·  In April 2010, the General Assembly approved the Governor’s recommendation for a $14.7 million (11.4 percent) GF reduction to the University’s 2011-12 appropriation. This has resulted in a 2.5 percent SG reduction to the2011-12 academic budgets and a 3.0 percent SG reduction to 2011-12 administrative budgets.

·  Cumulatively, over the past five years, the University has incurred a $51.5 million or 32 percent reduction in the state GF appropriation, and schools and departments have experienced a 14-15 percent reduction in their SG budgets.

Other Budget Reduction Concerns

Equipment Trust Fund (ETF) and Maintenance Reserve. The state’s fiscal crisis has impacted the status of other state allocations. The 2010-12 Appropriation Act (including recent amendments introduced by Governor McDonnell) includes an authorization to use debt for the ETF and maintenance reserve in both years. However, the constraints on the state’s debt capacity due to reduced state revenues have held up the issuance of debt for ETF and maintenance reserve in 2010-11. As of January 10, 2011, we still do not have any information regarding when and if the 2010-11 allocation will be released. We hope that we may hear information in the next week as the General Assembly session begins. We will let all ETF recipients know as soon as we have any word. As a reminder, any 2010-11 ETF purchases made before notification from the Budget Office that units may proceed with such purchases will be at the financial risk of the unit making the purchases. We do not have institutional resources to reimburse these purchases if the state does not release the funds. As of January 10, 2011, we also do not have any information regarding the 2011-12 status of ETF and maintenance reserve.

Eminent Scholars Match. The Governor’s introduced budget for 2011-12 does not include any further reduction to the eminent scholars match. The Budget Office will continue to watch this during the General Assembly session and will notify schools if it becomes apparent that a reduction will occur. At this time, units should plan to receive an eminent scholar matching allocation equal to the amount provided in 2010-11.

New Budget Model

President Teresa Sullivan has identified the implementation of a new budget model for the University as a top first priority of her administration. Initial work has begun to develop a new, comprehensive budget model that will encourage stewardship of university resources, be transparent in decision-making, and provide incentive-based execution. More information will be forthcoming as a steering committee is identified, a work group is established, and a timeline is developed. Progress updates will be broadly communicated.

Endowment Distribution/Endowment Fee Assumptions

The endowment spending policy adopted by the Board of Visitors allows the endowment spending distribution to increase each year by an inflationary factor, as long as the resulting distribution falls between 4 and 6 percent of the preceding June 30 market value of the endowment. The unprecedented market volatility between 2006 and 2009 resulted in the measuring falling outside this range, and the Board chose to re-set the distribution in each of those years.

Some measure of stability has returned to the endowment, and in 2010-11, the spending rate was increased by an inflationary measure rather than a specific re-set by the Board. The 2010-11 spending rate increased by 3.8 percent, based on the five-year average of the Higher Education Price Index. The 2010-11 distribution (made in two installments in January 2011 and June 2011) was set at $242.24 per share, based on shares owned on June 30, 2010.

Through November 2010, the endowment return has been 10.1 percent. (Monthly reports are available at http://uvm-web.eservices.virginia.edu/public/reports/.) If this performance continues through June 30, 2011, we would expect to see the 2011-12 endowment distribution increase by an inflationary measure. The 2011-12 distribution will be made in two installments on January 2012 and June 2012.

In addition, a 0.5 percent administrative fee (based on the endowment’s June 30th market value for the preceding fiscal year) will be assessed to each endowment. One-half of the assessment will be held centrally, while the other half will be returned as unrestricted funds to the schools and equivalent divisions that hold the endowment accounts. The 2011-12 fee will reflect the endowment market value as of June 30, 2011.

Expenditure Assumptions

Salaries and Benefits. The Governor’s budget for 2011-12 has a complex proposal related to Virginia Retirement System (VRS) and Optional Retirement Plan (ORP) retirement contributions and salary increases, summarized below. It is critical to note that, at the time these instructions were developed, this proposal has NOT yet been addressed by the General Assembly and is subject to change. In summary:

·  For employees participating in the VRS: Base salaries would increase by 3.0 percent and employees would begin to contribute 5.0 percent towards retirement on July 1, 2011.

·  For employees participating in the ORP: No base salary increase, but the University’s retirement contribution would be reduced from 10.4 percent to 8.5 percent on July 1, 2011.

·  If 2010-11 state revenue surpluses are sufficient, faculty and staff will be eligible for a one-time 2.0 percent bonus at December 1, 2011.

·  For more information, see http://www.hr.virginia.edu/news-events/news/gov-proposal/.

If the proposal is approved, the budgetary impact is still unsure. There would be increased salary costs, which would be more than offset by a decrease in the University’s retirement contribution. However other factors, such as rising healthcare costs, will also impact the University’s assessed fringe benefit rate. Additionally, the state’s proposal also includes returning to the state any savings related to changing the institutional retirement contribution paid from non-state dollars. If this holds, the overall financial impact may be closer to zero.

Due to the uncertainty around the proposal and the potential for the overall impact to be close to zero for departmental budgets, the University Budget Office suggests that non-targeted awards assume no change in the total of salary and fringe benefits for employees. Targeted awards should budget based on current compensation; if there are changes, budget adjustments will be processed at a later date.

For 2011-12, please note that the Budget Office has added new “budget only” expenditure type lines for University staff salary and benefits.

Fringe Benefit Rates. Prior to the recent proposal by Governor McDonnell, it was expected that faculty and staff fringe benefits rates would increase slightly in 2011-12 due to increased employer healthcare costs while remaining lower than in 2009-10 due to 2010-11 changes in retirement contributions. The rates below are those estimates only and do not include the impact of changes that may be approved during the 2011 General Assembly session. Final fringe benefits rates will be communicated by University Human Resources when approved and will be available at http://www.hr.virginia.edu/other-hr-services/payroll-information/fringe-rates/. New fringe benefits rates become effective on July 1 each year, so the payroll posted in July for the prior June will be encumbered at the old rates.

For targeted awards, units should use current fringe benefit rates to build budgets; when the 2011-12 fringe rate is finalized, the University Budget Office will modify state and local targeted budgets to accommodate the rates. UVA Budget Developers will be notified by email when targets are adjusted. Non-targeted awards should use the projected 2011-12 rates (projected before any 2011 General Assembly actions) outlined below.

/ 2010-11 FB Rates, for Targeted Awards / Projected 2011-12 FB Rates, for Non-Targeted Awards /
Full-time Faculty and University Staff—Executive / 27.0% / 29.0%
Full-time Classified Staff, University Staff—Managerial and Professional, and University Staff—Operational and Administrative / 31.3% / 33.5%
Part-time Faculty and Staff with benefits / 27.5% / 29.5%
Part-time Faculty and Staff without benefits and Wages / 5.5% / 6.0%

Other Than Personnel Services (OTPS). Accounts charged directly for communication services, insurance, utilities, and other facilities services should set budgets based on the rates released by Voice Communications, Risk Management, and Facilities Management available on the Budget Office website. For auxiliary units, an estimate of the 2011-12 general and administrative cost charge will be distributed in January and should be incorporated into the budgeted expenditures.

The Microsoft Headcount Fee will be going up from $50 to $53 per headcount employee in 2011-12. This change is the first cost increase that has been passed along to units since the fee was assessed in 2008-09. Previous cost increases were absorbed by the CIO’s office. Any questions on this fee should be addressed to Susie McCormick in ITC at or 924-4826.

Graduate Financial Support

The University Budget Office has been working closely with the Ad-Hoc Graduate Financial Aid Committee to address concerns with the timing and structure of the institutional allocation of graduate financial aid. Accordingly, the 2011-12 allocation will reflect a restructuring of the aid allocation in order to reduce some of the restrictions on spending and will be released at an earlier date.

Graduate Teaching Assistant (GTA) Full-time Equivalents (FTEs). For 2011-12, the allocation of GTA remission (in-state tuition and all required fees) will be based on the number of GTA FTEs budgeted in during 2010-11. Units desiring to increase GTA FTEs must submit a request via the addenda process. The addenda request should include the cost of in-state tuition remission, out-of-sate tuition adjustment, health insurance, and wages for any additional GTA FTEs.

2011-12 Budget Submission Requirements

Budget Development Calendar (Attachment 1)

The 2011-12 Budget Development Calendar can be found on the University Budget Office’s website and is included for reference as Attachment 1. Budget submissions must be received by the close of business on the dates listed. Please note that budget submission deadlines for each vice president/dean and executive vice president have been incorporated into the calendar to facilitate review and approval by these offices before budgets are submitted to the University Budget Office.

All budget submissions to the University Budget Office must be sent electronically to . If you have any questions related to your unit’s 2011-12 budget development or submission, please refer to the University Budget Office’s “Who Should I Contact?” list to identify the appropriate individual to whom you should direct your inquiry.

Budget Training

The University Budget Office will be holding separate 2011-12 Budget Development Kick-off meetings for Academic units and Administrative units. The Budget Development Kick-off for Academic units will be held on January 10, 2011 from 1-3 p.m. in Newcomb Hall’s Commonwealth Room. The Kick-off for Administrative units will be held on January 12, 2011 from 1-3 p.m. in Newcomb Hall’s Commonwealth Room. The focus of the session will be to provide an overview of critical budget-related issues for 2011-12 and changes in the budget submission process. The session will be targeted towards the chief budgeting professional in each organization – those who will be making budget decisions and developing the overall budget. These individuals should attend the session in order to receive guidance on assumptions and requirements related to the upcoming fiscal year.