The Oklahoma State Regents for Higher Education Allocation Process

Regents Education Program

Annual Conference

September 27, 2006

Appropriations History, FY97 to FY07

0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

State 4,104,977,66 4,498,606,69 4,877,234,30 4,937,170,09 5,350,656,39 5,437,843,91 5,086,646,61 5,106,597,02 5,358,101,67 6,054,203,81 6,639,829,15

FY02/03 Orig. 5,611,514,76 5,532,095,22

Higher Ed. 636,206,579 693,299,391 757,862,120 772,165,329 816,172,157 829,112,930 791,495,572 768,130,523 802,136,296 889,433,880 1,019,433,88

'97 '98 '99 '00 '01 '02 Rev. '03 Rev. '04 '05 '06 '07

Distribution of FY-07 AppropriationsBy Subcommittee

Judiciary, Public Safety11.0%

General Government

6.7%

Natural Resources

2.2%

Miscellaneous0.2%

Health and Social Services

15.9%Human Services

10.1%

Education53.9%

Total Appropriations = $6,639,329,152Excludes supplemental appropriations

Includes capital and onetime expenditures

Distribution of FY07 AppropriationsTwelve Largest Agencies Represent 90.6% of Total

Juvenile Affairs1.6%

Public Safety1.3%

Health Department1.0%

District Courts0.8%

Mental Health2.8%Career Tech

2.2%

Transportation4.8%

Corrections6.8%

Human Services8.0%

Health Care Authority

10.5%

Higher Education14.7%

Remaining Agencies9.7%

Common Education35.7%

History of Percentage of State Appropriations, FY96 to FY07

15.415.0

36.738.05

6.9

10.6

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

'96 '97 '98 '99 '00 '01 '02Rev.

'03Rev.

'04 '05 '06 '07

Higher Education Common Education

Corrections Health Care Authority

Higher Education Appropriation Sources, FY06 / FY07

Cash3%

Lottery Trust Fund

3%

General Revenue

Fund79%

OHLAP Trust Fund

1%

Gross Production

Funds14%

Cash8%Lottery Trust

Fund5%

General Revenue Fund

78%

OHLAP Trust Fund0%

Gross Production

Funds9%

FY06 FY07

Educational and &General Budget

The Educational and General (E&G) Operating Budget of an institution consists of two (2) sources of revenue:

State Appropriations – funds appropriated by the Legislature to the State Regents who, in turn, allocate to each institution. These funds constitute 39.4% (TCC) to 71.7% (Connors) of the institution’s primary educational operating budget.

Revolving Funds – funds collected by the institution that consist primarily of student fees, sales and services of educational departments, indirect cost reimbursement from sponsored grants and contracts and other sources of miscellaneous income that support the educational and general functions of the institution. These funds constitute on average 50% of the E&G operating budget, with student tuition and fees being the largest component of the revolving funds

Percent of E&G Primary Budgets Funded from State Appropriations and Revolving Funds

75.3%

24.7%

62.0%

38.0%

50.8%

49.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

FY88 FY96 FY07

State Appropriations Revolving Fund

The FY07 Principles included strong support to cover mandatory costs, encouraging restraint in setting tuition rates; allocation of a significant increase in appropriations for basic operating costs; and increases in funding for OHLAP, Academic Scholars and high school senior concurrent enrollment.

Specific Guidelines were also adopted which included modest tuition increases, administrative efficiency and accountability in use of special fees and financial reporting.

State Regents Budget Principles

The allocation of appropriations to the Institutions of Higher Education is based upon several factors encompassing the needs and costs of providing higher education services to the State.

The determination of how funds are allocated is made through analysis of hard data provided by the Institutions, examination of peer

institution activities and consideration of compelling special needs.

State Regents Allocation Process

State Regents Allocation Process

The allocation of appropriations to Institutions takes several forms; the basic ‘funding formula’, base adjustments, and Section 13 Offset.

In past years, funding was also provided for the cost of new facilities coming into service.

The State Regents utilize formulas for each of these forms.

Specific formulae can also be developed for specific State Regents priorities as well.

Scholarship Programs - Most notably OHLAP, but also OTAG, Academic Scholars,

and others

Growth in other OSRHE priority programs, - such as Brain Gain, Section 13 Offset

Debt service

Special items- Legislative initiatives, Office of Accountability, OSF Core fees,

etc.

Factors Affecting Allocation Levels

Besides the allocations made to the Institutions, increased need for some programs are considered and funded “off the top” of the Legislative appropriations:

Basic Funding Formula

The Basic Funding Formula is the method used by the State Regents to allocate the majority of appropriations to Institutions’ E&G Budgets.

500,000

20,500,000

40,500,000

60,500,000

80,500,000

FY05 FY06 FY07

Formula Base Adj. Other

The funding formula has been developed to achieve two goals:

Peer Funding Parity – students at Oklahoma’s colleges and universities should be funded at the average level of per-student funding provided to students at peer institutions. 

Funding Parity for Institutions Within Each Tier – within each institutional tier (research universities, four-year universities, two-year colleges, technical branches), institutions should be funded at approximately the same per-student funding level from state appropriations for like-type programs/courses

Basic Funding Formula

Process I – Compare per Student Funding at Peers to per Student Funding at OK Colleges; Calculate Peer Factor

Process II – Development of Program Cost Base

Process III – Calculation of Budget Need to Each College Based upon Program Cost & Productivity,

Peer Factor & Ratio of Student Funding to Total Funding

Process IV – Allocation of State Dollars Based upon Budget Need

Basic Funding Formula

Basic Funding Formula

Process I – Compare Per Student Funding for Peer Institutions to Per Student Funding at Like-Type Oklahoma Institutions & Calculate Peer Factor

Using most recent IPEDS data Determine average FTE funding at peer institutions Determine average FTE funding at OK institutions Calculate peer factor

EXAMPLE: Peer Funding per FTE $12,285 Oklahoma Regional Universities - Small

FTE Funding per FTE $9,317 Peer Factor Calculation:

12,285/9,317 = 1.32

The “peer factor” is the ratio of the per student appropriations at peer institutions divided by the per student appropriations in Oklahoma.

The resulting factor is the multiplier needed to match Oklahoma program funding with peer institutions.

Basic Funding Formula

Process II – Development of Program Cost Base; Budget Need

To arrive at the budget need for each institution, the State Regents use “program budgeting” that focuses at the program level, i.e., calculating the costs of offering courses in each academic program at each institution.

The cost base allocated to all courses is actual expenditures of appropriations, tuition and fees.

The cost of programs is calculated for courses with methodologies for apportioning direct and indirect costs.

Direct Costs Indirect CostsFaculty salaries General Admin.Other salaries, Libraries,supplies and materials, Operations andtravel, equipment, etc. Maintenance, etc

Basic Funding Formula

For each Institution there is determined a budget need for each field of study (program) that equals the sum of:

The standard cost of each program for the tier Multiplied by the number of students enrolled in each program, Multiplied by the percentage of state appropriations to the total of state

appropriations plus tuition and fee revenue, Multiplied by the peer factor. Thus, budget needs are determined by how much institutions spend for

programs adjusted by the “peer factor”.

Basic Funding Formula

The sum of the budget needs for the offered fields of study at an institution equals the total budget need for the institution. 

Thus, the budget need of each institution is determined by the mix of programs and their costs.

The sum of all the institutional budget needs equals the system budget need.

Basic Funding Formula

Process III – Allocation of Budget Need to Each Institution Based on Program Cost & FTE Productivity & Adjusted for Peer Factor & Ratio of State Funding to Total

NWOSU $17,770,256 x 1.32 x 59.2% = $13,880,650 / 1,870 FTE = $7,423 Budget Need per FTE

Langston $25,730,408 x 1.32 x 59.2% = $20,098,461 / 2,668 FTE = $7,533 Budget Need per FTE

USAO $11,670,399 x 1.32 x 59.2% = $9,115,948 / 1,182 FTE = $7,712 Budget Need per FTE

OPSU $10,288,897 x 1.32 x 59.2% = $8,036,833 / 1,121 FTE = $7,169 Budget Need per FTE

Rogers $22,332,246 x 1.32 x 59.2% = $17,444,098 / 2,696 FTE = $6,470 Budget Need per FTE

Basic Funding Formula

Process IV – Allocation of State Dollars Based on Budget Need

Allocation of increased State dollars is based on each institution’s need as a percentage of the total system need for institution.

Appropriation Need % of State Need % New Funds

NWOSU $13,880,650 1.23% 1.23% Langston $20,098,461 1.79% 1.79% USAO $ 9,115,948 0.81% 0.81% Panhandle $ 8,036,833 0.71% 0.71% Rogers $17,444,098 1.55% 1.55%

Total Need $1,125,839,353 100.00%

Basic Funding Formula

Basic Funding Formula

The ultimate allocation of funds to institutions through the formula is based upon each institution’s budget need as a

proportion of the total budget need of all institutions within the appropriated funds available for the E&G budgets of all

institutions.

Observations on Formula

All Oklahoma state system institutions are under-funded compared to peers.

The formula process provides some degree of budget base continuity—a requirement for effective management of the higher education enterprise.

The formula is applied only to new annual appropriations and state funds are not reallocated from one institution to another.

Regents have assured institutions that reductions in course and program offerings as part of the systemwide initiative on academic planning and resource allocation (APRA) would not effect their state allocation.

Influences on Formula

Peer institutions selected Peer funding per student for each tier of institutions Ratio of state appropriations to total of student fees and state

appropriations Credit hour production by academic field of study Cost of high/medium/low cost fields of study  Deviation of each actual field of study cost from the standard

cost

Limitations of Basic Formula

does not directly account for quality of education does not enable incentives for priority actions such as

implementing new programs or raising private funds, does not penalize institutions for decreasing enrollment nor

rapidly reward institutions for increasing enrollment, does not penalize institutions for high cost of programs, and does not include the total amount of funding for an

institution, such as revolving funds or sources of funding

through other formula.

Allows State Regents to address system wide funding issues outside the basic formula. For example, institutions that have had significant enrollment increases, with little or no increase in state support, could fall in the category needing a base adjustment. Also, if Legislature creates a new branch campus a base adjustment is warranted.

For FY07, base adjustment were given to resolve differences in per student funding among several institutions that had experienced rapid and significant enrollment growth. The funding levels in the formula had not been able to keep pace with the demand upon these institutions.

Base Adjustments

Those Receiving A Base Adjustment for FY07:

Univ. Central Ok. $2,535,678 OKC CC 2,253,936 Northern Ok. 736,980 OSU – OKC 563,484 Rogers State 422,613 Carl Albert SC 338,091 Murray SC 309,916 Redlands CC 309,916 Seminole SC 309,916 Northwestern OSU 281,742 Western Ok. SC 225,916 Connors SC 169,045

Breakdown of FY07Allocation of Increased State Appropriations

1. Basic Formula $85,000,000 or 65.4% of total2. Base Adjustments $8,456,710 or 6.5% of total3. OHLAP $10,000,000 or 7.7% of total4. Nursing / Health Care Worker $4,562,646 or 3.5% of total5. Concurrent Enrollment $2,500,000 or 1.9% of total6. Institutions - Non Formula $2,722,695 or 2.1% of total7. Academic Scholars $700,000 or 0.5% of total8. Teacher Residency $500,000 or 0.4% of total9. Adult Degree Completion $500,000 or 0.4% of total10. Debt Service $15,646,744 or 12.0% of total11. Summer Academies $300,000 or 0.2% of total12. Teacher Shortage Incentive $402,692 or 0.5% of total13. Regents / OneNet $2,112,241 or 1.6% of total14. Other Items $99,508 or 0.1% of total15. OSF CORE Fees $299,123 or 0.2% of total16. Program Reallocations $3,399,667 or -2.6% of total

Total Allocation to Institutions $130,000,000 100.0%

FY07 Allocation of State Appropriations

Institutions - Endowed Chairs, $7.5

Institutions - Debt, Capital, & Master Lease,

$37.2

Institutions - Grants, $4.5 Institutions - Operations, $877.2

Scholarships, $72.4

State Regents' Office, $9.1

Office of Accountability, $0.8

System Shared Resources, $5.2

Miscellaneous, $3.1

Quartz Mountain, $1.2

OneNet, $1.2

(In millions)Total = $1,019.4 million

(Total to Institutions: $926.4 million)

FY07 Allocation of State Appropriations(Percent of Total)

Institutions - Operations, 86.1%

State Regents' Office, 0.9%

Scholarships, 7.1%

OneNet, 0.1%

Office of Accountability, 0.1%

Quartz Mountain, 0.1%System Shared

Resources, 0.5%

Miscellaneous, 0.3%

Institutions - Grants, 0.4%

Institutions - Endowed Chairs, 0.7%

Institutions - Debt, Capital, & Master Lease, 3.6%

Total to Institutions: 90.9%

Questions and Answers

Contact Information: Greg Sawyer Associate Vice Chancellor for Budget and Finance Oklahoma State Regents for Higher Education 405-522-9425 gsawyer@osrhe.edu

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