Picture a new kind of planning discipline that was the Seattle University board of trustees' request at its summer 2002 planning retreat. The trustees asked administrators to augment the university's various budgeting and planning activities with a five-year comprehensive business plan. In doing so, the trustees hoped to bridge the needs, aspirations, and directions set forth in the strategic plan they had approved earlier and the tactical, shorter-range resource allocations represented by the annual budget.
Seattle University—one of the nation's 28 Catholic/Jesuit institutions of higher learning, with seven schools and 6,000 graduate and undergraduate students—had never prepared a comprehensive business plan. Because board members with disparate backgrounds had different notions as to what the plan should include, the financial and planning vice presidents collaborated in a yearlong effort that culminated with the trustees approving a five-year plan at their summer retreat in 2003.
Integrating Planning Activities
By virtue of the work we do, Seattle University's administrators, like all college and university business officers, are planners. In addition to aligning the strategic plan with the annual budgeting process, the comprehensive business plan needed to integrate our many planning activities. We have a strategic plan with a mission statement articulating the core values that we want to preserve and protect and that make our institution unique. We have a master plan with an environmental impact statement and a transportation sub-plan that guides the campus's long-term development and meets federal, state, and local agency regulatory requirements. A capital plan lays out the scope, costs, sequencing, funding sources, and the annual operational impacts of specific construction and renovation projects. Typically, we have a capital campaign at some level of planning or execution to help us marshal resources for the future, as well as a technology plan. We also have an annual financial plan or budget.
As Seattle University's chief business officer, I found myself in a new and central role—working with the vice president for planning to assemble the information and analysis critical for the comprehensive business plan. To broaden the input and the conversations surrounding the business plan, the president appointed a planning committee, an expansion of his seven-person executive team to include a graduate student representative, an undergraduate student representative, a staff employee, and a representative from the academic assembly.
For the purposes of the five-year business plan, the revenue and expense categories from all the university's schools and programs were consolidated and then restated from those shown in the statement of activities to the broad natural revenue and expense categories used for the annual budget. The budget for the 2004 fiscal year serves as the base budget for the business plan. Each year, we will revise the business plan concurrently with the annual budget, developing the annual budget in the context of the progress being made toward planned activities. We will also add another year, keeping the time horizon at five years.
Five-Year Baseline Business Plan
|Gross Tuition Revenue||89,090||93,945||99,065||102,879||106,840|
|Institutional Grant Aid||(21,950)||(23,146)||(24,408)||(25,347)||(26,323)|
|Net Tuition & Fee Revenue||68,915||5.31%||72,574||5.44%||76,522||3.75%||79,395||3.88%||82,472|
|Endowment (Budget Replacement)||6,025||5,180||5,284||5,390||5,497|
|Res. Hall Revenue||5,530||5,696||5,867||6,043||6,224|
|Faculty Salary Pool||22,651||23,331||24,030||24,992||25,991|
|Non-faculty Salary Pool||19,185||19,569||20,058||20,710||21,383|
|Fringe Benefits @ 28%||11,714||12,012||12,345||12,796||13,265|
|Student Wages Pool||2,545||2,647||2,792||2,946||3,108|
|Centralized Information Technology||3,340||3,484||3,554||3,603||3,657|
|Currently Scheduled Transfers||2,383||2,380||2,380||2,380||2,380|
|Net Available for
|The comprehensive business plan includes the base budget for 2004 and four additional years of pro-forma budgets and programs, giving the university a five-year planning horizon.|
Funding Schedule for Strategic Initiatives
|Funds Available (000s)||FY05
|Academic Excellence (Provost)||211||1,428||1,802||2,027|
|Vital Engaged Campus (Student Development)||155||325||375||425|
|Jesuit Catholic Identity (Mission & Ministry)||0||0||25||25|
|Enhanced Visibility, Connectedness (Univ.Advancement)||120||150||150||150|
|Increasing Revenue, Endowment, Gifting (Univ.Advancement)||223||313||400||400|
|Infrastructure: Capital Plan—Operational||50||51||52||53|
|Infrastructure: Finance & Investments||260||387||509||634|
|Infrastructure: Recommended Additional Planned Maintenance||0||598||1,390||1,786|
|Infrastructure: Planning Office—Center for Service||70||70||72||74|
|Funds Not Applied||0||62||500||502|
|The dollar pool available for action plans and new strategic initiatives can be seen at the top of the chart.|
Putting It All Together
We developed a balanced baseline budget simulation for FY04 through FY08. We adjusted expense categories each year for anticipated inflationary increases and to preserve the status quo for most programs. For example, we increased faculty salaries slightly more than inflation because we project that will happen, on average, at a select group of schools. In deliberating salary growth rates, the planning committee wrestled with whether faculty and staff salary pools should be planned to increase at equal or different percentage rates. Despite Seattle University's long-standing egalitarian culture, the planning committee ultimately decided that the pool for faculty talent is national in its scope and costs, while the pool from which the staff is drawn is local and regional. Thus, the committee decided to grow them at differing rates.
Six Plans, Six Time Horizons
University administrators face a daunting cycle in updating, integrating, and communicating the wide range of planning that goes on at a university. A variety of stakeholders are involved in plan development, and governing boards and central administrators need to understand and manage the integration and consistency of the various plans. Institutions often rely on the following plans, all with differing time horizons.
If we could foresee cost decreases, such as the retirement of a bond issue, we cut the baselines in the appropriate years. The university's vice presidents, individually and in teams, developed preliminary five-year projections for the revenue lines. The provost developed an integrated program for the tuition, fee, and institutional aid categories. The vice president for planning coordinated the work done by advancement, finance, and student development for endowment projections, annual gifts, auxiliaries, and the other revenue categories.
Putting together a five-year plan required evaluating and handling questions about business risk. Because Seattle University is heavily tuition dependent, our calculations and assumptions for enrollment and the discounting factor for student aid were critical. How much pricing power does the institution have today, and how much will it have in the years ahead? What effect will pricing changes have on the composition of the student body? We completed numerous iterations of the simulation to find a financial balance, and the university's executive team struggled with difficult tradeoffs, such as access and affordability (pricing and discounting), student quality, and enrollment. The five-year baseline business plan shows the consensus baseline plan before the layering in of new strategic initiatives.
Approximately three quarters of the baseline simulation is supported by the Net Tuition and Fee category. The projected increases for years 2005 through 2008 reflect enrollment changes, student aid policies, and the net impact of tuition rates that vary program to program and will change differently.
A Call for Action
Start Planning Smarter
Learn more about institutional planning, budgeting techniques, and how the two relate at NACUBO’s inaugural Integrating Planning and Budgeting workshop, May 17–18,at the Fairmont Kansas City in Missouri. Considering complex environmental and economic factors as well as the diversity of stakeholders, this program focuses on methods to integrate the planning and budgeting processes across programs and disciplines. It examines state-of-the-art concepts for creating cooperative strategies and making informed decisions. The workshop is designed for mid- to advanced-level business and financial officers, budget and planning professionals, deans of administration, and academic officers with budget responsibilities. Teams of academic and business professionals are encouraged to attend to gain maximum benefit for their institutions. For program details, visit www.nacubo.org/professional_dev.
A strategic plan and strategic plan implementation report, approved by the trustees in 2000 and 2002, call for improvements in six areas: academic excellence; campus vitality and engagement; Jesuit and Catholic character and identity; visibility; programs for new revenues; and infrastructure. As a result of the normal annual budgeting process and the earlier work on strategic planning, the university's executive team had many ideas to improve each area. Working with the other vice presidents, the planning office developed action plans and criteria for measuring success. Next, we facilitated planning committee meetings to narrow down the ideas to a number of discrete, affordable action plans. (The actions plans are summarized according to strategic initiative in the chart "Funding Schedule for Strategic Initiatives.") For example, one of our infrastructure-related action plans describes a planned maintenance initiative considered central to preserving and improving the campus buildings. Historically, the university has been forced to allow some planned maintenance of its vital infrastructure to become deferred maintenance that was either not regularly funded or not funded at all. Our five-year plan changes that procedure. There is currently a $10 million backlog of deferred maintenance. This plan represents a phased approach and attacks that backlog in two ways: by making planned maintenance an annual budget expense that is regularly funded and by expending additional strategic funds to catch up on that backlog. To measure success, we established two criteria:
- to fund planned maintenance in the base budget at $1.3 million annually and steadily grow the program over the five years; and
- to increase our overall planned maintenance expenditures by FY08.
The planning process helped Seattle University make difficult tradeoffs in the course of settling on what could be done. The tradeoffs included both the funded amounts and the timing for phasing and completing the strategic initiatives. For example, during the planning meetings, facilities personnel outlined a facilities life-cycle renewal program and advocated its immediate funding. This program was eventually built into the plan over the five-year period and modified so that
- we spent less in the base budget on planned maintenance than originally proposed;
- we spent less on additional planned maintenance than proposed FY04-FY06;
- we delayed the catch-up on the maintenance backlog;
- we delayed reaching NACUBO and APPA standards for planned maintenance spending beyond FY08; and
- we minimized capital initiatives for new or expanded space.
As we looked at the necessary tradeoffs and subsequent delayed actions, we realized that a phasing-in process would ultimately work to our benefit. Stretching out our priorities across time allows us to think ahead and accomplish our goals without having to upset the delicate balance between pricing and enrollments.
How to Offset Negativity
Although our comprehensive business plan gives us a roadmap to follow for the efficient use of resources, we were conscious of the need to anticipate and counteract negativity when advocates for programs and initiatives realized their ideas had to be substantially downsized or, worse yet, excluded from the five-year plan. We offset such negativity by keeping an open planning process, actively communicating with all of the campus constituencies during plan development, distributing the plan broadly across the campus, and presenting the plan to groups of faculty and staff. As we enter the budget preparation cycle for FY05, the work we have completed on the comprehensive business plan gives us a huge head start over previous years.
Ramping Up Academic Achievement
The strategic plan and mission statement focus on academic excellence as the primary strategic goal for Seattle University. In reevaluating our timeline for meeting our goals, we acknowledged that success would not happen overnight. Although it would require holding off on certain steps until funding could be secured, a gradual, long-term approach would serve us well. Key components of the plan include:
Reduce class sizes where it would enhance quality.
Hire more full-time, tenure-track faculty.
Offer competitive faculty salaries.
Increase library funding.
Offer a Center for Teaching and Learning.
Provide learning assessment programs.
Measurements Of Success
Improved retention rates.
Improved student satisfaction in target programs.
Measurable improvement in learning outcomes.
No new faculty hires in FY05.
Slower addition of faculty FY06 through FY08; some faculty hires delayed beyond FY08.
Library funding, which had a 1998 target goal of reaching the median of peer institutions' spending per full-time student, will be delayed past FY08.
Author Bio Denis S. Ransmeier is vice president for finance and investments, Seattle University.
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