Tuition deficits may lead to university budget policy change

Emma Austin

Department heads at WKU use one complex policy to determine what the next semester for their program will hold, but after mid-February, that reality may change.

WKU’s carry forward policy allows programs to take unspent money and determine what use it will have in the coming fiscal term, but a pending executive decision could give WKU’s administration overall control.

“We have to evaluate what’s the best mechanism to cover any shortfall in tuition,” Ann Mead, vice president for finance and administration, said.

Currently, the budget office provides each division with carry forward information in the fall. The carry forward is then allocated in thirds, the last of which is provided in early spring, Associate Vice President of Academic Budgets and Administration Ladonna Hunton said in an email.

Divisions are able to plan ahead and decide how to manage the budget each fiscal year. The current policy allows saving for purchases or one-time expenses without permanent funding.

“Deans and unit managers have always been conscientious stewards of their carry forward funds,” Hunton said.

In response to a deficit caused by enrollment declines, university administration is considering a change to the policy, which would halt allocation of carry forward money until the estimate for tuition is met.

Between 2012 and 2015, total enrollment saw a gradual decrease, dropping from 21,124 students to 20,068. Though there was a slight increase of 209 from 2015 to 2016, Mead said not as many students returned this spring as anticipated.

Mead said a decision could be made as early as mid-February, going into effect immediately.

“What’s gone wrong with the carry forward has nothing to do with the carry forward,” Mead said. “What’s wrong is we’ve had some decline in enrollment, but even a small decline in enrollment can cause some problems in your budget process.”

Mead said during strong fiscal years, the carry forward policy worked well. Tuition revenue allowed university-wide projects. However, when the university is faced by enrollment declines, the central budget is left without wiggle room.

The policy was revised in 2013, and a 10 percent cap was added to the policy, meaning a division could not receive a return higher than 10 percent of its original budget. The policy also added a tax on the carry forward to allocate a percentage to the central budget.

Before the carry forward policy was introduced, surplus revenue and under expenditures were accrued to the university’s central budget; there was no automatic policy to determine how the excess money would be allocated.

At the end of each fiscal year, all surplus revenue became one number for the entire university. Thomas Meredith, WKU’s president at the time, would ask divisions what they needed before the money was redistributed, Mead explained.

“There was a use it or lose it mentality,” Mead said. “Let’s say it’s June and I’ve got $5,000 in my budget. I might be looking around to see how I could spend it. It might be in the best interest for it to come central for university-wide priorities, but can you imagine saying there’s money left over in my budget; I think I’ll contribute that to a renovation project in athletics.”

President Gary Ransdell initially introduced the carry forward policy to return balances to individual divisions. Surplus revenue is returned to its division to encourage strategically prioritizing projects that may require more money than the annual budget allows.

According to the policy, which has been in place for almost a decade, it “provides additional fiscal flexibility and rewards good management.”

There are a few exceptions to the policy, including revenue-dependent divisions, which are expected to cover all their expenses.

Some people use carry forward, which is considered one-time money, to take care of expenses that recur annually.

“If you think of it like a rain bucket, it fills up when it rains, but you don’t know how much rain you’re going to get, and you have some evaporation,” Mead said.

Some costs come up that don’t have permanent funding, so there’s a reliance on “filling the bucket” again with the carry forward. If the policy is changed, there would be no guarantee of how much money is returned to departments and other university-funded programs.

“To tell you the truth, it would not go over really well,” Mead said. “We’re in January; they’ve already spent some of it; they’ve probably planned to spend most of it.”

Reporter Emma Austin can be reached at (270)745-0655 and [email protected].