At this point in the process, three types of adjustments will be used to determine the preliminary base spending levels for fiscal year 2001-02. They include:

Type 1: Transfers
Transfer adjustments account for permanent transfers of funds from one RRC to another or from one fund to another. An example is transferring salary and fringe dollars from one RRC to another to reflect a permanent transfer of a position. A second example is permanently transferring initiative dollars from one RRC to another following a nonrecurring post-budget transfer the previous year for a recurring commitment.

Type 2: Nonrecurring or One-Time Expenditures
Any nonrecurring or one-time allocations authorized in the approved 2000-01 budgets must be deleted from the base. Representative items in this category include allocations for equipment purchases or nonrecurring project grants. Please note: nonrecurring allocations included in the compacts, but transferred post-budget and not reflected on the allocation worksheets, were never officially in the base, and therefore do not need to be subtracted at this time.

Type 3: Debt Service
Adjustments to increase or decrease debt service allocations to conform to the required debt service schedule on bonds should be included. This adjustment applies only to the Controller’s Organization and Facilities Management.

From the preliminary base spending level, decisions on future investments will be added during Phase II of the budget process. Programmatic investments for fiscal year 2001-02 and beyond will be discussed during Phase II and throughout development of the 2001-02 Compact Documents. The Phase I base adjustment process does not include comprehensive resource planning, and therefore is not the appropriate mechanism to incorporate new investments. Compact allocations committed for fiscal year 2001-02 during the 2000-01 compact process will be incorporated into the process during Phase II – not during Phase I base development.

As will be explained further in the compact instructions for 2001-02 (to be distributed in mid-October), each compact initiative will require a financing plan. Financing plans, which could include any combination of internal unit resources and central allocations, will be proposed in the draft compacts in March, 2001, discussed and fine tuned, and finalized and approved before the compacts are completed in August, 2001. In order to plan for development of these financing plans, however, it is important to note the following guidelines and priorities that will be used in making decisions on compact allocations:

Compact allocation priorities for fiscal year 2001-02:

1. Current commitments for FY02 will be met barring any unforeseen circumstances.
2. Resources for programmatic investments outside the academic priorities in the biennial request are likely to be very limited.
3. Reallocated funds will not be available to provide for compact investments.
4. Any available central funds for compact allocations will be dedicated to address serious system issues, faculty support programs (e.g. funding leaves, awards, etc.), libraries and academic uses of technology.

Salary and Fringe Rate Increases – Potential increases in allocations for salary and fringe benefit costs are being discussed in relation to the Biennial Budget Request to the state and will be incorporated into later stages of the budget development process. No base adjustments will be done at this time for these costs.

Non-Salary Inflation – Increases for non-salary inflation will not be base adjusted. Some targeted increases are being discussed as part of the Biennial Budget Request to the state, but it is highly unlikely that such inflation will be provided outside of a specified increase in the University’s state appropriation.

Tuition and Indirect Cost Recovery (ICR) – It is not necessary at this time to propose any changes in allocations for fiscal year 2001-02 based on planned/projected increases in tuition rates, enrollment, or ICR revenue. Phase II Budget Instructions will contain information on how projected changes in tuition and ICR revenue will be incorporated into budget discussions.

Proposed base adjustments should be recorded on the 2001-02 Base Adjustments worksheet attached to these instructions. The upper portion of the worksheet shows the Board-approved central allocations to the RRC for fiscal year 2000-01.

The Budget Office has already listed the base adjustments we are aware of, so you should use the lower portion of the worksheet to list any additional adjustments you are proposing for consideration.

Follow these steps in completing the lower portion of the Base Adjustment Worksheet:

• Review Items Already on the Worksheet:
  Review items already listed on the worksheet and revise the figures if you believe they are not correct. Please write any proposed revisions to the items listed directly onto the worksheet and explain why the change has been made.

• Add Other Base Adjustments You are Proposing for Consideration – Types 1–3
  List proposed base adjustments (Types 1-3) in the column of the fund for which you are proposing the adjustment (O&M, State Specials, ICR, Central Reserves and Other Central Pools). For each proposed adjustment, provide a narrative description including:
  • the type of base adjustment proposed (Types 1-3)
  • a brief description of the base adjustment and rationale for its inclusion

Preparation and submittal of rate information through the budget process does not eliminate the need for units to work directly with Accounting Services in reviewing ISO rates for compliance with accounting standards. The submittal of information to the Budget Office as part of Phase I is intended to arrive at the appropriate level of individual rates, and does not involve reviewing the development of those rates relative to accounting standards. The two processes have a different focus and may involve different sets of information.

Due to the extraordinary increase in the projected fringe benefit rates for fiscal year 2001-02 (see Attachment B), the Budget Office is asking ISOs to prepare and submit their rate analysis at two different levels. At this point in the budget process, there is a great deal of uncertainty about how much (if any) of the increased costs of compensation (salary and fringe benefits) will be supported through increased central allocations to units, so there is also uncertainty as to how units with funding sources outside of central allocations will be asked to manage those costs. The impacts are unknown, so this tiered analysis of ISO rates will help inform management’s decisions in this area.

First, develop the rates and submit the materials assuming a 3% increase in salaries and the full associated fringe benefit costs, and any other non-salary cost factors – just as has been done in past years.

Second, submit information describing what the rates would be if the increase in fringe benefit costs could not be recovered through those rates – if that cost increase must be covered through reductions in other operating costs or increases in subsidies from other funding sources. Additionally, under this second scenario, describe what the impact of such a requirement would be on service levels and organizational structure. If you have questions regarding the content or the intent of this analysis, please contact your budget officer.