$5 million reallocation will strengthen university budget management process

Mississippi State will reallocate $5 million in the current year's budget over the next few weeks to remedy a long-standing weakness in the budget management process and position the university to accomplish the goals outlined in its strategic plan for the next five years.

"The Leadership for the 21st Century agenda that we agreed on earlier this year as a university community can move Mississippi State to new levels of quality and competitiveness, but we have to make sure that we're building on a solid foundation," said President Malcolm Portera.

"This is the continuation of an on-going reallocation process that was initiated with the reduction of university vehicles," Portera said. "We've made a good start on strengthening the academic side of the university with investments in the library, new faculty positions, and research support, and we have the plans in place to complete the physical infrastructure of the campus as well. We also want to ensure that our fiscal infrastructure is sound."

For the past five years, MSU has annually budgeted up to $5 million that is not actually on hand at the start of the fiscal year but is expected to become available as funded employee positions go unfilled for part of the year.

When a position becomes vacant, the unused salary that accumulates until a replacement is hired goes into the university's general fund. This "lapsed salary" is used to fill in the revenue gap that exists at the start of the budget year.

Departments that generate lapsed salary currently can reclaim a portion of the unused funds to pay temporary replacements or to cover the costs associated with filling the vacancy. The idea is to have enough lapsed salary left over each year to cover the unfunded part of the budget. If it doesn't work out that way, the university may have to dip into its reserve funds to make good the shortfall.

The current practice of deficit budgeting would leave the university particularly vulnerable in the event of a downturn in the economy that reduced state revenues.

But the "rolling hole in the budget," as Portera described it, would be plugged through a plan presented in recent days to the Administrative Council, the Faculty Senate Executive Committee, Professional and Support Staff Advisory Council, and others. The president is presenting the plan to other faculty and staff groups during a series of meetings.

Portera called for a $5 million reallocation from Education and General budgets--excepting faculty salary funds, scholarships, and tuition fee waivers--to fund this year's budget up front.

With faculty salary and scholarship budgets off the table, the $5 million to be reallocated would be pro-rated among university divisions. Most divisions would make one-time, permanent budget reductions this fall to meet their reallocation targets.

The divisions of Business Affairs and Student Affairs requested extra time to make the necessary adjustments, and those reallocations will be in place by next July 1. In the meantime, Business Affairs and Student Affairs will continue to return lapsed salary to the general fund to meet their reallocation obligations.

Guidelines for reallocation, Portera said, include protecting teaching and research, positioning the university to take advantage of new opportunities, and improving the ratio of faculty to other staff. He noted that only 868 of the university's 4,383 current employees are classified as teaching faculty.

Amounts to be reallocated are:
Business Affairs, $2,037,332; Academic Affairs, $1,580,730; Student Affairs, $531,748; Research, $368,288; External Affairs, $289,516; President's Office, $111,020; Athletics, $44,482; and Agriculture, Forestry and Veterinary Medicine, $36,884.

Vice presidents, working with deans, department heads and directors, will be asked to identify within the next few weeks programs or vacant positions that can be cut back to provide the funds for reallocation.

Education and General funds represent only a small part of the overall budget of the Division of Agriculture, Forestry and Veterinary Medicine, which receives separate state funding for its major units.

The planned reallocation is consistent with objective VI.A.2. of the Priorities and Goals for 2000-2004 adopted last spring. That statement says, "The university will eliminate reliance on lapsed salaries for recurring expenditures."

"Leadership for the 21st Century: Mississippi State University Priorities and Goals, 2000-2004," is on line at <http://msuinfo.ur.msstate.edu/priorities/>.