KU has nearly $20M that doesn’t show up in budget documents; chancellor, others using it to make mandated cuts
photo by: Carter Gaskins
KU Chancellor Douglas Girod has made only one actual spending cut as part of a mandated $20 million budget-cutting initiative, a review by the Journal-World has found.
For most of the other budget adjustments he has made, Girod has used money from a reserve fund that doesn’t show up in the published budget for his department. KU officials confirmed that many departments across the University of Kansas have funds — cumulatively they total upward of $20 million — that aren’t reflected in their published budgets. Many departments are using those funds to meet the university’s requirement of a 5.8 percent across-the-board budget cut, said Diane Goddard, KU’s chief financial officer.
At a university forum last week, Girod told a crowd that “we already have done in excess of 10 percent cuts in my office.” But that statement doesn’t mean the chancellor’s office has cut the amount of spending it plans to undertake in fiscal year 2019 by 10 percent. Goddard, though, said that is the case with many departments this year. Departments, or business units, are only required to come up with cash this year rather than making actual cuts to spending.
“This is a cash cut,” Goddard said. “Next year is a very different story. As we are creating the budget for next year, every single unit will have to identify base money and remove it from their budget.”
The Journal-World in late August began asking for details about budget cuts the chancellor had made to his office and for the other departments that he serves as a budget manager. On Aug. 30, a spokeswoman provided a list of budget adjustments made to the office of the chancellor and noted that only one “permanent cut” had been made to the chancellor’s budget, while the rest of the adjustments used “carry forward funds with decisions on permanent cuts to the base budget to come later.”
The one permanent cut was the previously announced elimination of a vice chancellor position that also served as the university’s chief financial officer. Girod announced in June that he was eliminating the position held by Vice Chancellor Leisa Julian. The plan also involved adding new financial responsibilities to Goddard, who was serving a financial role in the provost’s office.
Technically, though, Julian’s position never showed up in KU’s published fiscal year 2019 budget. The decision to eliminate the position was made prior to the publication of the budget. But Goddard said it was appropriate to consider elimination of the position as a 2019 budget cut even though it was never included in that year’s budget. She said the position easily could have been included in the FY 2019 budget and then removed.
It is unclear whether other departments also are being allowed to credit decisions made in fiscal year 2018 toward their FY 2019 budget adjustments. KU has not yet published a summary of budget adjustments made thus far for each department or unit.
The vice chancellor cut eliminated $239,700 in salary and an estimated $60,000 in fringe benefits, according to an email from spokeswoman Erinn Barcomb-Peterson.
The rest of the budget adjustments involved using carry-forward funds, which are a type of reserve fund that accumulates with money that was budgeted to be spent in previous years but that ultimately was not spent. Departments and units historically have been allowed to keep those unspent funds in a carry-forward account. The carry-forward account, however, is not shown as part of the department’s available funds in the budget document that is provided to the public. It is the use of those funds that is allowing many KU departments to make the 5.8 percent budget adjustment without having to cut staff positions or other spending levels.
In the case of the chancellor’s office, he reduced carry-forward funds by the following amounts for the divisions that he serves as a budget manager:
• Chancellor’s office: $53,556
• Dole Institute of Politics: $41,665
• Alumni Records: $23,196
• Aviation Services: $37,714
• General Counsel: $93,484
• Athletics: $87,386
Those cuts — which for budgetary purposes are all considered to be part of the Office of the Chancellor’s budget unit — total $337,001. That is equal to 3.8 percent of the $8.7 million 2019 budget for the Office of the Chancellor, which is far short of the 5.87 percent adjustment that is being mandated.
However, Goddard clarified that KU is not asking departments to cut 5.87 percent of their total budgets. Rather, departments are being required to make an adjustment that is equal to 5.87 percent of their “general use” dollars. General use dollars are those funded by tuition. Many departments also receive other types of revenue, including student fees, which are treated differently from tuition dollars. Student fee revenue generally does not factor into this year’s budget cuts.
When looking only at general use dollars, the chancellor’s budget unit has $5.6 million of budgeted spending for 2019. An adjustment of $337,001 is equal to 5.9 percent, which puts the chancellor’s office in compliance with the mandate to cut 5.8 percent. But the 5.9 percent adjustment is far short of the 10 percent cuts that Girod described at last week’s university forum.
Goddard, though, said Girod’s statement about making 10 percent cuts to his budget is accurate because she believes that the elimination of the vice chancellor position also should be attributed to the office of the chancellor’s budget. However, budget documents do not list that vice chancellor position as being part of the office of the chancellor. Instead, it is listed in an entirely different budgetary unit called Business and Financial Planning. The math on Girod’s claim that he has cut 10 percent from his office only works out if the approximately $300,000 in savings from the vice chancellor cut is recategorized to the office of the chancellor.
Goddard, though, said it was appropriate to recategorize the funds, in part, because the vice chancellor position reported directly to Girod.
Mechanics of a budget cut
For many university departments, the mandated budget-cutting process has gone like this:
Step One: Calculate the size of your required cut by looking at how much funding you are budgeted to receive from tuition dollars and then multiplying the number by 5.87 percent.
Step Two: Look in your “carry-forward” reserve account to determine whether you have enough idle funds to cover your required cut. If you do, you let KU budget leaders know to take this year’s budget cut out of your reserve fund.
Diane Goddard, chief financial officer for KU, confirmed many — but not all of KU’s departments — are able to meet their budget cut mandate by using those idle reserve funds.
But the general public and the university community will have a hard time knowing which departments are in a good position to make those cuts and which ones will struggle to do so.
KU’s published budget does not list the carry-forward funds available to each department. The leaders of those schools or departments know the amount, but other employees or interested members of the public do not.
University officials did not provide an explanation for why the carry-forward funds are not shown as part of the budgets, other than noting that the practice is not new. A precise total of carry-forward funds that exist throughout the university wasn’t immediately available, but Goddard confirmed the amount is near $20 million.
When asked why the university has allowed the departments to keep the unspent funds over the years, officials said they are re-evaluating several pieces of the university’s budgeting process. Some organizations allow departments to keep their unspent funds, while others will require those funds to be returned so they can be redistributed to meet other budget needs.
“We have needed to revise our budget protocol for a while,” Goddard said. “We are taking this year to do that.”