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Analyzing IPFW’s Budget

Written by: Bernadette BeckerFebruary 02, 2017

IPFW’s budget has been heavily criticized and analyzed in the face of the budget deficit and enrollment declines. One maneuver to combat the budget deficit was the Purdue early retirement incentive program, with the intention of saving the cost of salary and benefits of employees who retire and are not replaced.

“These reductions are permanent,” Director of Budget and Planning Walter Soptelean said.

IPFW’s goal was to save money on salary for those who took early retirement, by not rehiring for 75 percent of the positions. Certain “mission critical” positions, though, will have to be manned, Soptelean said. IPFW was near the goal of 75 percent savings but did not meet it, because “mission critical” people took early retirement.

EARLY RETIREMENT’S IMPACT 

Because of early retirement, Physical Plant lost 14 staff at the end of 2016, Physical Plant Work Center Coordinator Denise Guingrich said in an email. The Center received permission to replace two of the lost positions. Staff cuts also play a part in the recent move for staff and faculty members to take out their own trash, Soptelean said.

According to the data Soptelean reported, 70 people took early retirement packages. Of those,  25 were in the Office of Financial and Administrative Affairs, 43 were in the Office of Academic Affairs. Only one person took early retirement in both the Offices of Student Affairs and Advancement. The goal is to replace less than one-quarter of the positions.

Since the early retirement changes, Chancellor Vicky Carwein and Vice Chancellor David Wesse share an executive assistant. Wesse and Soptelean had shared an executive assistant.

In response to the 2016 early retirement plan: “Responsibilities were redistributed,” Carwein said

If the cuts hold, the projected savings is $2.6 million for each forthcoming fiscal yea within the general fund.

BUILDING THE BUDGET

Since the budgeting office is within Wesse’s Office of Financial and Administrative Affairs, Soptelean and Speshyock have seen Wesse’s many changes to streamline the operations at IPFW.  Some changes were to streamline the police force, change the university housing management agreement, tie scholarships to IPFW housing, and find new ways of reducing IPFW bad debt expense, etc.

“If he felt that Peggy and I couldn’t add value to the university, we would not be here,” Soptelean said.

“We really make no decisions. … We are a purveyor of information ,” he said.

“Everything we do we’re trying to do to positively impact the students,” Soptelean said.

The budget is biennial since appropriations happen on a two-year cycle, but more than the legislature determines the budget for IPFW.

“The Higher Education Commission strongly suggests the recommended guidelines for tuition increases; this last couple of years it was 1.56 percent,” Soptelean said.

The university’s main variable income is the tuition from students, but there are also some earnings on investments.

After Soptelean determines revenues, he looks at non-negotiable expenses such as bond payments, utilities, the Purdue management fee, and earmarked fees, such as IT and parking, that are tied to specific areas. One of the final components to the budget is computing the salaries, benefits and supplies.

“We are going to budget a reduction,” Soptelean said.

The reduction is in reaction to the last five years of declining enrollment.

‘WHY DIDN’T YOU BUDGET DOWN?’

A criticism by faculty and the public is that the budget didn’t anticipate  prolonged enrollment decline and make cuts sooner; instead, it planned for the budget as if enrollment was flat and thus created an increasing deficit.

Soptelean came to IPFW less than five years ago amid the situation of declining enrollment, he and Wesse, both fresh to the situation, thought that enrollment would bottom out. Instead, enrollment continued to drop. It was a game of catch up: each year the budget would be set as if the number of students would not decrease again.

“The budget drops every year, but we dropped it to our new enrollment level, not planning on it to drop any more,” Soptelean said.

CHANGES TO THE BUDGET

“What is the best use for that money?” is the main question on Soptelean’s mind.

He and Speshyock focus on efficient resource allocation.

Formerly, it was IPFW’s practice that the budget would be altered to match expenses as the year went on.

“We never used to have a variance,” Speshyock said.

This meant that the extent of resource misallocation was never totally understood. Supplies, travel, software, contracts, printing and IT used to be just one line of expenses, therefore it was hard to adjust. Now there are several categories to how expenses should be reported in line with the procedures used by Purdue West Lafayette.

Another change  was travel reimbursements. Formerly, people were reimbursed for mileage on their trips to Purdue West Lafayette in their personal vehicles. Now there is a car rental service that has saved almost 75 percent of costs,  Speshyock said.

PURDUE 

There is a Purdue initiative to get more intelligible financial information out to the public, Soptelean said. Particularly, Purdue wants to be able to ensure numbers are comparable across institutions.

One move is to consolidate funds, Soptelean said. In the Purdue system, there are thousands of separate funds that the Purdue administration is trying to compile into centralized locations. IPFW has been cleaning up funds as well. This will enable Purdue to run a system-wide financial report.

TRANSFER TO IU

Soptelean anticipates a total blackout to the finances of the health sciences going to IU, just like  he has no information regarding the IU School of Medicine at Fort Wayne. However, with the school transference Purdue will be billing IU for services rendered to IU students.

“We will charge IU per student whatever the students are being charged, but what IU charges the students, we don’t know,” Soptelean said.