Academic journal article Journal of the International Academy for Case Studies

Balancing the State College Budget: Why Must Tuition Increase and by How Much?

Academic journal article Journal of the International Academy for Case Studies

Balancing the State College Budget: Why Must Tuition Increase and by How Much?

Article excerpt

INTRODUCTION

Exam time is here, or so it seemed, as Percy Bradshaw prepared to enter the Board of Trustees Conference Room at Winegar University. This year July 15 had been selected as the date for the annual skewering. The event never failed to create butterflies as Percy braced himself for the litany of questions--perhaps it was an exam--that were sure to bombard him once inside the room. The examiners were the Board Members and President of Winegar and Percy had been relentlessly playing their predictable queries over in his mind as the moment of truth approached:

Will we have to raise tuition again this year?

Why?

By how much?

Will it cost us students?

What if we don't--worst and best case scenarios?

What are our alternatives to raising tuition?

Percy knew his answers would dramatically affect the pocketbooks and future prospects for thousands of Winegar University (Winegar University is a fictitious institution. However, all budget variable values are based on factual historical data) stakeholders. Not just students and prospective students, but faculty, staff, and the local business and employment community as well. For Percy Bradshaw was Winegar's Vice President, Finance, and hence responsible for assimilating revenue and cost estimates amidst increasingly pessimistic state revenue projections into budgetary recommendations for the President and Board of Trustees. What a moving target--mused Percy. Oh well, guess that's why I'm paid the big bucks--yeah right!--were Percy's final rueful thoughts as he crossed on through to the other side.

SUMMER: THE SEASON OF BUDGETARY UNREST

Earlier that summer, as in each of summers past, the Office of the Controller (more specifically Percy Bradshaw) monitored the state revenue projections and budget proposals emanating from the legislature in the state capital. As in each of his previous summers Percy had that sinking sense of deja vu--eleventh hour haranguing between the state Senate and House of Representatives over the amount of money budgeted for higher education was preventing him once again from finalizing a budget for the coming academic year. The University President was anxiously awaiting the budget so he could present it to the Board of Trustees for final approval. This meant, with the beginning of fall classes only 12 weeks away, the University could not present prospective students or their parents with their tuition tariff. The tuition charges to a large extent determine the number of students enrolling and thus determine the major revenue stream that would support the university's operations. Percy rued the recurring unpleasantness of summer--the season of uncertainty that complicated an already complex budgeting process. So, Percy decided he would do what he always did; attempt to prepare budgets based on various scenarios that would result from a number of interrelated factors.

His analysis this year would be further complicated by the fact the university's expenses exceeded revenues by $4.5 million in the previous year. This loss was largely due to an unprecedented 5 percent rescission (each state university was required to give back to the state; in Winegar's case nearly $1 million) of state funds. While last year's deficit was covered by using the University's reserve funds, Winegar's President clearly stated using the reserve funds is not an option for the next academic year. Further evidence the President was gun shy from the previous years' rescission of allocated funds was his request for budgets under three scenarios: worst case (five percent below last year's post rescission funding), best case (pre-rescission funding level) and most likely (same allocation as last year with the rescission).

THE CONTEXT OF BUDGETING AT PUBLIC (STATE ASSISTED) INSTITUTIONS OF HIGHER LEARNING

Institutions such as Winegar have seen their level of state funding drop precipitously in recent years. …

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