Just Jay Blog

When Budgets Don’t Go as Planned

A lot goes into the budgeting process at Bethel, and this year is no exception. I asked Kathleen Nelson, senior vice president for finance and administration, to share about how the process works at Bethel and what things will look like for next year. Since my first request a few things have changed, but I’ll let her explain.

It sounds like some things have changed since the budgeting process for next year started. What happened?

As the year progressed, we learned that our enrollment wasn’t going to be what we were hoping. In the fall we knew that enrollments at both the Seminary and CAPS/GS would be lower, but the College of Arts & Sciences numbers were strong, so we weren’t anticipating any significant financial challenges. In fact, we went home for Christmas break having already done a significant amount of work on the budget and feeling like we were prepared to develop a final budget for next year.

However, when interim and spring enrollment numbers for CAS became available, we realized that they were lower than what we expected. In a normal spring semester, we have about 4% fewer students than fall. That number grew to 6% this year, or 42 fewer students than planned.

What does that mean for this year? Are we looking at layoffs?

We have no plans to make any cuts in personnel to address lower enrollment or the budgeting process for next year. The enrollment shortfall won’t significantly affect the budget for the remainder of the 2011-12 year. At the trustees’ direction, for several years we’ve included a contingency in our budget for situations just like this. The contingency and some reallocations will allow us to end the year with a balanced budget.

Does this impact the budget next year?

Lower enrollment will have a greater impact on the 2012-13 budget. Based on the graduation years of the students no longer here, we expect the budget to be impacted for multiple years.  While we will recruit additional new students, it is very difficult to recruit enough new students to make up this difference by fall.

We’ll need to make some budget cuts to address this new reality. We haven’t finalized anything but there will likely be some cuts to the contingency fund, deferred maintenance, and the inclusion of a “vacancy factor” (budgeting for unfilled positions throughout the year).

What are some of the other factors that impact the budget for next year?

As we position Bethel for the future and follow our strategic plan, we have committed to some significant expenses in our budget for next year:

  • Faculty compensation plan. Educating future world-changers and Christ-followers requires incredible faculty. These individuals deserve to be compensated fairly for their service to Bethel and our students. This plan will help keep us competitive with faculty compensation at other peer institutions.
  • Salary increases. For 2 of the last 3 years, employees have not received a cost of living increase. This year we are budgeting to provide employees with a percentage increase similar to last year.
  • Physician’s Assistant (PA) program. We are committed to launching a PA program for spring 2013. This requires spending significant resources next year.  We believe enrollments in this program will contribute significantly to the university in the next several years.
  • Bond payments. Bethel issued a new bond agreement in 2007 to both refund existing bonds and finance a portion of the Brushaber Commons while those commitments and pledges are outstanding. The bond structure had interest-only payments until 2013 when we begin to make our first principal payment.
  • Deferred maintenance. While our campus is young compared to most, our facilities are aging. Facilities Management does a wonderful job of keeping them clean and ready for classes, meetings, and guests, but sometimes greater repairs, maintenance, and refurbishment are required. From new roofs to new air conditioners and roads, our campus needs a little extra care—at a greater financial cost.

What’s next?

Along with the President’s Cabinet and the Executive Leadership Team we’re working to finalize a budget that will be reviewed by the Board of Trustees Executive Committee. Once we’ve done that, we’ll be able to review the new requests to determine what we can fund next year. I’ll talk about how the requests work and give an update on the budget for next year in my second post on the budget process.