Campus units must meet individual savings targets
Beginning in fiscal year 2020-21, and initially phased in over a 5-year period, each campus unit was assigned a target for ongoing core fund savings. Savings could be achieved through net revenue generation, realigning costs to other appropriate fund sources, targeted program reductions, streamlining and efficiencies.
Units have developed plans to make progress toward their assigned targets. One-time bridging and limited-term cost containment strategies have been necessary in some cases; however, savings ultimately must be ongoing and cumulative. Plans are being assessed annually by the provost with input from the Budget Framework Advisory Committee for alignment with the principles and monitored as part of the annual budget process. The process is ongoing and iterative to reflect changing circumstances and emerging opportunities.
Phased approach to core fund savings targets
Beginning in 2020-21, an annual amount of $9 million in savings targets was allocated to units, growing to $45 million by 2024-25. Units were asked to accelerate their efforts to achieve these targets where possible. Through fiscal year 2022-23, units identified a total of $30.7 million in savings, including $29 million ongoing and $1.7 million one-time. This exceeded the third-year target amount of $27 million by almost $4 million.
While we are on track ahead of schedule (with 72.4% of our five-year goal achieved in just three years), added budgetary pressures require that we provisionally extend unit savings targets an additional year and increase the amount by a combined $9 million, bringing the total unit savings targets to $54 million over six years. If we identify different ways to achieve the needed core fund savings, identify additional revenue, or recommend a different allocation methodology for this additional year of savings targets, this additional year of savings targets may be reconsidered. In the meantime, units should plan to identify more core fund savings within three years, incorporating these savings into long-term planning, thereby mitigating abrupt impacts to programs and staff.
Central campus is committed to taking action
As part of the framework plan, central campus has identified $25 million in savings. The following actions are in progress to achieve this target, many of which have campuswide impacts:
- Capital Investments: Over the next few years, we are reducing the planned core fund investment in our capital program debt service by up to $5 million, equivalent to up to $80 million in capital spending. This will delay much-needed capital investments. Therefore, we are evaluating alternative funding models, including internal borrowing, to mitigate the gap.
- Faculty Resources: Over the next few years, we are redirecting up to $4 million in base resources collected centrally from faculty returns to support faculty merits and promotions. In the past the central share of the faculty resources were reinvested in new positions through programs such as the Hiring Incentive Program. Funds for some reinvestment remain, but the scale will be somewhat limited.
- Space Release Program: Over the next six years, we are reducing our use of leased administrative space in Davis, resulting in up to $4 million in ongoing savings. We have launched an incentive program for units that release space to central campus.
- Realign Funding for the Cost of Utilities: Currently, the majority of costs associated with utilities is paid centrally with core funds. We are realigning at least $5 million over five years from core funds to central campus Finance & Administration (indirect cost) funds.
- Savings from Limiting Core Fund Investments: The budget framework assumed that the campus would make up to $4 million in ongoing core fund investments for critical priorities through the 2021-22 budget process. However, actual core fund investments were limited to $2 million. The remaining $2 million will be directed toward achieving the central campus savings target. In addition, as stated in the Budget Framework, the provost will not accept new requests for central campus investments in 2023-24, saving the campus an additional $3.5 million.
How savings targets were defined
In recognition of our primary teaching and research mission and strategic priorities, unit targets are disproportionately allocated to administrative activities. Savings targets, while not strictly formulaic, take into account multiple factors, including core fund base budgets, all fund expenditures, space utilization, unit net operating margin trends, and metrics such as staff and student to faculty ratios. To arrive at the final rebalancing target, a measure of judgment was applied on top of the various measures described above.
For the sixth year of unit savings targets, central campus may consider adjusting unit targets if the task forces identify different ways to achieve the needed core fund savings, identify additional revenue, or recommend a different allocation methodology.
Unit leaders must strategically evaluate their activities for efficiency and efficacy, keeping in mind potential service impacts to clients. Units with recharge activities must strive to manage rates in compliance with campus guidelines while delivering efficient services. Information on the campus’ Self-Supporting Recharge rate review and approval process can be found here.
- Core Funds Savings Targets Campus Summary (PDF) shows a summary of the multi-year plan to achieve core fund savings.
- Unit Savings Targets (PDF) provides the unit level targets.
Savings target planning and review process
Download Graphic (PDF)
Campus supports this process through
- Providing data, information and benchmarking to support unit planning.
- Adjusting campus policies, guidelines and expectations to support efforts.
- Sharing successes.
- Developing programs and providing access to support, such as:
- Lean Six Sigma training
- Change management
- Program evaluation