The Instructional Subsidy

A Workshop on the Calculation of the Instructional Subsidy

Ohio Board of RegentsWinter, 2000

Presented by:

Deborah Gavlik, Director of Budgets and Resource Planning

Andy Lechler, Senior AnalystRich Petrick, Vice Chancellor for

Finance

Objectives of Workshop

Provide an introduction to the instructional subsidy;

Walk through the calculation of the instructional subsidy step by step;

Give participants the opportunity to perform calculations themselves;

Informal Q & A

Overview of Agenda -- Key Components

FTEs The Conversion Factor Two-Year and Five-Year FTEs

Allowances (from Resource Analysis) Instruction and Support Student Services Plant Operation and Maintenance

Overview of Agenda -- Key Components

Fee Assumptions Also known as ‘Local Contribution’

Overview of Agenda -- Calculations

Base Subsidy Activity-Based Earnings + Doctoral Subsidy

Square-Foot Based POM AdjustmentGuarantee or Hold HarmlessCapital Deduction “Late Space” DeductionTotal Subsidy

I. Counting Students for Subsidy Purposes

Annualized FTEsAll-terms FTEsEligible FTEs

Then -- Annualized FTEs

Used prior to FY 1999 instructional subsidy

Counted as of the 14th day of summer and fall terms

Definition of annualized FTE: Fall CH/15 + Summer CH/45 (quarters) or /30 (smstr)

Now -- All-Terms FTEs

More accurate way of counting students Reported after the end of the term, as of the 15th

day of the term by the Registrar’s office; Discourages ‘front-loading’ Rewards campuses for retaining students:

more subsidy if retain students throughout the year; course enrollments move from lower to higher models

as students progress.

Recognizes winter and spring term enrollment change

Now -- All-Terms FTEs

= 30 semester hours or 45 quarter hours;

For FY 2000 calculation, FTE data obtained through HEI for the first time

No current year data used -- lagged one year

Eligible and Ineligible FTEs

Some Key Factors Affecting Eligibility Rank Residency Selective Service Fees Paid

II. The Conversion Factor

Interim adjustment needed in the transition from annualized to all-terms FTEs

The Conversion Factor -- Why Is It Needed?

Cost allowances are now calculated in Resource Analysis based on annualized FTEs (legacy of old system)

Generally, # annualized FTEs > # all-terms FTEs

But expenditures = actual annual amounts, and do not change

The Conversion Factor -- Why Is It Needed?

Therefore, cost/annualized FTE < cost/all-terms FTEs

Without an adjustment -- a conversion factor -- we would not model expenditures correctly

Conversion factor is an interim adjustment

What is the Conversion Factor?

Ratio to Convert All-Terms FTEs to Annualized FTEs

How calculated: Ratio of Annualized FTEs/All Terms FTEs, Statewide, by Model

FY 1996 and 1998 ratios averaged to obtain conversion factors for FY 2000 and FY 2001

Calculation of the Conversion Factor, General Studies I Model

General Studies I Model- FY 1996 Annualized to All-Terms FTE Ratio = 1.089

General Studies I Model- FY 1998 Annualized to All-Terms FTE Ratio = 1.0902

Average = (1.089+1.0902)/2 = 1.0905

CINCINNATI CINCINNATISUBSIDY SUMMARY - FY 2001

Instruction & Support $87,875,839Student Services $13,195,972POM $25,019,565Base Subsidy (Excluding Doctoral Allocation) $126,091,376

Doctoral Allocation (@ 100% --->) $33,574,893 Will be reduced by 2% per Grad Funding Recommendations

Total Base Subsidy $159,666,269

Subsidy Based on : 5-Year Average

ADJ USTMENTSPOM Calculation: NASF POM= $27,150,545 Activity POM= $25,019,565

POM ADJ USTMENT Revised Activity POM (Capped at 177% of NASF POM) $2,130,980

TOTAL SUBSIDY $161,797,249

Capital Deduction (1st + 2nd Cycle) $0

RATES PER SUBSIDY-ELIGIBLE FTE

Instruction & Local Student ConversionSupport Costs Contribution Services POM Weights for

FY 01 FY 01 FY 01 FY 01 Both Years3,762.00 3,415.00 594.00 488.00 1.09054,305.00 3,415.00 594.00 584.00 1.13305,259.00 3,415.00 594.00 1,217.00 1.04505,012.00 3,415.00 594.00 553.00 1.03458,477.00 3,415.00 594.00 1,175.00 1.05906,611.00 3,947.00 594.00 655.00 1.05007,582.00 3,947.00 594.00 1,109.00 0.9840

10,574.00 3,947.00 594.00 1,598.00 1.011012,300.00 8,297.00 594.00 1,022.00 1.064517,558.00 8,297.00 594.00 1,895.00 1.069523,214.00 8,297.00 594.00 2,614.00 1.117019,647.00 8,297.00 594.00 1,382.00 0.966525,840.00 8,297.00 594.00 2,613.00 1.008027,709.00 10,780.00 594.00 2,485.00 1.002539,323.00 15,105.00 594.00 3,362.00 1.0000

Conversion Factor, Example of General Studies I Model

General Studies I - FY 1998 Eligible All-Terms FTEs - 3,188 Conversion Factor - 1.0905 3,188 X 1.0905 = 3,477

General Studies I- FY 1999 Eligible All-Terms FTEs - 3,160 Conversion Factor - 1.0905 3,160 X 1.0905 = 3,446

All-terms All-terms All-terms All-terms All-terms All-termsFinal FY 98 all-terms1/10/1999 1/10/1999 Revised 2/99 FY 1999 FTEs FY 1999 FTEs

CINCINNATI Total CINCINNATI FY 1998 FTEs Total Ineligible EligibleMODEL Ineligible Eligible FTEs CINCINNATI FY 1999 FTEs as of 10/4/99

Ineligible EligibleGENERAL STUDIES I 3,370 182 3,188 3,341 181 3160GENERAL STUDIES II 3,185 198 2,987 3,098 186 2912GENERAL STUDIES III 980 51 929 927 55 872TECHNICAL I 425 15 410 419 16 403TECHNICAL III 200 8 192 211 11 200BACCALAUREATE I 3,344 159 3,185 3,349 161 3188BACCALAUREATE II 2,993 270 2,723 3,142 309 2833BACCALAUREATE III 2,668 338 2,330 2,498 327 2171MASTERS & PROF I 961 2 959 1,067 1 1066MASTERS & PROF II 1,220 1 1,219 1,292 3 1289MASTERS & PROF III 505 0 505 489 0 489DOCTORAL I 608 16 592 544 32 512DOCTORAL II 920 13 907 890 10 880MEDICAL I 0 0 0 0MEDICAL II 659 659 663 0 663TOTAL 22,038 1,252 20,899 21,930 1,292 20,638

TOTALFY 1998 FY 1998 FY 1998 FY 1999 FY 1999 FY 1999

MODEL Total Ineligible Eligible Total Ineligible EligibleGENERAL STUDIES I 3,675 198 3,477 3,643 197 3,446GENERAL STUDIES II 3,609 224 3,384 3,510 211 3,299GENERAL STUDIES III 1,024 53 971 969 57 911TECHNICAL I 440 16 424 433 17 417TECHNICAL III 212 8 203 223 12 212BACCALAUREATE I 3,511 167 3,344 3,516 169 3,347BACCALAUREATE II 2,945 266 2,679 3,092 304 2,788BACCALAUREATE III 2,697 342 2,356 2,525 331 2,195MASTERS & PROF I 1,023 2 1,021 1,136 1 1,135MASTERS & PROF II 1,305 1 1,304 1,382 3 1,379MASTERS & PROF III 564 0 564 546 0 546DOCTORAL I 588 15 572 526 31 495DOCTORAL II 927 13 914 897 10 887MEDICAL I 0 0 0 0 0 0MEDICAL II 659 0 659 663 0 663TOTAL 23,179 1,306 21,872 23,062 1,343 21,720

All-terms FTEs Weighted by the Conversion Factor

III. 2-Year and 5-Year FTE Average

Why use the 2 and 5 year average? Winning answer gets a special Regents’ cup of coffee...

Calculation of Two-Year Average FTE

Average of FY 1998 all-terms FTE and FY 1999 all-terms FTE, weighted by the conversion factor

FY 1998 FTEs come from the www-based subsidy FTE

FY 1998 = 3,477 (all-terms, converted)FY 1999 = 3,446 (all-terms, converted)Average = (3,477 + 3,446)/2 = 3,461

Calculation of Five-Year Average FTE

Average of FY 1995, 1996, 1997 eligible FTE (annualized) and FY 1998 and FY 1999 eligible all-terms FTE, weighted by the conversion factor

Calculation of Five-Year Average FTE

FY 1995 = 3,605 (annualized)FY 1996 = 3,544 (annualized)FY 1997 = 3,619 (annualized)FY 1998 = 3,477 (all-terms, converted)FY 1999 = 3,446 (all-terms, converted)Average = (3,605 + 3,544 + 3,619 +

3,477 + 3,446) / 5 = 3,538

Eligible FTES Used in the FY 2000 Calculation Eligible FTES Used in the FY 2001 CalculationAll-terms FTEs are weighted by the conversion factor All-terms FTEs are weighted by the conversion factor

TOTAL (Includes buffered Med II FTEs) (Includes buffered Med II FTEs)

MODEL 2-Year FTE Average5-Year FTE Average 2-Year FTE Average 5-Year FTE Average

GENERAL STUDIES I 3,461 3,538 3,514 3,534GENERAL STUDIES II 3,342 3,251 3,434 3,338GENERAL STUDIES III 941 1,006 957 990TECHNICAL I 421 422 426 419TECHNICAL III 208 231 207 220BACCALAUREATE I 3,346 3,440 3,367 3,394BACCALAUREATE II 2,734 2,612 2,722 2,641BACCALAUREATE III 2,275 2,567 2,265 2,493MASTERS & PROF I 1,078 1,046 1,052 1,038MASTERS & PROF II 1,341 1,424 1,358 1,386MASTERS & PROF III 555 580 611 610DOCTORAL I 534 630 603 634DOCTORAL II 901 1,108 998 1,078MEDICAL I 0 0 0 0MEDICAL II 773 778 774 777TOTAL 21,910 22,633 22,288 22,552

IV. Resource Analysis

How we determine costs (allowances) per FTE

Resource Analysis

Used to calculate the statewide average cost of instruction per FTE in the various subject areas and subsidy models

Costs reported in several categories: faculty salary administration library academic support plant operations and maintenance

Resource Analysis

Historical costs allocated to subject and level, and model

RA uses data about: student enrollments in courses salaries of instructors teaching the courses the space used by academic departments.

http://www/regents.state.oh.us/hei/RA/RAspecifications.html

Resource Analysis

For FY 2000, take average of: Allowances used in FY 1999 Subsidy (based

on FY 1995 Resource Analysis, inflated) Allowances determined from FY 1997

Resource Analysis, inflated Inflation Rates:

FY 1997 to FY 1998 - 0%FY 1998 to FY 1999 - 3.7%FY 1999 to FY 2000 - 3.7%

Resource Analysis Example GS1 Model

FY 1997 Resource Analysis Cost, inflated= $3,374 X 1 X 1.037 X 1.037 = $3,628.295

FY 1999 Rate, inflated = $3,598 X 1.037 = $3,731.126

Average = ($3,628.295 + $3,731.126)/2 = $3,579.7105, rounded = $3,680

V. Fee Assumptions

Determining the state share and the student share of modeled costs

Fee Assumptions

Subsidy= Allowance - Fee Assumption

Five fee assumptions Lower division undergraduate Baccalaureate Graduate Medical I Medical II

Fee Assumptions

Baccalaureate fee assumption is set first; all others are derived from it

Lower division fee differential protects 2-year campuses from an actual loss of subsidy

Graduate fee assumption no longer used to determine doctoral subsidy

Fee Assumptions

Now primarily a rationing device Total modeled expenditures = $2.5

billion If student share = 0%, then

Fee assumption = $0State share = 100% and Instructional subsidy = $2.5 billion

But -- current instructional subsidy appropriations = $1.6 billion

VI. Base Subsidy

The enrollment-based formula earnings

Base Subsidy

Consists of three partsAll are enrollment-based

Instruction and Support Student Services Plant Operations and Management

Base Subsidy - Instruction and Support

Two Calculations:(Instruction and Support Allowance -

Fee Assumption) X 2-Year FTE Average

(Instruction and Support Allowance - Fee Assumption) X 5-Year FTE Average

Instruction and Support Example - GS1 Model

Two-Year Average FTE Calculation:($3,680 - $3,214) X 3,461 =

$1,612,826

Five-Year Average FTE Calculation:($3,680 - $3,214) X 3,538 =

$1,648,708

Base Subsidy - Student Services

Uniform amount per FTE -- no variation by model

Differential Student Services amount by campus Student Services Weight = modified

headcount to FTE ratio

Student Services Weight

Ranges from 1.000 to 1.29Weight provides additional funding to

campuses with large part-time enrollments, such as community colleges

Campuses with highest weights are: Geauga, Sinclair Community College, Cuyahoga Community College, and Edison State Community College

Base Subsidy - Student Services

Two Calculations:Student Services Allowance X

Student Services Weight X 2-Year FTE Average

Student Services Allowance X Student Services Weight X 5-Year FTE Average

Student Services Example - GS1 Model

Two-Year Average FTE Calculation:$556 X 1.066 X 3,461 = $2,051,321

Five-Year Average FTE Calculation:$556 X 1.066 X 3,538 = $2,096,958

Base Subsidy - Plant Operations and Maintenance

Base POM subsidy calculated on activity (enrollment) basis

Two calculations:POM Subsidy X POM Activity Weight

X 2-Year FTE AveragePOM Subsidy X POM Activity Weight

X 5-Year FTE Average

Base Subsidy - POM Activity Weight

Weights FTE enrollments for Non-credit job-related training activity

(@100%) and Sponsored research (@50%)

Weights range from 1.000 to 1.157Campuses with highest weights are: North

Central Technical College, Lima Technical College, Cuyahoga Community College, Lorain County Community College, Ohio State University, and the University of Cincinnati

Plant Operations and Maintenance Example - GS1 Model

Two-Year Average FTE Calculation:$488 X 1.117 X 3,461 = $1,886,577

Five-Year Average FTE Calculation:$488 X 1.117 X 3,538 = $1,928,550

Base Subsidy - Greater of 2-Year and 5-Year Earnings

2 -Year Average Instruction and Support - $84,478,011 Student Services - $12,135,450 Augmented POM - $23,893,178 Total

$120,506,639

Base Subsidy - Greater of 2-Year and 5-Year Earnings

5 -Year Average Instruction and Support - $87,560,697 Student Services - $12,384,383 Augmented POM - $24,652,334 Total

$124,597,414

Base Subsidy - Greater of 2-Year and 5-Year Earnings

5 -Year Average = $124,597,4142 -Year Average = $120,506,639Therefore, campus is on the five-

year average

VII. Doctoral Funding

No longer FTE-driven

Doctoral Set-Aside

New Provision of H.B. 282 FY 2000 = 10.94% of total Instructional

Subsidy, or $175,177,753 FY 2001 = 10.75% of total Instructional

Subsidy, or $177,251,0462% of $177.3 million reserved for

reallocation for critical state needs in FY 2001

Doctoral I Equivalent FTEs

= sum of Doctoral I FTEs plus 1.5 times the sum of Doctoral II FTEs

Use greater of 2-year or 5-year FTEs for FYs 1994 - 1998

Annualized FTEs for FYs 1994 - 1997All-terms FTEs for FY 1998

FTEs adjusted for effects of doctoral review beginning in FY 2001

Campus Share of Doctoral Allocation

UnadjustedShare of Doctoral Revised, Final FY 2000 Revised, Final FY 2001

Doct. I Share of Doct. I Set Aside, FY 2000 Allocation $$, Adjusted Allocation %, AdjustedUniversity Equivalent FTEs Equivalents $175,177,753 for Hold Harmless for Hold Harmless

AKRON 907.5 7.054% $12,357,039.00 $12,354,113 7.052%BOWLING GREEN 751.8 5.843% $10,235,636.00 $10,233,184 5.842%CENTRAL STATE 0 0.000% $0.00 $0 0.000%CINCINNATI 2,437.10 18.942% $33,182,170.00 $33,174,304 18.938%CLEVELAND 187 1.453% $2,545,333.00 $2,544,737 1.453%KENT 1,175.88 9.140% $16,011,247.00 $16,048,997 9.162%MIAMI 490.7 3.814% $6,681,279.00 $6,679,703 3.813%OHIO STATE 4,903.25 38.111% $66,761,993.00 $66,746,157 38.102%OHIO UNIV 902.04 7.011% $12,281,712.00 $12,278,804 7.009%SHAWNEE 0 0.000% $0.00 $0 0.000%TOLEDO 597.1 4.641% $8,130,000.00 $8,128,073 4.640%WRIGHT 332 2.580% $4,519,586.00 $4,518,517 2.579%YOUNGSTOWN 15 0.117% $204,958.00 $204,905 0.117%MCOT 166.5 1.294% $2,266,800.00 $2,266,257 1.294%NEOUCOM 0 0.000% $0.00 $0 0.000%

Total 12,865.87 100.00% $175,177,753.00 $175,177,753 100.000%

Calculation of Doctoral Subsidy

Total FY 2000 Subsidy = $175,177,753

Total Doctoral I Equivalent FTEs = 12,866

U. of Cincinnati Doctoral I Equivalent Enrollments = 2,437.1

Calculation of Doctoral Subsidy

Campus Share of Subsidy, unadjusted = 2,437.1/12,866 = 18.942%

Campus Share of Subsidy, adjusted = 18.938%

Doctoral Allocation = $175,177,753 X 18.93751% = $33,174,304

VIII. Square- Foot Based POM Calculation

Protecting historical investments in campus facilities

NASF POM Rates

POM Rates listed on page 2 of detail: AV-DP $6.45 Circulation $6.53 Classroom $5.18 Labs $6.45 Offices $5.18 Storage-Mechanical $2.30 Other $5.18

NASF POM Rates - Adjusted for Inflation

Adjusted for Inflation - Same % Increases as for Instruction and Support Costs

FY 1997 Resource Analysis Cost, inflated for AV-DP= $ 5.95 X 1 X 1.037 X 1.037 = $6.40

FY 1999 Rate, inflated = $ 6.27 X 1.037 = $6.50

Average = ($6.40 + $6.50)/2 = $6.45 - FY 2000 rate

Calculation of the Square-Foot Based Subsidy

FY 2000 Net Assignable Square Feet (NASF) = FY 1998 total plus FY 99 change and FY 00 change

FY 2000 NASF POM Weight - 1.143Initial Calculation: POM rate X NASF X NASF POM

Weight

Example of Calculation of NASF POM Gross Earnings - AV-DP

POM Rate - $6.45NASF = 50,432 + 0 + 7,377NASF POM Weight = 1.143Subsidy = $6.45 X (50,432 + 0 +

7,377) X 1.143 = $426,188

Roads and Grounds Expense

Inflate historical ratesFor U. of Cincinnati - $996,340This amount added to NASF X NASF

POM Rate X NASF POM Weight for each of the seven categories of space

Gross NASF POM Earnings = $32,407,201

Next Step

Prorate Gross Earnings to Each Model

Proration based on Activity-Based POM for each Model as a Percent of the Total Activity-Based POM Subsidy

Use 2-Year or 5-Year Average, depending on Subsidy Base

Example of Calculation of NASF POM Subsidy - Proration of POM Activity Subsidy by Model

Subsidy Base - U. of Cincinnati = 5-year average

Total (excluding doctoral) plus doctoral = $24,652,334 + $1,008,416 + $3,096,565 = $28,757,315

% Share of POM activity based subsidy for GSI model = $1,928,550/$28,757,315 = 6.706%

Example of Calculation of NASF POM Subsidy - Prorated Amount Times Gross Earnings

Percentage share of the POM allocation then multiplied times the total amount for the seven categories of space plus roads and grounds

6.706% X $33,353,381 = $2,173,326This amount then multiplied by the

ratio of eligible FTE to Total FTE for that model

Example of Calculation of NASF POM Subsidy - Allocation by Model Times Ratio of Subsidy Eligible FTEs to Total FTEs

Eligible FTEs = 3,160Total FTEs = 3,341Ratio of Eligible FTEs to Total FTEs =

3,160/3,341 = 94.6%$2,173,326 X 94.6% = $2,055,585

Example of Calculation of NASF POM Subsidy

This calculation repeated for all models

The NASF POM subsidy = the sum of these calculations minus amounts attributable to the doctoral models

IX. The POM Adjustment

Balancing activity and square-foot POM subsidy

The POM Adjustment

Limits Activity-Based POM earnings to 161% of the NASF POM Earnings

If Activity Based POM > 161% of the NASF POM, take the difference between the Activity Based POM and 161% of the NASF Based POM

Subtract the difference from the Base Subsidy (POM adjustment is negative)

Example - Negative POM Adjustment

Hocking Technical CollegeNASF POM = $1,933,178Activity POM = $3,478,029Activity POM capped at 161% of NASF$1,933,178 X 1.61 = $3,112,417POM Adjustment = $3,478,029 -

$3,112,417 = -365,612

The POM Adjustment

IF NASF Based POM > Activity Based POM, subtract Activity Based POM from NASF Based POM

Add the difference to the Base Subsidy

Example - Positive POM Adjustment

University of Cincinnati:NASF POM = $26,249,499Activity POM = $24,652,334NASF > Activity POMSubtract Difference and add to base

subsidyDifference = $1,597,165

Total Subsidy

Total Subsidy:Base Subsidy + Doctoral Allocation =

Total Base SubsidyTotal Base Subsidy + POM

Adjustment= Total Subsidy

X. The Guarantee

Providing additional protection against loss of subsidy

FY 2000 Guarantee

Based on FY 1999 Instructional Subsidy plus:

Success ChallengeResearch ChallengePriorities in Graduate EducationAccess Challenge (less tuition restraint)Jobs Challenge (less amounts for targeted

industries)

Calculation of the Guarantee

Step #1 - Add FY 1999 Instructional Subsidy plus FY 1999 Selected Challenges

Step #2 - Multiply Results of #1 times 1.03

Step #3 - Add FY 2000 Instructional Subsidy plus FY 2000 Selected Challenges

Calculation of the Guarantee

Step # 4 - If Results of #3 Greater than the

Results of # 2 - Guarantee = 0 If Results of #2 greater than

Results of #3, Guarantee = #2 - #3

Example of the Calculation of the Guarantee

University of Akron - FY 1999 Instructional Subsidy plus Challenges X 1.03 = $94,908,180

FY 2000 plus Challenges = $94,233,243

Thus, Guarantee = $94,908,180 - $94,233,243 = $674,937

The Guarantee

3% in FY 20001% in FY 2001

XI. The Capital Deduction

“Charging” for certain capital decisions

Negative Capital Component Adjustment

Four campuses have negative capital component adjustments in FY 2000

The adjustment is negative because the amount of capital dollars they have requested and received exceeds their earnings calculated through the capital allocation formula

XII. The “Late Space” Deduction

The final POM adjustment

“Late Space” Deduction

Affects only two campuses in FY 2000.

Adjustment from prior year NASF space changes that did not occur.

Needed to prevent a delay in subsidy determination.

QUESTIONS?