Retrenchment Case Study
Like many public institutions, Big Leafy University (BLU) must confront declining state support. For the past 10 years, per-student expenditures have declined an average of 2-3% each year. The recent economic recession has worsened this trend. A state budget reversion (i.e., the state is recanting on funds it said it would distribute) is having a tremendous effect on many public agencies across the state. Big Leafy is no exception.
Charge to the Budget Committee
Imagine that today is about midway through the fiscal year. As a member of the Student Affairs Budget Committee for Big Leafy University you must respond to the worsening economic forecast by (a) implementing a budget reversion for the current fiscal year and (b) planning for anticipated budget cuts of 3% in the coming year. The Budget Committee, which includes budget officers from across the Division of Student Affairs as well as the senior finance manager for the division, generally sets the budgets for the Division. Given the gloomy fiscal picture, the Committee has been given considerable discretion in taking the steps necessary to shore up BLUs financial plans. You are asked to make the necessary adjustments to the Offices of Residence Life, Multicultural Affairs, and Counseling & Health Services.
Your Tasks
You have four tasks. First, you are to do an environmental assessment for the Division of Student Affairs at Big Leafy University, identifying what you see as the most important strengths and weaknesses in light of what is described in the Big Leafy University Profile file and the most important opportunities and threats based upon what you surface about the state of Kentucky, the region in which it is embedded, and the higher education marketspace in which Big Leafy University operates. In other words, you will want to identify what you see as most relevant strengths, weaknesses, opportunities and threats, not all possible ones.
Second, the university president has announced that the statewide reversion will be effective no later than April 30 of the coming year. To offset the revenue shortfall, a budget reversion is being implemented across all departments. The reversion is equivalent to 2% of the 2017-18 academic year base budget. After considering your environmental assessment, you will need to identify the accounts from which you will secure the necessary funding reductions and then project 2017-18 department fund balances at the end of the fiscal year (June 30). It is up to you whether you allocate the budgets across the board (i.e., each office sustains a 2% cut, or whether the cuts are allocated differentially. Whatever your decision, you must provide rationale in the final memo.
Third, the state has advised public universities that they should anticipate a 3% reduction in state appropriations for the 2018-19 academic year. Big Leafy University derives approximately 40% of its operating budget from state appropriations, so this news is cause for concern. Taking into account your work in the first and second phases of this assignment (those just described), you are to formulate 2018-19 operating budgets for the four departments indicated above. You may use any institutional budgeting approach (e.g., across the board, targeted, restructuring) that you desire, in combination or as a stand-alone. However, explain your choices and provide adequate justification, most importantly for those decisions that are likely to be controversial.
Fourth, you will submit an administrative memo and a budget spreadsheet detailing how you will handle the cuts. In the memo you will want to detail (a) your overall strategy for the current fiscal year reversion as well as the coming fiscal year, (b) offer a short summary of your proposed cuts, and (c) your assumptions behind the cuts (e.g., why the proposed cut makes sense given the environmental scan you conducted).
Logistics
All files for this exercise can be found in the Retrenchment Case link in the main menu bar of our Blackboard course site. There are three essential files (including this one): An Excel spreadsheet with the budgets for the three departments, a Word document with the profile of Big Leafy University, and a Word file containing the case study overview (this file).
The Excel spreadsheet contains four worksheets, one for each office budget and one for the Division of Student Affairs. Note that there are comments embedded in some of the cells that provide additional information. You can mouse over the cells to see the comments or print the document. The comments for each cell will appear at the end of the printed document. Your task is to complete the sections of the spreadsheet that are highlighted in yellow.
It is your choice whether you decide to work alone or as part of a group. I encourage you to work with a group, however, because this (a) more accurately simulates how you would work on a budget reversion as an administrator and (b) lessens your individual workload. A memo should accompany the spreadsheet both will be submitted via Blackboard.
Finally, there will certainly be instances in which you desire more information about Big Leafy University and the Division of Student Affairs. You have leeway to come up with plausible scenarios to fill in any missing details. For example, if one of your strategies is to reduce expenditures via a reduction in programming, feel free as to detail how you might do that (e.g., cutting aspects of the first-year experience programs).
Deliverables
You have two deliverables for this case study. First, you will complete the budget spreadsheets for each of the offices and the Division of Student Affairs. Second, you will develop an accompanying memo (please ensure your names are on the memo). The memo should be concise, succinct, and no longer than 3-4 pages (appendices not included). Each person (whether you are in a group or not) must submit the group memo to Blackboard. If you are in a group, you will prepare one memo and one spreadsheet with each of you uploading the same memo and spreadsheet to Blackboard.
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