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The Budget Process

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The share of the state budget devoted to higher education in Florida declined 13.6 percent from 1990 to 1995 (from 13.2 to 11.4 percent). Total state appropriations to higher education over this period increased from $3.4 billion in 1990 to $4.1 billion in 1995.

The reduction in state budget share has hardly gone unnoticed. Charles Cobb, the chair of Pan Am Corporation and chair of the Business/Higher Education Partnership in Florida made this recent statement: "Florida's de facto disinvestment policy for higher education needs to stop. The share of revenues going to the universities and community colleges needs to stabilize now and increase later." The report from the Business/Higher Education Partnership further recommended that the state guarantee that higher education's share of state funding not fall below the current low levels of 7.5 percent for the universities and 3.6 percent for the community colleges.

The major sources of state funding for higher education in Florida include general revenues, the lottery, and tuition dollars (appropriated by the Legislature). Fifty percent of the state lottery is dedicated to education in Florida. Of that 50 percent, 70 percent goes to K-12 education, 15 percent to the community colleges, and 15 percent to the State University System. In addition, community colleges receive funding from local taxes as well as state general revenue. These local funds come from special referenda, and very few colleges have been successful in tapping this source.

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The State University System

Each campus in the University System is responsible for submitting a budget to the system office. The budgets are based on historical allocation, changes in enrollment or institutional mission, and system priorities. The system allocates funds to the institutions based on a series of formulas. The institutions then have the flexibility to move dollars between program areas and between types of expenditures.

Prior to 1991, the budget process did not grant as much flexibility to the University System. A line-item budget was submitted to the Legislature and a detailed line-item budget was approved. Some legislative and other state leaders expressed concern about the deregulation of the SUS budget process; according to one observer, "We should not have given them the flexibility without some accountability mechanism in place."

Some concern was expressed by state leaders that the Legislature works from a different formula than the Regents in coming up with the system budget request. This results in different sets of priorities being pursued in the budget process. Attempts to work from the same general formula are underway at the Legislature.

The total SUS budget from the state is approximately $1.67 billion in 1995-96, up slightly from $1.44 billion in 1991-92 (see Table 4). According to one long-time legislative observer, this represents about 40 percent of the operational budget of the University System. The 40 percent does not include federal research funds or auxiliary services. Included in this total are state lottery funds (about $124 million in 1995-96) and approved student fees (about $287 million). The rest of the state funds for the University System come from state general revenue.

Table 4 State University System Appropriated Funding (Dollars in Millions)
	1991-92	1995-96	% Change
General Revenues	$956.0	$1,166.7	+22%
Lottery	$127.0	$124.4	-2%
Student Fees	$246.3	$286.6	+16%
Other Trust Funds	$111.8	$93.2	-17%
Total Funds	$1,441.1	$1,670.9	+16%
Source: Florida Senate Ways and Means Committee, Education Funding Summary (Tallahassee: 1991-92 and 1995-96 editions).

While the University System received a cut in state funding during the recession in the early 1990s, enrollment did not decrease; in fact, it rose slightly. One university official stated that the system handled budget cuts by reducing adjunct professors and teaching assistants, increasing the teaching load, and foregoing lower priorities like maintenance of facilities. In addition, faculty were not granted salary increases for one year.

During 1995, PEPC recommended that the legislative funding formula for the University System include a new allocation process designed to fund FTIC students in the SUS for only the costs of lower-level instruction. The PEPC position states that: "The commission recognizes and supports the importance of public service and research in the state universities but believes that these functions should not be components of undergraduate enrollment funding. If it continues to be necessary to fund these functions as a part of undergraduate enrollment, they should be funded only as a component of upper-level enrollment growth." PEPC's policy statement was, in part, a reaction to the proposed increase of FTIC freshmen enrolled at the University System rather than at the community colleges.

At least one campus administrator expressed concern about this practice. He stated that it would be difficult to take any more students without the full funding and said campuses will be reluctant to do this in the future. According to one higher education official, no one can say how the budget was arrived at for the current fiscal year. As he stated, the state has a number of formulas, but in the final analysis the budget amount for the University System is negotiated with the Legislature.

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The Community College System

According to legislative leaders, the state provides a lump sum to each community college. It expects each local board of trustees to develop priorities for programs that meet local needs. The Legislature also provides the local boards of trustees with the flexibility and responsibility to set policy on pay and salary increases. In addition, each year the Legislature establishes an average student fee charge; local boards have the flexibility to set their fees anywhere within ten percent above or below this average amount. The Legislature also provides categorical funding for special projects or state priorities; these funds are limited in purpose.

While enrollment is the primary driver of the funding formula for the community colleges, the formula takes into account the base budget from the previous year, the costs to continue operation, and the enrollment workload. Additionally, the formula looks at the need for new facilities and new programs to arrive at a total amount for each institution.

The Legislature has decided to hold the community colleges harmless with regard to enrollment losses, especially if the declines are due to an improving economy or a decline in the number of high school graduates. This has introduced some inequity in funding between the colleges. In fact, one staff member told us that some rural community colleges spend a great deal more per student than most urban institutions-as much as $800 per student.

The community colleges are well on their way, according to a number of state officials, in moving toward performance-based budgeting. Beginning in 1996-97, performance-based budgeting will be based on measures of effectiveness in the AA degree, the AS degree and student transfer. One state official cautioned, however, that there is no understanding about what performance is in Florida and how it should be measured or rewarded.

A recent legislative practice has encouraged the colleges in this direction. The Legislature challenged the community colleges and area technical centers to place five percent of their budgets in an incentive program that the Legislature would support with an additional $12 million. Colleges could only participate if they took five percent off their budget. Eventually, 20 of the 28 community colleges signed up for this program. The five percent, plus more, could be earned back by demonstrating success on certain outcome standards. The outcomes were related to completion and graduation rates and placement. One legislator said that the process helped community colleges restructure the way they do business and become focused on outcomes. This has eased community colleges into the performance-based budgeting plan being pushed by the Legislature and Governor.

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