Saturday, April 22, 2006

Details, Details II

I've been going through the details of the state budget, and found this interesting little tidbit of information. In the Budget in Brief (page 80), the governor took credit for a $28,000,000 reduction in one-time funding for UMDNJ. The detailed budget information for the Department of State (pp. D-348-51), however, shows that there's more to the story.
UMDNJ is a huge business, with 2006 operating income projected at $1,166,984,000. In executing its operations, it expects to spend $1,402,723,000 this year, with a net cost to taxpayers of $235,739,000. The university proposed to increase its operating income (from fees, tuition, etc.) by 2.8%, and increase its general operating costs by only 0.3%, saving the taxpayers about $28 million. This seems like a very reasonable business case, and is the way a state enterprise should manage itself. Two-point-five percent productivity improvement is a pretty easy putt for an organization with over a billion dollars of income. When I worked for GE, the business expected each manufacturing plant to generate 4-5% every year.
But the university, being a state institution, cannot run itself like a business. Included in its budget request was a separate line item, titled "Appropriation Funding Difference," calling for an additional $28 million in Grants-in-Aid. It appears that this is the $28 million in one-time expenditure reduction for which the governor took credit.
Of course, UMDNJ didn't stop there. They also included separate line items for Increased Utilities Costs ($10 million), Capital Renewal / Replacement ($15.2 million), and Research Faculty Development ($5 million). Somewhere, either at State or in the governor's office, these additional funds were zeroed out. In addition, this year's general operating budget is being reduced to $1,386,375,000 (1.2%) for 2007.
The net impact of these changes is significant - $79 million less than the school requested. Without those expenditures, the net cost to the taxpayer for each graduate of the university decreases by $47,000. Now if we can get rid of the remaining $151,266 per graduate, we'll be in really good shape.

Tags: New Jersey, Taxes, Budget, UMDNJ